“Passive Income” Ideas For Creators, Investors, and Everyone Else
Side hustles are great — but what about side not-so-much hustles? In other words, what if you could supplement your income without adding to your regular workload? That’s basically what the idea of passive income offers.
Although generating passive income will involve an investment of some type — be it time or money — the on-going impact can add up to much more. On top of that, there are now several different options for making extra money, ranging from creative projects to clever investing.
So, if you’re looking to increase your income by passive means, let’s take a look at a few popular ideas — but first, let’s talk about what the concept of “passive income” really means.
Is “Passive Income” Really Passive?
Not really. Thank you for coming to my TED Talk.
But seriously, the term “passive income” is less than ideal. That’s partially because it comes from the good ol’ Internal Revenue Services (IRS). According to them, a “passive activity” is a “Trade or business activities in which you don’t materially participate during the year.” There are several examples the IRS gives for what would take an activity from being passive to your “materially participating,” such as working more than 500 hours on an activity in a given year. Thus, you can see how’s there’s a lot that can fall under this category.
Definitions aside, I like to think of passive income in a few different ways. First, it could be something that you pour work into upfront but pays ongoing dividends. Then there are the truly passive income opportunities where your money is really doing the work for you — although some of these do require some risk on your part. Finally, another form of passive income in my mind is the kind where you make money by outsourcing the day-to-day operations of what would otherwise be active work to other people (or machines).
For this list, we’ll look at all of these forms of passive income and perhaps some that fall somewhere on the spectrum between “passive” and “active.” Moreover, each of these options are customizable, so you can decide how to balance your time with the potential returns. Okay — onto the list.
For Those Who Create
Write a book or ebook
This is one of several examples on this list that I have some experience with. Since publishing my first printed book The E-Ticket Life in 2015, I’ve continued to receive royalties from book sales fulfilled through Amazon (meaning I don’t lift a finger) even in between the times when I actively attempt to hawk my books at the biennial D23 Expo. On top of that, I also have an ebook all about writing and publishing your own book titled Write, Print, Publish, Promote that also generates revenue without much effort on my part.
For both titles, I used Kindle Direct Publishing (actually The E-Ticket Life was published with CreateSpace, which has since folded into KDP) to distribute my book. As I mentioned, under this arrangement, Amazon handles the printing and shipping of my book and provides me a commission on each copy. What’s also nice is that the commission is based on the list price, so Amazon discounting the book doesn’t affect my cut. Plus, if you do want to sell copies of your book yourself — either on a website or in person — you can purchase them at a heavily discounted price.
Create an online course
Sharing your knowledge and passion in a book is one thing, but what about taking things to the next level and creating a course? This is actually something I’m currently working on right now thanks to Teachable’s Creator Challenge (spoiler: my course will actually cover that next suggestion on this list). What’s great about online courses is that you can not only help people learn new skills and invest in themselves but you can also create the material once and see revenue from it again and again.
Although I’m currently building my course with Teachable, there are several other online course hosting sites as well. This includes Udemy and Skillshare. Each of these sites comes with their own pros and cons that you’ll want to consider, such as their pricing structure, their course searchability, and more.
Start a YouTube channel
Did you know that making money on YouTube isn’t exclusive to Gen Z vloggers or video game streamers? It’s true — as I’ve learned first hand in recent months. Although Money@30 is small channel of just over 3,000 subscribers, I’ve been able to earn as much as $600 a month in revenue. Most importantly it continues to grow each month and I think I’ll be hitting $1k/month before the end of the year.
Granted, I do actively manage my YouTube channel, uploading new content on a weekly basis. However, the bulk of my earnings actually comes from older videos that have “hit.” It just goes to show that, if you have a high-ranking, popular video on the platform, you could continue to see revenue from it for some time. On top of that, you can also monetize your content via affiliates or even sponsorships.
P.S. — if you want to learn more about getting started on YouTube and making your first $1,000 on the platform, be sure to check out my series on the topic and keep an eye out for my upcoming course.
Try affiliate marketing
Speaking of YouTube, one of the ways I started monetizing my channel even before I was eligible to run display ads was through affiliate links. If you’re unfamiliar, affiliate links are custom links to products or services that, when used by others, could result in a commission for you. Commonly this monetization practice is used by bloggers but can also be utilized by YouTubers, podcasters, and those with the incredibly vague role of “influencer.”
