33 Best Passive Income Ideas to Build Lasting Wealth

Passive income is any income you earn that requires little or no time investment from you.

This is in contrast to active income — such as a job — in which the amount of income you earn is directly correlated to your time invested.

Active income, of course, comprises the bulk of one’s income. One would have to have $2,105,967 invested in stocks with a 3% dividend yield in order to enjoy dividend income equal to the U.S. median household income of $63,179.

Your mission, then, is to make as much active income as you can so you can invest as much as you can in passive income sources.

But which passive income sources are best? I’ve listed out my top picks below, but if I don’t cover something, let me know in the comments!

Real Estate

Real estate is one of the classic forms of passive income: you own an asset — such as a home or commercial building — that someone else wants to use, and you rent it out to them at a fair price.

And though there are many ways to go about investing in real estate, I get into the most common and easily accessible ways below.

Do any of these strategies appeal to you? Let me know in the comments!

1. House Hacking

• 

  House Hacking

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  • Basics: You purchase a home or small multifamily property and rent out part of it while you live in a portion of it.
  • Pros: Since you live in the property, you qualify for residential financing at lower interest rates than commercial financing. Also, you can get an FHA loan that allows you to put as little as 3.5% down.
  • Cons: You will need to qualify for a mortgage as well as make a down payment. You will also need to live in the property for at least one year.
  • Estimated Return

    10%+

  • Required Investment

    $5,000 - $100,000+, depending on where you live and what kind of financing you choose

  • Risk

    Low to Moderate

In my twenties, I was fortunate enough to have a decent job as a CPA as well as a good credit score, which allowed me to purchase a four-unit property in the Los Angeles area where I live.

Naturally, I “house hacked” this property, living in one unit and renting out the other three.

I also rented out the single bedroom in my own unit for extra cash flow, while I slept on a mattress in the living room.

Here are the numbers on my house hack deal:

• Purchase Price: $435,000
• Monthly Rents (Including Bedroom in My Unit): $3,155
• Monthly Payment: $3,000

Now, that $155 of monthly “cash flow” would get eaten up by maintenance and repairs, so at the end of the day, I was breaking even.

But I was living for free while my tenants were paying down my mortgage, while most of my peers were shelling out well over $1,500 a month for Los Angeles rent.

And now that I’ve moved out of this property and raised the rents, I now gross over $4,800 monthly while my monthly mortgage payment has remained the same.

House hacking can be a great strategy to earn passive income, so if you have any questions about my house hacking journey, be sure to ask me in the comments!

2. Private Lending

• 

  Private Lending to Flippers

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  • Basics: To find the best deals and guarantee a quick sale, house flippers typically like to buy with cash. The only problem? They don't always have the cash on hand. This is where you come in, wiring the necessary funds into escrow at closing and then receiving them back — with interest — when the flipped home eventually sells.
  • Pros: You can earn upwards of 12% on your money with no time investment other than arranging the funds transfer.
  • Cons: Not all flips work out, so your loan will generally be secured by the property being flipped. This means that if the flipper isn't able to pay you back, you will take possession of the property. If the flipper's business has really gone south, however, you may be stuck with a partially-rehabbed property.
  • Estimated Return

    12%+

  • Required Investment

    $30,000+

  • Risk

    Moderate

Flipping houses is definitely not passive, but providing funding to house flippers is.

And if you’re looking in a truly passive way to invest in real estate, this is it.

Although I live in California, I’ve loaned money to flippers in both North Carolina and Tennessee.

You want to make sure you dot your i’s and cross your t’s when it comes to the legal agreement(s) between you and the flipper, of course.

This would typically mean having a lawyer draft the following documents for you:

• Promissory Note
• Deed of Trust

Of course, I lent directly to flippers, but sites like Yieldstreet allow you to participate in a loan portfolio secured by multiple properties, thus spreading out your risk.

3. Turnkey Rentals

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  Turnkey Properties

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  • Basics: A turnkey property is a rental property, typically outside of your own geographic area, that you purchase in ready-to-rent condition. Another company — the "turnkey" company — has already rehabbed the property and may even connect you with local property managers and mortgage lenders.
  • Pros: If you live in a high cost of living area, purchasing turnkey properties can be a great way to get started investing in rental real estate.
  • Cons: You really have to do your due diligence when it comes to buying turnkey properties, especially if you're buying them sight unseen. There have been instances where turnkey property companies have significantly misrepresented the condition of the properties they sell to naive out-of-state buyers.
  • Estimated Return

    8%+

  • Required Investment

    $20,000+

  • Risk

    Moderate

Buying a single-family home and renting it out is perhaps the classic form of investing in real estate.

The only problem is that there are certain parts of the country where the property values are so high that would-be local investors are either not able to invest because they lack the funds for a down payment or they are not willing to invest because the cash flow would be so poor.

This is where turnkey rental companies come in. Turnkey companies buy in cash properties at a deep discount, rehab them, and then sell these rent-ready properties to investors, typically from high-cost-of-living areas.

Be warned, though — some turnkey companies are on the shady side.

Think about it: An investor from California, Hawaii, or New York — where $500,000 will get you a very “average” home in many parts of the state — might think that being able to buy a rental property for $50,000 is a bargain in any market.

But the reality is that the property is in far worse condition and in a far seedier area than the turnkey company claims and in reality probably isn’t worth more than $30,000.

And to make matters worse, because the property is in a worse area than the turnkey company let on, vacancy rates are high, and the investor can’t even make the property cash flow (despite the pro forma showing a 10% “cash-on-cash” return).

Then, when they try to get out of the deal by selling the property, they find that the have to sell at a huge loss because they overpaid in the first place.

Of course, I’m not saying to avoid turnkey rentals — I’m just saying to do your due diligence and make sure that the turnkey company you work with has a long track record working with happy investors.

4. Crowdfunded Real Estate

• 

  Crowdfunded Real Estate

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  • Basics: A turnkey property is a rental property, typically outside of your own geographic area, that you purchase in ready-to-rent condition. Another company — the "turnkey" company — has already rehabbed the property and may even connect you with local property managers and mortgage lenders.
  • Pros: If you live in a high cost of living area, purchasing turnkey properties can e a great way to get started investing in rental real estate.
  • Cons: Like any real estate deal, it can turn sour.
  • Estimated Return

    8%+

  • Minimum Investment

    $500

  • Risk

    Low to Moderate

Have you ever wondered who owns the big apartment buildings and office complexes in your city or town?

