62 Best Passive Income Ideas to Make You Money in 2021
Become financially independent faster with passive income, the Holy Grail of making money!
One of my favorite money quotes is from Warren Buffett, the Oracle of Omaha himself. He says, “If you don’t find a way to make money while you sleep, you will work until you die.”
Ain’t that the truth!
What is Passive Income?
Before we jump into the passive income ideas, it’s important to remember the purpose of making money passively.
Passive income is money that just shows up in your bank account month and after month while you’re sleeping. It’s reoccurring income that takes little or no effort on your part to earn and maintain.
If you’re constantly trading your time to earn money, there will always be a maximum amount you can personally make. But setting up passive income streams means you can spend your time on other activities, and your earning potential is unlimited.
Earning passive income can provide you a nest egg to help in case of sudden unemployment or a healthcare deductible. It could also allow you to upgrade your next vacation spot, pay for a house project, and get caught up with your retirement goals.
Best of all, the extra financial security can give you some peace of mind, knowing that even when you’re relaxing or taking a break, you’re still making money with these new streams of income!
How to Make a Passive Income
So, how do you make money while you sleep? The good news is that you don’t need to reinvent the wheel with passive income ideas, and you have plenty of free educational resources to help you learn how to create it.
But let’s get something straight: earning passive income takes a lot of work to set up. There are very few ways to make serious money with no effort. But there are a ton of ways to make a lot of money over time by putting in the upfront effort.
Yes, it takes initial effort and money to start building passive income. Investment of money, investment of time, and for most passive income streams… both! Over time though, as you stack up multiple passive streams, your income will start snowballing. With each new investment, you’ll see more money coming in every month.
Eventually, your passive income streams will bring in enough money to cover your expenses. At that point, you’ve reached financial independence: you are no longer dependent on your 9-5 job to live. You can retire in your 30s if you want, or wait until your 80s.
How to Start Making a Passive Income
So, how do you get started investing all that money you’re saving? What are your options for passive income investments?
The following passive income ideas run the gamut from easy to difficult, low-return to high, high-risk to low. Consider what your financial goals are when factoring in which options to choose and be sure they match.
There are a couple primary ways to make a passive income stream. One way is through a monetary investment. Many only require an initial investment as low as $500. The other way is through an investment of your time, such as starting a side hustle.
As you peruse the list, pick two or three that jump out at you.
How Many Passive Income Streams Should You Have?
There is no “on size fits all” approach, but for beginners I recommend you pick two or three from the list below that jump out at you. Don’t try to invest in more than that for now—each passive income idea has a learning curve, and if you bite off more than two or three, you’ll find yourself with too much to chew. As you mature in these areas, slowly branch off into others.
62 Passive Income Ideas for 2021
Here are the best passive income ideas to help you earn money while you sleep:
- Crowdfunded Rental Properties
- High-Yield Dividend Stocks & Funds
- Certificates of Deposit (CDs)
- Store People’s Stuff
- Refinance Student Loans
- Start a Blog
- Real Estate Investment Trusts (REITs)
- Peer to Peer (P2P) Lending
- Make Money Watching TV
- Refinance Your Mortgage
1. Crowdfunded Real Estate
Investment real estate is near and dear to my heart.
In an extremely long-term study measuring returns over the last 145 years, guess which investment beat out even stocks for the best returns. That’s right: rental properties.
Best of all, rents and real estate values combine the low volatility of bonds with the high returns of stocks. And like stocks, investors benefit from both ongoing residual income as well as value appreciation.
Crowdfunding real estate companies like CrowdStreet let you invest in rental properties in a completely hands-off procedure. If you’re an accredited investor with a higher net worth, they might be right for you. They require a $10,000 minimum investment but allow you to invest directly into the commercial real estate of your choosing (versus the “beginner” or “long term growth” portfolios that competitors offer), and better yet, CrowdStreet charges nothing in fees.
If you want to ease into the waters with a much lower initial investment, consider Fundrise. With a relatively small investment of $500, your return will be paid as a purely passive stream of income. I make about $500 a month through my own Fundrise investments. The low minimum makes this accessible to most and provides plenty of options for property investment.
Roofstock takes it a step further by giving you the option to buy and sell existing rental properties in whole. You get a complete profile of each investment property and can see how much they currently earn. They offer crowdfunded portfolio and individual units as well for passive income.
|Company||Min. Investment||Fees||Next Steps|
|Roofstock||$0 ($5,000 for Roofstock One)||Varies||Invest Now|
To learn more, read our comparison post on real estate crowdfunding websites.