In order to be successful with affiliate marketing, there are a few things you’ll need: a platform, a product, and a pitch. By “a platform,” I mean a medium for reaching people — be it a blog, YouTube channel, or social media. Next, you’ll need a product (or hopefully several products) to have affiliates relationships with. A good way to find affiliate opportunities is to start by looking to see if the companies you use and enjoy offer any programs. Sometimes these programs will have restrictions of requirements — such as having a certain traffic threshold — but it’s worth looking into nonetheless.
Finally, having a pitch means creating content that can highlight a product in a natural way. For me, this often means doing honest reviews of apps or services (although not all of my reviews are for affiliates). However, you may also find an opportunity to share affiliate links within other pieces of content, placing them wherever a recommendation makes sense for the topic at hand.
Something to keep in mind when it comes to affiliate marketing is that are rules for how you should inform your audience that you may be compensated for their purchases. These rules aren’t completely clear, but the FTC’s guidelines are a great place to start. It’s also helpful to look at how other content creators are disclosing affiliate relationships. Finally, in my opinion, it’s important to be mindful about the products and companies you’re promoting with affiliate links. Pushing a subpar product you don’t believe in just because you think it will sell might make you a few dollars in the short-term but could cost you your credibility over time.
Take and sell stock photos
This is one option I’ve heard about and have been somewhat interested in but have never seriously pursued. That may be because I’m not so much a “photographer” as much as I am a “guy with a phone.” In any case, there are now several sites that allow photographers to sell their images and receive a commission when someone purchases a license to use them. So, if you’re ready to monetize your hobby and put your skill to work, this could be a great option.
For the Risk-Tolerant
Invest in real estate by buying properties
To me, just the term “real estate” has a ring of wealth and status. That’s probably because many moguls have made millions in the space. Your adventures in real estate might not lead you to such heights, but being a landlord can generate passive income.
While purchasing a home is certainly a major investment, leasing that home can provide you with “mailbox money” as your tenants pay rent. The only problem is that not every renter pays on time — or at all. Thus, your title of “landlord” may involve more work than you might be hoping for. Luckily, if you’re willing to part with some of your profits, you can hire a property manager to take care of issues with tenants.
Invest in real estate via crowdfunding
If buying and managing a property doesn’t sound like your style and/or purchasing a building is a bit outside of your price range, there are other ways you can still invest in real estate. These days, there are real estate crowdfunding sites. Be warned that some of these options are only open to accredited investors — meaning those who’ve made at least $200,000 for the past two years or have a net worth higher than $1 million (excluding the equity of your main residence). Still, others do allow non-accredited investors to participate.
Some of the real estate crowdfunding and REIT (real estate investment trust) platforms out there include Fundrise, Rich Uncles, Realty Mogul, Patch of Land, PeerStreet, and more. In addition to a few of these only being open to accredited investors, they also have varying minimum investments. Plus many of the platforms offer tailored portfolio options to help you better reach your investment goals.
Fund peer-to-peer loans
Around the time of the Great Recession, when big banks began pulling back on their lending, a new type of loan was coming of age. Peer-to-peer (P2P) lenders like Lending Club and Prosper have come a long way since then but the idea itself remains largely the same: match borrowers looking for loans with investors willing to fund said loans. In return, you can earn a piece of the interest a borrower pays.
Although you could, if you really wanted to, fund an entire loan by yourself, there’s a better way to invest on P2P platforms. With Lending Club allowing you to put as little as $25 toward funding a loan, you can help manage your risk by purchasing smaller stakes in multiple notes. On top of that, many platforms offer some form of automation that will purchase notes based on the criteria that you set — it all depends on just how passive you want your passive income to be.
Buy dividend stocks
It’s safe to say that most people realize that, as an investor, you make money when a stock goes up and you sell it for more than you paid. Yet, there’s another big way shareholders can make money with their portfolio: dividends. Simply put, a dividend is a portion of profits that a company decides to pay shareholders. For example, The Walt Disney Company recently announced a dividend of $0.88 per share, netting this big-time shareholder a whopping $1.76.