Well, unlike the smaller properties that are typically, these huge properties are typically owned by a group of investors.

Investors pooling funds to purchase property is not new, but technology has made it far easier for people like you or me to get into this game through crowdfunding.

Here are the players in a typical crowdfunding deal:

• The Sponsor.  This is the company who sets the overall investment objective, buys the property (with investor capital), and oversees the rehab, management, and eventual sale — finds the deal. The sponsor typically invests some of its own money into the deal as well so it has “skin in the game,” so to speak.
• The Crowdfunding Platform.  This is the company that raises capital for the deal, essentially serving as a middle man between the investors and the sponsor. It advertises the deal, ensuring that everything is done pursuant to Securities and Exchange Commission rules, and pools investor funds.
• The Investors.  These are the people who actually earn passive income on the deal. They simply invest their capital and receive quarterly distributions then a larger distribution when the property is refinanced or sold. For tax purposes, they are typically members in an LLC or a partnership in a limited partnership and therefore each receive a Schedule K-1 reporting their respective share of the LLC’s or partnership’s income or loss for tax purposes.

Of course, as with any passive income idea, there is risk that comes with investing in crowdfunded real estate.

RealtyShares, one of the early players in the real estate crowdfunding space, shut its doors not too long ago.

5. Farmland

• 

  Farmland

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  • Basics: Some farmers, believe it or not, don't own the land that they farm on. In these situations, the land is owned by some investment partnership or LLC. To invest in this farmland, you would buy fractional shares in this investment partnership or LLC, which generates cash flow from the rents collected from the farmers as well as appreciation from the long-term increase in value of the land held within the partnership or LLC.
  • Pros: Farmland can be a great hedge against your other, more traditional investments such as equities and real estate.
  • Cons: Your investment isn't liquid, and you generally have to be an accredited investor to invest in farmland deals.
  • Estimated Return

    10%+

  • Minimum Investment

    $5,000

  • Risk

    Low to Moderate

Did you know that over 40% of all U.S. land is farmland?

You don’t have to be a farmer to reap the benefits of the United States agricultural industry.

In fact, through creative real estate investing platforms such as AcreTrader, you can own a little bit of United States farmland, collecting rent from farmers and enjoying the capital appreciation as the value of the land increases over time.

6. Flipping Raw Land Online

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  Flipping Raw Land Online

  • Basics: Most real estate investors focus on either buying existing developments or developing on raw land. Flipping raw land is an innovative approach to real estate investment that takes significantly less time and money than flipping houses or other buildings.
  • Pros: You can find raw land available for as little as a few hundred dollars depending on the desired location. It often takes very little time to clean up the property and get it into selling condition. If you’re successful, you can keep using the profits to invest in new properties and earn even more passive income.
  • Cons: You’ll only make money if you’re able to find a buyer, so you may end up holding properties for a while before flipping them for a profit. In some cases, you may be forced to take less than you paid for just to move on from the asset and invest the money in other properties.
  • ESTIMATED RETURN

    Varies

  • REQUIRED INVESTMENT

    Around $1,000, but depends on location

  • RISK

    Moderate

In many ways, flipping raw land works the same as flipping houses or buildings. You’ll try to purchase land and sell it for a profit without developing on the property (although you may want to clean up, mark boundaries, and perform other tasks to make the land more presentable).

One key benefit of this strategy is that raw land is substantially cheaper than developed properties. Even if you just have $1,000, you should be able to find at least a small amount of raw land that matches your budget. From there, your return depends on what buyers are willing to pay for the same plot.

Similarly, flipping raw land shares many of the same risks that are involved in flipping houses. If there isn’t much interest in the property, you may have to hold onto it for longer than intended without receiving any income.

If you flip properties regularly, you’ll sometimes have to sell for less than you paid.

As with other passive income opportunities, what you get out of flipping raw land depends on what you’re willing to put in. If you simply buy land and hope someone will buy it for more money, you probably won’t have much success.

On the other hand, if you’re willing to fix up land that isn’t generating interest, you may be able to turn a better profit. For example, raking leaves, marking space for a home and driveway, and cutting down inconvenient trees can make a plot more attractive to potential buyers.

Many transactions are completed in cash, but you can also offer financing options when selling raw land. This will lead to a higher overall sale price, and people are often willing to pay significantly more in total if they can make smaller monthly payments.

Renting Out Your Stuff

Houses aren’t the only thing you can rent out for profit.

While you may not be earning thousands of dollars a month from the passive income ideas below, they can still put a little extra money in your pocket each month.

7. Renting Out Storage Space

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  Renting Out Storage Space

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  • Basics: People generally rent out extra space for either temporary or long-term renters, but you can now rent out space for storage through a growing number of services. This helps people turn space into a sustainable income while giving people who need storage a more convenient and affordable option.
  • Pros: Spaces that are too small to host people can be adapted for storing personal belongings, and it’s much easier to maintain a space for storage than to keep it in good condition between renters. If you’re renting out space in your own residence, you’ll be able to generate income without having people stay in your home.
  • Cons: Storage space is typically less valuable—you can usually make more money by using your space for vacation or long-term rentals. Peer to peer storage renting is still a relatively new field, so you may have trouble finding renters outside of major cities.
  • ESTIMATED RETURN

    Varies

  • REQUIRED INVESTMENT

    Depends on location and the size of the space

  • RISK

    Moderate

Most people look for storage in dedicated units, but peer to peer storage is rapidly growing in many areas of the country. Even relatively small areas can generate a significant monthly revenue, especially if you live in an area with a high demand for space.

Neighbor, for example, supports closets and other small spaces that wouldn’t be suitable for hosting guests. This is one of the best ways to turn unused space into income.

The site also allows users to list storage space for cars, buses, boats, and other vehicles.

Rental management and maintenance can be extremely time-consuming, so storage is a good option for anyone on a busy schedule. If you’re renting out an entire room, you’ll probably have to sacrifice some income compared to what you could make by renting the same space for vacationers or subletters.