You can also read up on how to make money from house hacking, another popular strategy for making passive income through real estate.
2. High-Yield Dividend Stocks & Funds
While most dividend yielding stocks pay only 1.5-3.5% in dividends at best, a minority pay high yields in the 6-8% range. You don’t have to be an expert though—take the opportunity to learn.
Granted, a dividend yield is not written in stone. If the company has a bad quarter, it may not pay a dividend at all. Or the company may go out of business entirely, for that matter. That’s the risk you run with equities.
Instead of trying to pick an individual dividend stock, another option is investing in mutual funds and ETFs that specialize in high dividend yields. Try researching funds on either your investment bank’s stock screener, or use a free service like Yahoo’s stock screener if you haven’t opened an account yet with an investment bank.
Watch out for high fund management fees. Actively managed funds often charge high fees, which can eat up much of the fund’s returns.
When in doubt, invest in a passively managed, low-cost index fund. According to Matthew Frankel from The Motley Fool, 92% of actively-managed funds have underperformed the market over the last 15 years.
To learn more, check out these best investing strategies.
|Robinhood||Fee-free app-based trading||Invest Now|
|Ally Invest||Trade stocks and ETFs for free||Invest Now|
Robo-investing is a method of investing that diversifies your portfolio and uses algorithms to enhance yields.
In other words, robo-advising gives your investment strategies that AI edge that is currently all the rage in trading.
Robo-investing is a fantastic time-saver (no more wasted time in laborious research on which stocks to invest in) which is exactly what passive income is about. Platforms like Betterment allow you to opt for flexibility—automagically ride the market while reducing volatile risks that come with traditional investing.
In short: higher returns, passively.
We definitely recommend Vanguard’s Digital Advisor for robo-investing. They require an initial investment of $3,000 to enroll and charge an annual net advisory fee of about 0.15% of your Digital Advisor balance (around $4.50 a year for a $3,000 portfolio). But with that Vanguard provides ongoing, automated investment management while you barely lift a finger.
|Betterment||0.25% annual maintenance fee||Get started|
|Vanguard||0.15% advisory fee||Get started|
4. Certificates of Deposit (CDs)
Certificates of deposit are about as exciting as late-night poker reruns on ESPN. Still, if you want to park your money somewhere safe and insured by the FDIC, CDs can at least help you reduce your losses to inflation, while generating a tiny bit of passive income.
Just be aware upfront that CDs require a minimum deposit period. For example, you may need to leave your initial investment untouched for at least a year. But it will give you a slightly higher return than a high yield savings account.
Consider using CDs in conjunction with other investments when you need to set money aside in a 100% secure place, for example, to store a tenant’s security deposit. If the alternative is parking it in a savings account, at least a CD will be generating passive income in a small way.
Check out today’s best CD rates.
CIT Bank CDs provide a great way to grow your savings. Offering competitive rates and flexible terms with no fees, you can’t go wrong with CIT Bank!
Best Side Hustles for 2021
If you’re looking for how to get started earning cash on top your 9-5, you’re in luck! We just published our completed guide “The Best Side Hustles for 2021.” It features our top 23 side hustles that can earn anything from a little extra spending money to thousands of dollars per month! Just enter your e-mail below and we’ll send you the full guide!
Thank you! Please check your e-mail inbox now to receive the The Best Side Hustles for 2021 guide!
5. Rent Out Storage Space
Did you know one in 11 Americans pays for extra storage space?
The self-storage industry is booming and has been for years. As passive income ideas go, this business model is a pretty simple one.
While you could buy or build a full-scale commercial self-storage complex, that’s not the only option. My friend Deni used to rent out space in her garage! And no, it wasn’t enough to make her rich, but the passive income covered about half of her mortgage payment and required no work or headaches on her part.
It’s also far less regulated than the residential rental industry, making evictions far cheaper and faster if the worst happens and your renters default.
A company called Neighbor proclaims itself to be the AirBnB of storage. And we highly recommend them!
It’s easy to turn your basement, garage, spare room, even closet, into passive income and a great side hustle, earning up to several hundred dollars a month. In New York City, they estimate a spare basement rental to generate almost $10,000 in extra cash per year!
6. Refinance Student Loans
Refinancing your student debt, even at half of a percent lower, could save thousands of dollars in interest payments over the life of your loan. It doesn’t get more passive than that.
It only takes a quick application to check current rates available to you and will not impact your credit score.
On top of that, Millennial Money readers may get additional cash signup bonuses when refinancing with one of these companies.
