Passive income, also known as residual income or ‘making money while you sleep,’ is a way to bring in a steady income stream without actively working for it. There may be a few roadblocks to maneuver around initially, but once they’re clear, your passive income stream will steadily pay you despite the lack of active effort.
Passive Income Is Not The Same As Active Income
This wouldn’t be a true passive income writeup without explaining the difference between passive and active income streams. An active income stream is one where you are actively working to earn money. The most common example of active income is someone who works a normal job. If you stop going to work, you stop getting paid.
On the other hand, passive income streams require little or no work to ensure the income stays steady. With a truly passive income stream, your day-to-day operations should require little (if any) actual hands-on work.
Now that you know the difference let’s dive right in!
Passive Income Streams From Real Estate
Over the last 150 years, do you know which investment medium has consistently outgrown the stock market? Yep, it’s real estate! Here are some ways real estate can generate a passive income stream.
- Rental Properties – One of the most common forms of passive income. Whether you move to a new home and decide not to sell your old one, or if you buy a second home strictly for business purposes, the right house with the right tenants can truly be a hands-off income stream.
- Rent Out Just A Room – Using a service like Airbnb to rent out just a portion of your current home is a great way to bring in extra passive income that you can snowball into something else down the line.
- Crowdfunded Real Estate Investing – So maybe you want to invest in real estate but don’t have the money needed to get started? Well, there are some great crowdfunded real-estate investment platforms out there that let you get started with even just a couple hundred bucks. Fundraise is currently the most popular platform.
Passive Income Streams From Traditional Investing
Technically, a lot of the passive income streams we talk about in this article will need investment, but we’re talking about traditional “old school” investments for this category.
- Play The Stock Market – Being able to invest in stocks, bonds, or funds was the most popular form of passive income for decades. The S&P’s top 500 stocks returned an average of almost 11% over the last 4+ decades.
- Stock Dividends – Certain types of stocks, usually from huge corporations, will pay out quarterly or yearly dividends. If a company is paying 3.5% dividends and their stock is selling at $200 per share, you will earn $7 for every share of that stock you own.
- Bond Investments – Investing in bonds has shown steady and average growth over the last 4-5 decades. They’re great if you want to park your money somewhere for the long term.
- Mutual Funds – A fund is usually a collection of stocks and/or bonds. For example, there may be a fund available for the tech industry or pharmaceutical companies. It’s a great way to mitigate the risk of owning just one or two stocks.
- Private Equity Funds – Not available on the publicly traded market (hence the term private), equity funds often pool money from investors for large projects, such as a huge commercial real-estate development.
- Collectibles – Baseball cards, coins, and comic books are still appreciating, which can make for some wonderful passive income potential when held onto for long enough.
Let The Banks Work For You
Banks charge customers an interest rate when they loan them money for a house or a car. They get this money from their deposit accounts and, in return, kick back some of the profits they made to their customers in the form of interest rates. With the right startup capital, it’s possible to realize some decent gains without lifting a finger.
- High Yield Savings Accounts – Banks are competing for your business now more than ever. To stay competitive, they’re offering higher interest rates with little (or no) fees.
- High Yield Checking Accounts – This extra level of competition is also driving them to pay outstanding interest rates on checking accounts, which was unprecedented even just a decade ago.
- Money Market Accounts – Although it acts like a traditional deposit account, a money market account’s interest rate fluctuates based on factors in the economy. It’s great for when we hit an economic boom.
- Certificates of Deposit – Enjoy a higher than usual guaranteed annual percentage yield if you agree to tie your money up for 6-12 months or longer.
Generate Passive Income Streams Online
You don’t need to have $500k in inventory, an already established business, or the personality of a YouTube streamer to make money online and to lay the groundwork for generating passive income streams.
- Sell Your Expertise – Are you an expert in repairing 1978 Camaros? Write a definitive how-to guide. Do you know how to make the most amazing photographs? Create an instructional video course. Once you do the work of creating an ebook guide, of course, the passive income that can potentially follow is pretty hands-off. Services like Udemy and Teachable make this even easier.
- Basic Affiliate Marketing – If you already have a website or blog, you can take advantage of affiliate promotions. An affiliate program is when a larger company offers to share revenue of sales you refer their way. Search google for “Your Industry + affiliate program.”
- Social Media Influencing – Do you have a social media account with a decent following? It doesn’t matter if it’s anything from Instagram to TikTok. A strong social media following opens you to making money from the same types of deals offered above by affiliate programs or direct sponsorships. Search google for “Your industry + social media influencer platform.”
- Design T-Shirts – Do you have some killer T-Shirt design ideas? If so, you can upload them to companies like CafePress, Zazzle, and Threadless, where they will pay you anytime they print one of your designs on a shirt (or one of their many other available items)
- Alexa Skills – Those tech-savvy can create an Alexa skill that lets them earn from Alexa Developer Rewards.
- P2P/ Peer To Peer Lending – Become an online lender without starting your own finance company using P2P lending programs like LendingClub and Prosper Marketplace. Your initial investment comes back in the form of interest rate payments as borrowers pay their bills back over time.
Unique Ways To Generate Passive Income Streams
We’re going to finish off our list with 8 unique ways of generating passive income. Some of these don’t fit in the categories above. Some of them fit in a category above but were truly so unique we decided to leave them here. You probably won’t find these methods listed in any other article about passive income stream sources.
- Rent Ad-Space On Your Car – You’re already driving your car, so why not get paid for it? Various services out there, such as Wrapify, offer a way to earn some passive income for doing something you already do!
- Cash-back Shopping – Another way to earn some passive money for doing something you already do is by taking advantage of cash-back shopping rewards. Services like Rakuten and Ibotta make it super easy to get paid for something like buying your groceries at Walmart or Target.
- Sell Your Photos – If you’re a budding photographer that has a nice collection of pictures, selling them on a service like Dreamstime is a great way to earn money for any random assortment of pictures that you’ve already taken.
- Use Certain Apps – A few companies, namely Nielsen Digital and Mobile Expression, make it easy to earn a little bit of extra income with little-to-no work simply by installing certain apps on your phone.
- Vending Machines – These guys are often the first step for young, budding entrepreneurs. The reason being is that they require relatively low investment, and profit-sharing makes it easy for you to find businesses to house your machines at.
- Rent Out Your Car – Similar to Airbnb with homes, and you can now rent out your vehicle with services like Getaround. Depending on how infrequently you need to use your car, it’s possible to make upwards of one or two thousand bucks extra each money.
- Use Spare Room For Storage – Get paid to use the spare room in your house and spare land on your property to store stuff for other people. A company called Neighbor makes it easy to get started, and they offer a $1 million liability guarantee!
There are so many ways to generate a passive income that it would be impossible to create a complete list of every method available. You can even use some of the methods we’ve listed here to branch off and develop other new passive income generators.
Whether you’ve got $0 or $100,000 to start with, the above list should at least offer a little bit of something for everyone!