8. Renting Out Your Car

• 

  Renting Out Your Car

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  • Basics: Just as Airbnb and similar apps offer the opportunity to rent out space, Turo and a variety of other services make it easy to rent out your car. As with other rentals, your overall earnings will depend on the car’s make and model along with demand in your area.
  • Pros: Many people only drive to work, school, or other regular obligations. For example, you could use your car on weekdays and rent it out to tourists on Saturday and Sunday. Renting out your vehicle is a great way to offset car payments, insurance, and other expenses. Rental platforms generally offer coverage in case anything happens to your car.
  • Cons: Letting renters use your car will speed up depreciation, so some of your earnings will have to go to additional vehicle maintenance along with rental insurance. You’ll also be dependent on demand for rental cars during your availability.
  • ESTIMATED RETURN

    Varies

  • REQUIRED INVESTMENT

    Depends on the car

  • RISK

    Moderate, mostly vehicle damage and depreciation

Turo and similar car sharing apps enable users to rent out their cars for custom periods of time. Most listings go for roughly $40-$100 per day, although newer models can rent for even more money.

While peer to peer renting has grown dramatically over the last few years, conventional rental car services are still more common, so demand is somewhat unpredictable. That said, you should be able to rent your car out at least occasionally as long as you live in an urban or suburban area.

The key downside to renting out your car is that you’ll lose a large portion of the rental price to insurance, depreciation, and other fees and expenses. Even if you’re able to rent for $100 per day, you might only end up pocketing $60 or $70 after accounting for vehicle-related costs.

9. Renting Out Parking Spaces

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  Renting Out Parking Spaces

  • Basics: Parking spaces are valuable commodities in many urban areas. Platforms like SpotHero and Pavemint have filled this niche by connecting drivers with people who have extra space. You could earn hundreds or even thousands per month depending on your location and number of available spaces.
  • Pros: If you don’t have a car, there’s no real downside to renting out extra parking space for money. Even a single space can go for hundreds of dollars a month in major cities. For example, the SpotHero website claims that spaces in Greenwich Village start at $500 per month.
  • Cons: The legality of renting out parking varies in different locations, and it may be a gray area. Zoning rules, for example, might prevent you from using your residential space for commercial purposes. Similarly, an HOA may not approve of renting out your space.
  • ESTIMATED RETURN

    $100 to $500 per month

  • REQUIRED INVESTMENT

    An extra parking space

  • RISK

    None (as long as you research any potential legal problems before getting started)

Parking spaces are relatively new to the P2P marketplace, but there are already a few reputable startups in this field. Unsurprisingly, parking is a valuable commodity in high-density locations.

In fact, SpotHero has spaces in NYC that demand $500 or more per month.

The main difficulty with this strategy is that you may have trouble with the legal and practical implications of renting out a parking space. For example, if you get parking through your building, you won’t be able to rent out the space without permission from your landlord.

Even if they’re willing to work with you, they may ask for some of the money you earn.

Homeowner associations, local governments, and other organizations may also prevent you from renting out your parking space. That said, many people have successfully rented out spaces without encountering any major issues, and it’s a simple and painless way to earn extra cash.

Depending on your availability and the site you use, you might be able to list your spot by the hour instead of by the month. This is an easier option for people who only need their spots on certain days or at certain times.

If you have a vacant parking spot, you can turn it into passive income with very little effort.

Easy Passive Income Ideas

Real estate is a great way to earn passive income, but it takes a lot of research and often capital.

If you aren’t ready to make that kind of commitment — or sink that kind of cash into one asset — consider some of the easy passive income ideas below that require less research and cash to start benefiting from.

10. Referral Programs

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  Referral Programs

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  • Basics: Word of mouth marketing is highly valuable for most businesses, so many companies pay a significant bonus for successful referrals. Every program is different—some brands pay in cash, while others provide a store credit or discount on future purchases.
  • Pros: Referring friends and family members to new companies is a pretty simple way to earn cash. Some of your favorite brands probably offer referral programs, so you can make money by recommending the products and services you already use. You don’t have to take on any risk in order to make referrals.
  • Cons: Different programs come with different restrictions. For example, the referral might need to make a minimum order or maintain a subscription for a certain length of time. In many cases, you could successfully refer someone without receiving a reward, and you won’t have any control over whether they fulfill the requirements. Even if you manage to make consistent referrals, most companies only offer a small bonus, and it may not be redeemable for cash.
  • ESTIMATED RETURN

    No investment needed

  • REQUIRED INVESTMENT

    None

  • RISK

    None

Referrals won’t replace your day job, but some programs are surprisingly lucrative.

Like cash back apps, referrals are an easy way to earn some money on the side, and they don’t require any risk or initial investment. Cash back apps, referral programs, credit card rewards, and other seemingly small sources of income can add up to a lot of extra cash.

The top referral programs provide cash, store credit, and other perks for each successful referral.

Of course, some brands offer better rewards than others. Rakuten, for example, pays $25 in cash every time a referral spends at least $25. There’s no limit on how much you can earn through the referral program.

11. Real Estate Investment Trusts

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  Real Estate Investment Trusts

  • Basics: Real Estate Investment Trusts, or REITs, enable investors to pool their money in order to buy real estate. REITs are required to pay 90% or more of all taxable income to shareholders, so most of your gains will come as dividends.
  • Pros: Many REITs are publicly traded, making them easier to buy and sell than funds and other assets that can’t be traded on an exchange. You’ll receive substantial dividends every year without losing any equity, and you can defer income tax on dividends by investing through an IRA or 401(k). REITs have generally provided excellent returns since their inception in 1960.
  • Cons: The 90% payout requirement gives you more money upfront, but it also removes money that the fund could have used to invest in other assets. Furthermore, dividends from REITs count as taxable income. While real estate technically makes your portfolio more diverse, real estate values are closely tied to the overall market.
  • ESTIMATED RETURN

    10-12%

  • REQUIRED INVESTMENT

    Usually at least $1,000, but some providers allow smaller investments

  • RISK

    Moderate in the short term and low in the long term

REITs are similar to crowdfunded real estate investments in collecting money from investors and use it to buy assets. On the other hand, they’re also different in several important ways.

Unlike crowdfunding, REITs are often traded on public exchanges, making them easier to buy and sell as needed. They’re also legally mandated to pay out at least 90% of all taxable income to investors, meaning that you’ll receive most of your gains in the form of dividends.

You can also invest in a real estate investment trust without being an accredited investor, which is required for many crowdfunding projects. Individual accredited investors have a consistent income of at least $200,000 ($300,000 for joint filters) or a net worth of at least $1 million.

These minimums are out of reach for many Americans, making REITs significantly more accessible to the middle class.