7. Start a Blog
Whatever you’re passionate and knowledgeable about, share it with the world!
No matter how small the niche, other people in the world share your enthusiasm. Did you know there are blogs dedicated to sungazing, the practice of staring at the sun and consuming your energy that way instead of eating? Seriously: you can start a blog about anything.
As your blog builds traffic, you can monetize it by mentioning affiliate products or services, publishing ads on the blog, or by selling your own products or services.
Starting a blog might be the perfect side hustle: you can do it on your own time, build multiple passive income streams, meet new people, and unlock tons of new opportunities.
It also only takes a low initial investment, but offers tons of income potential.
Just remember: like traditional investing, a blog is a long-term play. You won’t generate income on the first post you publish. But keep sharing good content and solid advice, and the returns will find momentum.
The important part is to just 👏 get 👏 started 👏.
I started blogging simply because I love thinking and writing about money. But along the way, I’ve made over $1 million as a result of launching the Millennial Money blog 3 years ago.
If you’re interested in getting started but want more info, I offer a free 7 Day Blogging Side Hustle Email Course that shares the exact strategy I used.
8. Real Estate Investment Trusts (REITs)
A real estate investment trust, or REIT, tends to pay generous dividends.
Why? Because a REIT typically invests in income-producing real estate or high-interest debt service, so they’re inherently more passive income-oriented investments.
REITs tend to do well when real estate markets are performing well, and their dividends and values suffer when real estate markets suffer. But one advantage with a REIT is that investors can buy and sell just as quickly and easily as mutual funds, on the same exchanges, yet still benefit from the diversification of entirely different markets.
Just because equity markets may crash, it doesn’t mean real estate markets will, and vice versa. If you’re looking to diversify your portfolio into real estate but don’t want to invest directly, REITs can be a high-yield option.
9. Peer to Peer (P2P) Lending
One not-so-dissimilar passive income option is lending money to individuals through P2P lending websites like Lending Club and Prosper.
You can pick and choose the borrowers and loans that you like, browsing through the loan requests on these websites. If the loans interest you, start with a small amount of money for your first loan. An amount that wouldn’t cripple you financially if you never saw it again.
The returns typically range in the 6-10% spectrum—nothing to scoff at. Of course, at the higher end of that spectrum, expect the risk to be significantly higher too.
As you get more comfortable with evaluating loans on these platforms, you can gradually scale up your investments. While I have not invested in P2P website loans myself, I’ve known other passive income investors who have seen great success with them.
Note that P2P websites tend to make personal loans, rather than real estate investment loans.
10. Make Money Watching TV
If you have a habit of watching movies, television, or playing video games, there are several ways you can turn this activity into a passive income stream.
Participating in official surveys for companies or watching specific programs through a website can earn you some extra cash.
You can also stream your activity on a streaming service or on YouTube. Video game streaming is already a huge business, and if it’s something you enjoy, you can easily capitalize on that activity.
11. Private Equity Funds
Speaking of accredited investors, typically private equity funds are only available to these wealthier investors.
A private equity fund is a pooled fund that invests in a large-scale project, whether it be a large real estate investment project, a startup company, or some other investing venture. The fund is managed by an individual or management group that oversees the fund’s investments.
Often private equity funds require medium to long-term investment, measured in years.
While private equity is not a passive income opportunity available to most of us, they can make excellent passive income streams for the wealthy, and are worth mentioning as a possibility after you make your first million or two.
12. Rent Your Car or Parking Space
Familiar with Turo? It’s a simple enough concept: “Airbnb for cars.” Individuals can rent their cars out short-term to other individuals. Yet another example of the sharing economy at its best!
Turo does provide state-minimum insurance with all bookings, and several options for car owners to add more protection if desired. Still, make sure you do your homework to fully understand all risks and liability for your car before renting it out on Turo.
While I’ve never rented out my car on Turo, I have used it many times as a renter. My experiences have been mostly positive, and it saves me hundreds of dollars every time I rent a car on vacation.
I’ve known some car owners to build up a fleet of cars that they rent on Turo, generating considerable passive income. It also makes for a great way to generate ongoing cash from your old cars rather than trading them in to the dealer for pennies on the dollar! Get started with Turo today.
Did you know that the average vehicle is parked 96% of the time? Parking spaces are highly valuable. Especially if you live in a city. Individual parking spots can go for as much as $375/month in San Francisco. Let’s say you live in a less expensive city; I bet you could get $100/month, or $1,200/year! Draft up a contract and rent it out!