While some investors elect to roll dividends into buying more stock, others use these payments as passive income. As a result, you can find lists of stocks that have traditionally paid out an impressive dividend. At the same time, since there’s always a trade-off, companies that tend to pay large dividends also tend to have lower growth rates than, say, tech stocks. But, if it’s passive income you’re after, this style of stock investing may make sense for you.
For the Risk-Averse
Open high-yield savings accounts
When you were little, were you told how putting your money in the bank would allow it to grow? Well, that’s technically true — but, these days, you better choose the right bank. While most of the big banks might pay you .01% interest, online and s0-called “challenger” banks tend to offer APYs far higher, allowing you to actually earn money on your savings.
Since bank paid interest rates tend to fluctuate for a number of reasons, I won’t bother listing any account-specific interest rates. That said, currently you can find online savings accounts that pay as much as 2% APY. Some of the online banking services I personally use include Discover Bank, SoFi Money, and Marcus by Goldman Sachs, although Ally and Synchrony Bank are also popular, high-paying options.
Try certificates of deposit
Certificates of deposit (CDs) are kind of like savings accounts, except that you won’t be able to access your money for a set period of time. You could almost think of it as setting your money inside of a time capsule you dig up at a later date — and find some extra cash in it. Again, the interest rates on CDs can vary over time but it’s currently not uncommon to find options paying 2% APY or higher. Your rate will also likely depend on the length of your CD, with longer-term options typically paying more.
One popular strategy for investing in CDs is known as laddering. Jim Wang of Wallet Hacks does a better job explaining the process than I could, but it seems effective. Of course, before you get too carried away, perhaps it’s best to give your first CD a try and see how it goes.
All lot of the time, when people talk about a balanced investment portfolio, they’ll mention having a mix of stocks and bonds. In this case, the bonds are seen as the safe investment that helps hedge the risk of those oh-so-volatile stocks. While they may be less risky than stocks and, thus, yield smaller returns, bonds can still earn you some passive income.
Interestingly, there are now several types of bonds you can consider. For example Worthy Bonds advertises a fixed interest rate of 5%, term rates of 36 months, and have a minimum investment of just $10. While I haven’t personally purchased any Worthy Bonds for myself yet, I have seen several other personal finance bloggers give them positive reviews. So, although they may not be entirely risk-free, they may be worth a shot.
For Those With Assets to Rent
Offer up a room/home on Airbnb
Unless you’ve been living under a rock (or a city where they banned it before it even caught on), you’ve surely heard about Airbnb. The popular/loathed site allows you to turn your home into a bed and breakfast by listing your spare bedroom or your entire home for others to stay in. You can manage your listing on the site, approve renters, and then work your magic to try to get the best rating you can and attract future guests.
As I alluded to, one big thing to note when it comes to Airbnb is that it may not be legal in your neck of the woods. Moreover, even if it is technically legal, several cities have been cracking down on the short-term rentals industry, meaning this opportunity could quickly dry up — plus it might lead to issues with your neighbors. This isn’t to put down Airbnb or dissuade you from renting your home, but you’ll definitely want to be mindful about your investment and have a Plan B in case your city council is the next one to take up the issue.
List your car on Turo
Do you have an extra car in your family that doesn’t get used a whole lot? Well, instead of letting it sit idle in the driveway, you may be able to rent it out and make some extra cash. Today, platforms like Turo allow you to list your car, set rental rates, and find people who will pay you to use it for a few days.
Compared to Airbnb, personally, I find the Turo route to be less work. Maybe I’m naive but it seems like prepping a car for rental would be easier than cleaning a room or an entire house. As for how much you can make, Turo offers a few different options depending on how much insurance you want, with your cut ranging from 65% to 90%. They also have a “car-culator” on their site that will attempt to estimate how much you could earn by listing your vehicle — but, not having tried renting my own car, I can’t really speak to its accuracy.
Even if “passive income” isn’t always as passive as its name may imply, it’s still often better than the 9 to 5 grind (just ask Dolly Parton). Plus, with new platforms and services popping up every day, there are now more ways than ever to generate passive earnings. Whether you invest your time in creating something you can sell over and over, put your cash into something with some risk, choose to play it safe, or look to your unused possessions for rental opportunity, what’s important is finding an option that works for you and will keep the passive income rolling in.