REITs are also different in that they generally invest in a wider range of properties. That said, you can also find REITs that focus on specific types of real estate like self-storage, infrastructure, or resorts and hotels.

Owning a smaller share of more properties reduces risk by diversifying your portfolio.

12. Rewards Credit Cards

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  Rewards Credit Cards

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  • Basics: Many credit cards give rewards for using the card that can be redeemed for cash back or travel points, and it seems that every year new cards are released with even more rewards opportunities. If you haven't checked out rewards credit cards for a while, be sure to check out our list of the best cash back credit cards and the best travel credit cards to see what's out there right now.
  • Pros: By using a rewards credit card, you're essentially getting a discount on every purchase you make. Over time, that adds up to quite a bit of money back in your pocket that you earned without having to really do anything differently other than use the right credit card.
  • Cons: Some credit cards come with an annual fee, so you have to make sure that the rewards you earn will be more than this fee. Also, if you don't pay off your balance every month, the credit card interest you owe will likely outweigh any rewards you earn.
  • Estimated Return

    2%+ on spending

  • Minimum Investment

    $0

  • Risk

    None, as long as you pay off your balance every month

Unless you live under a rock, you’re probably aware that certain credit cards give you cash back or travel points with every purchase.

What you may not know is that just over the course of 2019 and now 2020 several new cards have come out that have significantly upped the ante when it comes to rewards credit cards.

If you’re only earning 1-2% back on every purchase, you’re missing out. Be sure to check out our lists of the best cash back, travel, business, and 0% APR credit cards on the market right now.

13. Fine Art

• 

  Fine Art

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  • Basics: Similar to crowdfunded real estate, you can now invest in crowdfunded fine art through a company called Masterworks with as little as $1,000.
  • Pros: Historically, fine art had provided investors high returns as well as a hedge against more traditional investments.
  • Cons: This is a new and untested form of crowdfunded investing that is currently being promoted by only one company, so proceed at your own risk.
  • Estimated Return

    8%+

  • Minimum Investment

    $1,000

  • Risk

    Moderate

Fine art is ridiculously expensive; Leonardo’s Salvator Mundi, for example, sold a few years back for $450 million.

What makes it even crazier is that this piece of art sold for $60 in 1958. No, not $60 million. $60. As in ten times six.

While not every piece of art enjoys appreciation like that, art is still a viable investing vehicle and one that until recently has only been available to the 1%.

Now, however, Masterworks is democratizing the game by purchasing pieces of fine art and making them into investment securities, which allows them to market these pieces to the public as an investment opportunity.

Masterworks, of course, takes a hefty piece of the pie — a 1% annual management fee as well as 20% of the profits — so any claims about the lucrative returns on art over a certain time period must be weighed against these costs.

14. Cash Back Apps

• 

  Cash Back Apps

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  • Basics: Just like they sound, cash back apps give you cash back on purchases when you snap a picture of your receipt in the app.
  • Pros: Cash back apps are super low effort and can be fun to use.
  • Cons: While using cash back apps is definitely easy money, it's never going to be a huge passive income stream.
  • Estimated Return

    1%+ on spending

  • Minimum Investment

    $0

  • Risk

    None

Cash back apps give you essentially free money or gift cards for remember to use the app while or after you shop.

While the earnings aren’t huge, using cash back apps is an easy, low-effort way to put some extra change in your pocket and counts as a passive income idea in my book.

Examples of popular cash back apps include Ibotta for grocery shopping, GetUpside for gas, and Rakuten for online shopping.

15. Dividend Stocks

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  Dividend Stocks

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  • Basics: You purchase stocks of companies that pay a quarterly dividend to investors.
  • Pros: Dividend stocks are super passive; you simply buy the stock, and the dividend is deposited to your account every quarter. Also, you can choose to automatically reinvest your dividends for future growth.
  • Cons: There is no guarantee that a company that pays dividends now will pay dividends in the future.
  • Estimated Return

    Typically 2% - 3%, not including capital appreciation.

  • Minimum Investment

    Typically none, but depends on the broker.

  • Risk

    Moderate in the short-term and low in the long-term.

Many people think that the only benefit of stocks is that they go up in value in the long run — which is generally true — but another benefit is the passive cash flow you can receive today via dividends.

Also, you don’t have to pick and choose individual stocks to invest in. You can rather invest in an index fund that are constructed to match the components of some index, many of which are built around dividend stocks.

16. Peer-to-Peer Lending

• 

  Peer-to-Peer Lending

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  • Basics: You pick and choose loans from specific borrowers you want to fund in increments as small as $25.
  • Pros: Peer-to-peer lending returns are generally independent of the stock and real estate markets, making peer-to-peer lending a diversification strategy.
  • Cons: Since peer-to-peer lending -- at least in the form in which it exists today -- is such a new industry, its long-term returns are untested.
  • Estimated Return

    3 - 5% as a rough estimate, but varies wildly.

  • Minimum Investment

    $25 - $1,000, depending on the platform.

  • Risk

    Moderate to High

Many people think that the only benefit of stocks is that they go up in value in the long run — which is generally true — but another benefit is the passive cash flow you can receive today via dividends.

Also, you don’t have to pick and choose individual stocks to invest in.  You can rather invest in an index fund that are constructed to match the components of some index, many of which are built around dividend stocks.

17. Small Business Bonds

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  Small Business Bonds

  • Basics: Small businesses are always looking for funding. A growing number of apps connect companies with people who want to invest some extra cash. You’ll earn a relatively reliable return on your investment while helping small businesses access the cash flow they need to survive and grow.types including spreadsheets, coloring books, workbooks, and full-length books.
  • Pros: Small business bonds usually offer a better return than other low-risk alternatives like high-yield savings accounts. Worthy only requires a minimum investment of $10, enabling you to start generating returns even if you only have a little extra cash.
  • Cons: On average, stocks perform better than bonds, although they may also involve more risk. The seemingly small difference between 5% and 7% (which you might earn on an ETF or mutual fund) can add up to a lot of money, especially if you’re investing over a long period of time. Unlike investment accounts, small business bonds may not be insured.
  • ESTIMATED RETURN

    5%

  • REQUIRED INVESTMENT

    $10

  • RISK

    Low

Business owners often look to banks and investors for funding, but you don’t need a large investment to generate returns on small business bonds. Small business bond apps allow you to invest in a large pool of bonds, diversifying assets and reducing your overall level of risk.

As usual, avoiding risk also prevents you from achieving the greatest possible returns. Risk tolerance is ultimately up to you, but experts often recommend only keeping a small percentage of your portfolio in bonds. In general, you should put more money in bonds when you’re investing over a short period of time.

If you’re buying into a pool of bonds through a larger service, you’re depending on their ability to vet debtors and get back payment. Keep in mind that they’ll also take a significant cut of the bond yield.

Another disadvantage of small business bonds compared to bond funds is that bond funds include a much larger volume of bonds. Risk mitigation is one of the main reasons to consider bonds over stocks, so it makes sense to look for the safest option.

Worthy Bonds is a good place to start if you’re interested in investing in small business bonds. Worthy offers a fixed 5% interest rate for as little as a $10 investment. Bonds mature over three years, but you can cash out anytime if you’d rather move the money somewhere else.

Online Passive Income Ideas

Maybe you don’t have a lot of money, but you have a lot of time.

If this is the case, the internet has opened the door for you to put in the time and effort to create a passive income stream now.

No, these online passive income ideas certainly aren’t “passive” when you start out, but they become more passive over time as you complete your body of work and see the ad revenue roll in.

18. YouTube Channel

• 

  YouTube Channel

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  • Basics: You create content on YouTube and receive a portion of the ad revenue generated when people watch the ads before, during, and/or after your videos.
  • Pros: Once you have built out a substantial library of content that gets consistent viewership month in and month out, your YouTube channel can become a low-maintenance source of passive income.
  • Cons: Creating and monetizing a YouTube channel is certainly not passive at first unless you take on the risk of hiring out your production process.
  • Estimated Return

    Varies

  • Minimum Investment

    Nothing but your time

  • Risk

    None, other than lost time

By now, you’ve probably heard of famous YouTubers making millions of dollars per year.

They are constantly putting out content and typically have an entire team helping produce their videos.

And it can feel a little disheartening when you try to start your YouTube channel with nothing but your smartphone and your laptop.

But everybody has to start somewhere.

Just know that you will have to work ridiculously hard at the beginning and put out a lot of content when you are first starting your channel.

And you won’t make any ad revenue at first because now YouTube requires you to have at least 1,000 subscribers as well as 4,000 public watch hours over the previous 12-month period.

That said, once your channel is monetized and you have a body of work that continue to get views every month, your YouTube channel can become a truly passive revenue stream for you in perpetuity — or at least as long as YouTube is around.

19. Blog

• 

  Blog

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  • Basics: You create content on your blog and monetize it via ad revenue, affiliate commissions, and/or promoting your own digital products.
  • Pros: The returns can be astronomical. Theoretically, you can shell out a few hundred dollars for web hosting and a good theme and make a full-time income within a year or two. Of course, having this kind of success that quickly will require a substantial upfront time investment.
  • Cons: Starting a blog takes work and won't be truly passive for months or even years after you create it. This is definitely a long-term strategy.
  • Estimated Return

    Varies

  • Minimum Investment

    $100 - $300 for good hosting and a website theme

  • Risk

    None, other than lost time and a few hundred dollars

Like starting a YouTube channel, creating and monetizing a blog will take a substantial upfront time investment, and you will likely not earn much if any money for the first six months as you build out your content and following.

That said, once you have developed your advertising and affiliate partners, built out your content base, and set yourself up for success on both social media platforms and for SEO purposes, your blog can hum along nicely and generate you a substantial revenue stream.

Think of your blog like a piece of real estate with each blog post as another unit that you have to put to its highest and best use, doing what’s best both for you as the owner as well as your readers (“tenants”) and providing them the best experience possible.

If you’re just getting started with blogging, I’d recommend that you check out the videos I’ve published on my Blogging Done Right Youtube channel.

20. Digital Downloads

• 

  Printables

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  • Basics: You create a downloadable digital product and sell it online.
  • Pros: You can theoretically create a good printable in an afternoon, get yourself set up on Etsy tonight, and have your first sale by the morning. The great thing is that once people are able to search for and find your digital download(s), they can continue to create income for you forever.
  • Cons: It can be tough to stand out in a sea of digital downloads.
  • Estimated Return

    Varies

  • Minimum Investment

    None

  • Risk

    None, other than lost time

While starting a YouTube channel, blog, or podcast is more of a long-term play, you can make money creating and selling digital downloads online relatively quickly.

Here’s how the process works:

• You identify an informational need in the market — something people want to learn more about, but the information about this topic is scattered or not well-organized online.
• You create a downloadable digital product — such as a Word document or PDF file — that meets this informational need.
• You sell this digital download, either on your own site or a platform like Etsy (no, Etsy’s not just for jewelry anymore).

If you’re interested in profiting from niche digital downloads, I’d recommend Sharon Tseung’s course.

21. Ebook

• 

  Ebook

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  • Basics: You write a book and sell it online.
  • Pros: Once an ebook is published, it is your income-producing asset forever.
  • Cons: Writing an ebook takes time and will certainly feel like unpaid labor while you're writing it. Also, there are literally tens of millions of books on the market today, and there is no guarantees that yours will sell.
  • Estimated Return

    Varies

  • Minimum Investment

    None

  • Risk

    None, other than lost time

Here’s the good news: it’s easier than ever to be an author!

And here’s the bad news: it’s easier than ever to be an author.

Look, I’m not going to sugarcoat this: there are tons of ebooks out there whose authors sacrificed time, sleep, and sanity to complete them and yet never sold more than a few dozen times.

On the other hand, of course, there is a small fraction of ebook writers who do actually enjoy a five- or even six-figure annual passive income stream from their ebook creations.

So if you love writing — and believe me, you really have to love it — creating an ebook could be your ticket to passive income.

22. Online Course

• 

  Online Course

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  • Basics: You create an online course and sell it online.
  • Pros: While an online course can take hours, days, weeks, or even months to produce, once you create it and successfully market it, it will create income for you indefinitely.
  • Cons: An online course takes an immense amount of time to create. Also, there's no guarantee that it will sell. The rewards here can be very large, but you can also spend a lot of time on something that won't make you any money if you don't do proper market research.
  • Estimated Return

    Varies

  • Minimum Investment

    None

  • Risk

    None, other than lost time

Similar to ebooks, an online course is one of those passive ideas where you have to put in the “sweat equity” now to make money in the long run.

However, creating an online course is not something that can just be done in an afternoon.

And unlike a $10 ebook — where the written word and maybe some graphics is all you need — the end buyer’s expectations are higher with a $499 or $999 online course.

They will probably expect videos and perhaps even a well-moderated community of students.

If this sounds daunting to you, perhaps start with an ebook and if you start to build a devoted audience, move on to a higher-ticket online course.

23. Renting Out Your Lock Screen

• 

  Renting Out Your Lock Screen

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  • Basics: Renting out your lock screen might sound like a scam, but a few companies offer surprisingly good rewards just for installing their app and using a specific lock screen. While you won’t earn a substantial income, this can be a reliable way to make a few extra dollars on the side.
  • Pros: S’more and other businesses provide rewards in exchange for installing apps, using your phone, and other easy actions. Renting out your lock screen is truly passive—some apps give you other ways to make money, but these are entirely optional.
  • Cons: You may be paid in gift cards or other rewards rather than cash, and you probably won’t earn more than a few dollars per month. Furthermore, some services are notoriously unreliable, and you may have trouble getting in touch with their support team if you experience any problems.
  • ESTIMATED RETURN

    Up to around $5 per month

  • REQUIRED INVESTMENT

    None

  • RISK

    Moderate—make sure to thoroughly vet the app before getting started.

There are a variety of ways to earn money on your phone, but most of them require you to perform certain actions such as watching videos, testing apps, or shopping online. Renting out your lock screen is even more passive, helping you earn money just for installing an app and unlocking your phone.

S’more is one of the most popular lock screen apps, although it’s currently only available on Android. Users earn points for installing the app, using their phone, referring friends, taking surveys, and more. Points can be redeemed for gift cards from a wide range of retailers.

Similarly, Slidejoy connects users with advertisers by charging for space on your lock screen. This is a great spot for brand visibility, and some of the revenue gets passed on to you. You don’t need to click on ads or make purchases to earn rewards, and points can be redeemed for PayPal credit.

In general, you won’t be able to earn much more than about $5 per month by renting out your lock screen unless you also complete other offers (e.g. taking surveys). On the other hand, this is one of the easiest ways to make money if you don’t care about what’s on your lock screen.

Unfortunately, neither of these apps have great reputations. S’more has a rating of just 3.1 stars on the Google Play Store, while Slidejoy is at 3.9. Customers report having trouble contacting support and receiving payouts, and these issues seem to be common among lock screen apps.

With that in mind, you shouldn’t start using an app before checking reviews and looking through their website. While you really can earn passive income by renting out your lock screen, it’s important to stay vigilant in order to avoid being scammed.

24. Downloadable PDFs

• 

  Downloadable PDFs

  • Basics: It’s easier than ever to self-publish PDFs, and there’s an audience out there for virtually any subject. You could generate a reliable passive income if you’re able to stand out in your niche and differentiate your content from the competition. This works for a wide range of content types including spreadsheets, coloring books, workbooks, and full-length books.
  • Pros: You can either sell through a platform like Amazon for maximum exposure or use your own site in order to keep more of the profits. There’s no limit to how much you can earn by selling printables, and the income is entirely passive once you develop the PDF.
  • Cons: You’ll only make money when someone buys your product, and it can be difficult to get visibility with so many other creators out there. You may have to take some time for research in order to identify a niche where your brand is likely to succeed.
  • ESTIMATED RETURN

    Depends on sales

  • REQUIRED INVESTMENT

    • Website (unless you’re planning to sell on an established platform)—Shopify Basic costs $29 per month
    • Time

  • RISK

    Moderate—you won’t have to invest much money into the project, but you may end up spending a lot of time developing content for a relatively small return.

Traditional publishing structures can make it tough to get your content out there, but you can self-publish online with a relatively small budget. Along with full-length books, content creators also sell a variety of PDFs such as guides, coloring books, and budgeting spreadsheets.

Self-publishers have two main options. Some authors sell content on their own websites through ecommerce sites like Shopify. This approach allows you to keep almost all of your revenue, and you’ll have full control over the website’s design.

On the other hand, the accessibility of self-publishing has also made it more difficult to stand out from the crowd. Listing your products on platforms like iBooks and Amazon will give you more visibility in exchange for more of the profits. Apple, for example, takes 30% of all iBooks sales.

Regardless of how you choose to sell, a popular PDF can be an excellent source of passive income, and you won’t have to do any additional work beyond creating the document.

Some people are able to make a living by selling content online, but you shouldn’t go into this project expecting to quit your day job. Even high-quality content can go unnoticed, and many authors have trouble generating reliable sales.

25. Stock Photos

• 

  Stock Photos

  • Basics: Stock photos are an easy way for brands to add visual content without investing in professional photography. You can sell photos to stock photo websites like Shutterstock in exchange for a percentage of all sales.
  • Pros: After taking and uploading a photo, you won’t have to do any additional work to earn passive income. If your photos become popular, you could make a surprising amount of money just from stock photo downloads. There’s constant demand for photos of all kinds, and you can maximize earnings by targeting specific audiences.
  • Cons: Just as the rise of web content and digital marketing created demand for stock photos, it also created a massive supply. No matter what kind of pictures you want to take, you’ll almost certainly be competing with experienced photographers.
  • ESTIMATED RETURN

    Varies

  • REQUIRED INVESTMENT

    None (a high-quality phone camera is sufficient)

  • RISK

    None

Companies are always looking for stock photos of all kinds, and you may be able to find good photo opportunities in your everyday life. They might buy photos of anything from your latest vacation to the exterior of your home, and it’s easy to upload pictures to several websites.

Stock photo sites usually pay a set fee or percentage on each download, so how much you earn comes down to your popularity. You could approach it as a full-blown side hustle or more of a hobby depending on how serious you are about selling stock photos.

Anyone with a decent phone camera can start taking and selling stock photos, so it’s a relatively approachable field considering the potential for significant earnings. While some people have trouble making any substantial amount of money, others earn thousands of dollars per year on stock photos alone.

Unusual Passive Income Ideas

Who says making passive income has to be boring?  Check out the passive income ideas below that you may not have heard of before.

26. Putting Ads on Your Car

• 

  Putting Ads on Your Car

  • Basics: Cars are a great way for brands to increase visibility. You can get paid just for putting ads on your car, with exact rates based on your car’s make and model along with your location and driving habits. Different platforms may offer more or less for the same vehicle.
  • Pros: You’ll be able to make money without renting out your car and losing money to depreciation. Just as renting out a car can pay for car payments and other expenses, getting cash for ads will offset the cost of gas. People who spend more on gas will also earn more money for ads, and you can further increase your earnings by displaying more ads.
  • Cons: You might not like the idea of putting ads on your car, and some companies will require a long-term commitment. Even if you wrap your entire car in ads, you’ll probably have trouble earning more than $100 or $200 per month, which may not even be enough to cover gas. While many companies are legitimate, you’ll need to watch out for a well-known fake check scam.
  • ESTIMATED RETURN

    $50-$200 per month

  • REQUIRED INVESTMENT

    Depends on the car

  • RISK

    None

Aside from any aesthetic concerns, putting ads on your car is one of the most painless and straightforward ways to earn passive income. Depending on your car, location, and average driving distance, you could earn $100 or more per month on your commute.

In general, car advertising platforms are willing to pay more for additional advertisements. You can now connect with advertisers on numerous platforms, so enter your information on a few sites to find the best offer.

It’s worth mentioning that many people have deposited bad checks for scammers who pretend to represent legitimate businesses.

They’ll ask you to deposit the fake check and forward the money to a third party. This tactic is particularly common on and around college campuses.

To avoid the scam, always look for car advertising opportunities online rather than responding to unsolicited emails.

Never agree to forward money for someone you don’t know. Even if their check initially clears, the funds could be removed from your account later on after someone notices and reports the error.

27. Selling Plasma

• 

  Selling Plasma

  • Basics: Plasma is used to treat a number of conditions, and you can make as much as $50 each time. The first visit usually takes two hours. Each subsequent visit should be closer to 90 minutes. The American Red Cross recommends selling or donating plasma no more than once per 28 days, which works out to around 13 times per year.
  • Pros: You can sell plasma more than once per month, and the whole process only takes a couple hours out of your day. Your plasma will also be used to help other patients. This is one of the best ways to earn passive income while making a real difference in someone’s life.
  • Cons: Donating plasma isn’t exactly a pleasant experience, although most people report only minor pains. You may also experience side effects like dizziness, lightheadedness, and dehydration. Plasma donation centers generally pay in prepaid cards rather than cash, and some ask donors to give plasma more often than is considered safe.
  • ESTIMATED RETURN

    $25-$50 per month

  • REQUIRED INVESTMENT

    Around two hours for the first visit and 90 minutes every time after that

  • RISK

    Discomfort and other uncommon side effects; the risk of complications increases if you donate more than roughly once per month

Plasma is a highly valuable resource in the treatment of many medical conditions. Donation centers pay donors—usually in prepaid cards, but sometimes in cash—for each visit.

From there, it’s used to treat trauma, burns, shocks, severe liver disease, and other health issues.

The American Red Cross claims that it’s safe to donate plasma as often as once per 28 days. You can donate a different amount of plasma per visit depending on your weight—the current thresholds are from 110 to 149 pounds, 150 to 174, and 175 to 400.

Similarly, different centers offer different payouts for the same quantity of plasma. In general, you’ll get around $25 to $50 every time you donate, but you should compare local offers to find the best deal.

The process is relatively straightforward, and it shouldn’t take more than two hours for your first visit or 90 minutes after that. On the other hand, it can be surprisingly painful, and some donors experience side effects such as dizziness, dehydration, and lightheadedness.

Unfortunately, it’s common for donation centers to offer additional rewards to people who donate plasma more often. This is an extremely predatory practice as they may downplay the seriousness of the side effects associated with making too many donations.

Furthermore, centers generally have certain requirements for donors—for example, you may need a minimum body temperature or iron level in order to donate. You won’t know whether you meet these restrictions until being tested, so you may end up making the trip for nothing.

Selling plasma isn’t a bad way to earn passive income, but you should have a thorough understanding of the health risks involved, especially if you’re thinking about donating more than once per month. At one donation per month, you could make $500 or more per year by selling plasma.

28. Music Royalties

• 

  Music Royalties

  • Basics: While music royalties are traditionally traded within the industry, the market has recently become more accessible to private investors. More and more people are approaching royalties as an investment opportunity, and they’re available on numerous online exchanges.
  • Pros: Music royalties generate income in two ways: you’ll earn a steady income every year, and you can also resell them later on. Royalty Exchange claims that the average ROI on royalties is over 12%, slightly higher than many other investment opportunities can offer. The website also displays royalties from the last year to give you an idea of your potential earnings.
  • Cons: Royalties worth investing in can be extremely expensive, and they may not be as predictable as more traditional investments like index funds and ETFs. For example, most Royalty Exchange auctions start in the thousands or tens of thousands of dollars. Music royalties are subject to copyright law, so they don’t provide the same permanence as tangible assets.
  • ESTIMATED RETURN

    12%

  • REQUIRED INVESTMENT

    Roughly $5,000 or more

  • RISK

    High, especially if you put a lot of money into a small number of investments

Music royalties are an increasingly popular investment. Royalties pay out annual dividends while also offering the potential for long-term gains. Individual royalties are less reliable than collections of multiple assets, but even relatively affordable royalties can cost thousands of dollars.

Royalty Exchange claims that the average ROI for music royalties is 12%, while index funds generate an average of roughly 10%. Economic conditions can affect their value, but music royalties are relatively insulated from the rest of the market, so they can be a good way to diversify.

Of course, putting large amounts of money into individual investments is inherently risky, so it’s important to understand the potential for loss when investing in music royalties. If a musician or genre loses popularity, their royalties could experience a dramatic price drop in a relatively short period of time.

Safe Passive Income Ideas

A lot of the ideas above involve some sort of risk in that you could lose a significant amount of money or time.

Just know that these safer forms of passive income will likely not yield the same kinds of returns that you will find with the other ones on this list.

29. High-Yield Savings Account

• 

  High-Yield Savings Accounts

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  • Basics: You deposit money into an online high-yield savings account and earn interest.
  • Pros: Apart from a complete breakdown of the U.S. financial system, there is no risk.
  • Cons: Returns are far lower than you could earn with other passive income sources.
  • Estimated Return

    2%

  • Minimum Investment

    Typically none, but depends on the bank

  • Risk

    None

If you have your money parked at a brick-and-mortar bank, then I hate to break it to you, but you could be earning a lot more in interest at an online bank.

Online banks don’t have all the overhead — think personnel and leasing costs — that brick-and-mortar banks do, so they can pass on some of these savings to their customers in the form of higher interest rates.

30. Certificate of Deposit

• 

  Certificate of Deposit

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  • Basics: You deposit money for an agreed term and earn interest on it at a guaranteed rate. Your rate does not change, even if interest rates change.
  • Pros: Apart from a complete breakdown of the U.S. financial system, there is no risk, and unlike with a mere savings account, you lock in an interest rate today.
  • Cons: Returns are far lower than you could earn with other passive income sources, and your investment is typically not liquid as most banks charge a penalty for early withdrawal.
  • Estimated Return

    2.15% - 2.30%, depending on the term

  • Minimum Investment

    $500 at the low end, though some banks require significantly more

  • Risk

    None

High-yield savings accounts are great, but their interest rates can change at any time.

With a certificate of deposit, however, you commit to keeping your money deposited with the bank for a specified period of time, and in return you are guaranteed a certain interest rate.

So even if interest rates drop, your earnings are not affected.

That said, this can work against you as well: if interest rates increase, you could very well wish you hadn’t locked up your money at a lower rate.

Old-School Passive Income Ideas

While passive income is having something of a renaissance now in 2020, I bet your grandparents had passive dreams of their own, though they probably looked a little different than yours.

You may dream of having a YouTube channel generating thousands of dollars in ad revenue monthly, while gramps may have dreamed of one day owning a laundromat.

Below are some of the most common and successful old-school passive income ideas.

31. Laundromat

• 

  Laundromat

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  • Basics: You provide a place where customers can wash and dry their clothes for a fee.
  • Pros: The business is self-service, so there's little to no interaction with customers, and you can eventually outsource the management to an employee.
  • Cons: There is a high up-front capital investment, and beyond that, running a laundromat isn't as easy as it looks. There are maintenance issues, customer complaints, and more. Also, since laundromats are often in low-income areas, and they typically have lots of cash (or at least coins) in-store at any given moment, there is the risk of break-in.
  • Estimated Return

    Varies

  • Minimum Investment

    $200,000+ depending on size and location, but can be financed

  • Risk

    Moderate

Everybody has to clean their clothes, and while some are fortunate enough to have a washer and dryer in their home, others use a laundromat.

However, don’t go off thinking that you can just purchase a laundromat and never have to think about it again.

While eventually your laundromat may be a “coin cow,” in the early stages you will likely have to be doing a lot of the low-level work yourself.

32. Vending Machines

• 

  Vending Machines

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  • Basics: You stock machines with prepackaged foods and drinks, which customers purchase with cash and coins.
  • Pros: Vending has the potentially to be an extremely passive business model, but in the early stages, you will likely need to invest your time as well as your capital.
  • Cons: Location is everything, and given that vending machines have been around for over 100 years, many of the best urban locations are already taken.
  • Estimated Return

    Varies

  • Minimum Investment

    $1,000+

  • Risk

    Moderate

Ideally, once you purchase a vending machine and place it in a well-trafficked location, all you have to do is make sure it’s well-stocked and then collect your cash.

Of course, getting into the vending business is not as easy as it sounds, and you should be sure to do your research before jumping in headfirst.

33. Buying a Car Wash

• 

  Buying a Car Wash

  • Basics: Running a business is inherently active, but car washes are one of the easiest options for people who want to earn a relatively passive income. You can create a new car wash from scratch if you want, but it’s typically easier to buy one that’s already operating.
  • Pros: Purchasing a car wash reduces risk and gives you upfront information about the location’s cash flow. You’ll also avoid some of the more complicated aspects of opening a business such as construction and zoning. Car washes don’t need more than one or two employees at a time, so there’s very little overhead compared to other business models.
  • Cons: Purchasing a business is a major investment, so you’ll need a lot of cash on hand (and/or a loan) to get started. It may take a long time to break even on your initial investment, and even buying an existing car wash carries a significant level of risk.
  • ESTIMATED RETURN

    Depends on location

  • REQUIRED INVESTMENT

    Depends on location

  • RISK

    Moderate, higher if opening a new car wash

Owning a physical business is different from many of the other passive income opportunities on this list. That said, car washes are generally easier to oversee than other companies, and they also come with relatively little overhead.

The average in-bay car wash costs $6.34, yielding an average of $4.35 in profit. In other words, most of the cost of each wash will go directly into your wallet, and you won’t have to spend much time or money managing the business to make sure things are running smoothly.

Of course, running a business isn’t for everyone. Even if you decide to purchase a car wash from another owner, the sale process can be complicated and time-consuming. Furthermore, no business comes without risk.

The best way to mitigate risk if to buy an existing car wash and go over its numbers to confirm cash flow.

Considering your initial investment, it could take years to break even on the money you spent to buy the car wash. That said, you’ll have a significant monthly income to rely on for as long as you want to hold onto the business.

If you’re ready for such a strong commitment, buying a car wash is one of the most lucrative ways to earn passive income.

Frequently Asked Questions

• What Is Passive Income?

  Passive income is any income you earn from a business or other enterprise in which you are applying little or none of your own efforts.

• How Is Passive Income Taxed?

  Generally speaking, most passive income you earn will fall into one of two categories:

  Investment Income
  Real Estate Income
  Business Income

  Investment income is passive income such as interest and dividends that is reported on Schedule B of your Form 1040. Certain “qualified” dividends are taxed at preferential tax rates, and others “non-qualified” dividends are taxed at the normal, ordinary income tax rates.

  Interest income is almost always taxed at the normal, ordinary income tax rates.

  Business income such as blogging and YouTube revenue, though it can be passive, is considered business income by the IRS and should be reported on Schedule C.

  Real estate income is just what it sounds like: income you earn from rental real estate or the sale thereof. This income is subject to special passive activity loss rules and is reported on Schedule E of your Form 1040.

• Which Passive Income Idea Is Best?

  When it comes to personal finance and making money, “best” is extremely subjective.

  In order to determine which passive income idea is the best one for you, you have to articulate to yourself what you prioritize in a passive income stream. Is it:

  Low or no time investment?
  Low or no financial investment?
  Highest returns?
  Lowest risk?

  Once you answer this question, you’ll be able to accurately determine which of the passive income ideas I list above is the best one for you.