13. Private Notes
Like the idea of investing in real estate, but don’t want the hassles of ownership and property management?
One option is to lend other real estate investors money for their deals. You can lend directly to investors in the form of a private note and negotiate whatever interest rate is acceptable to both you and your borrower.
For example, I have a loan out right now with a real estate investing couple in Ohio that I know and trust. They have an excellent track record of success. For a nine-month note, I’m earning 1% per month, or 12% annually.
The risk? If the borrower defaults, you may have little recourse, unless your note is attached to the property’s deed as a lien.
A word to the wise: This passive income stream is not for beginners. Private notes can be incredibly lucrative and even safe, but only to the extent that you know and trust the investors involved.
14. Write a Book
My book, Financial Freedom: A Proven Path to All the Money You Will Ever Need for Penguin Random House, was released in February, 2019.
The book is a blueprint for fast-tracking financial independence through personal finance, investing, and entrepreneurship, all broken down step by step. It’s the why, what, and how. I share all of the mistakes I’ve made with stories and strategies from others who’ve done it too. It’s not your typical money book.
Through royalties, publishing a book is a passive income strategy that will continue to pay. Check it out!
15. Publish an Ebook
Similarly, publishing an ebook for Kindle is one of the best ways to make passive income as a writer.
Self-publishing on Amazon is easier now than ever. There are no startup costs, and you don’t have to convince a publisher to take a chance on your book. Whenever someone buys and downloads your book, you receive author royalties. If you’re serious about it, you can make thousands of dollars in passive income by self-publishing on Amazon!
16. Create an Alexa Skill
Alexa is the new frontier in personal devices. Just as with apps on smartphones, there is a way to create content on Alexa that you can profit from passively.
The Alexa equivalent of apps are called skills, which are little programs that work with Alexa’s voice-based system to generate content for the end-user. Creating a useful skill can yield high returns to Alexa’s growing user base.
If you have the technical skills to master this, you can see excellent returns on creating Alexa skills.
Much like data entry, transcription work is relatively mindless and can result in plenty of profit.
Transcriptionist work is more like active income, but its flexibility makes it a qualifier for this list. As a transcriptionist, you are tasked with listening to audio files and transcribing them. Simple enough, but it typically pays per audio hour. This means that if the audio file is one hour long, you are paid for one hour of work. You usually aren’t asked to transcribe long periods, so this can be a flexible way to earn cash.
18. Buy Royalties
Never heard of the Rule of Thirds or an arpeggio? No sweat. You can buy other artists’ royalties, already pumping along as passive income streams.
There are entire websites dedicated to buying and selling royalties. Try Royalty Exchange to get a sense of what kinds of royalties are available for sale.
Just make sure the royalty rights you buy are just as likely to continue generating sales in the future. Some art forms have a limited lifespan, as anyone who danced the Macarena can attest.
19. Build an Affiliate Marketing Niche Site
A niche website is a site built to attract visitors online with very focused interests. The goal is to become the authority on a specific topic. Content is exceptionally high quality and addresses specific questions related to that topic. The niche site targets a precise keyword, with high search volume, and provides solutions. Typically, search engines boost these sites to the top of the results page.
Check out how this guy flipped a niche website for $40,000 in just four months.
An affiliate niche website is one that monetizes the site using affiliate marketing and affiliate programs.
With affiliate marketing, you can earn commissions each time someone clicks on an advertiser’s link posted to your page. When you sign up for an affiliate marketing program, you’ll usually be given a personalized affiliate link. These links take users to the official signup page for the software/service but reward you with credit for each new customer you bring in.
These programs are usually free to join, but you may need to be a current customer to participate.
When you sign-up for an affiliate program with recurring commissions, you’ll often be given access to a member dashboard where you can generate affiliate links, track signups, and choose your payment method.
Most of the time, affiliate programs will pay you affiliate income every 30 to 60 days via PayPal or bank transfer. Each company is different, though, so make sure that you clarify payment times with the software company.
20. Start a Podcast
No John Steinbeck with the written word? No problem. Writing is a skill, and not everyone is interested in developing it. Another medium for generating useful, educational, or entertaining content is by, well… talking!
If you have a touch of charisma and don’t mind a microphone, try starting a podcast rather than a blog. Just like with a blog, you can earn money from affiliates, or advertisers, or by selling your products and services.
And no, you don’t need a $500 microphone or fancy home studio to get started. Start with a quick Amazon search for the best podcasting headsets under $50 to keep your initial investment low.
21. Create an Online Course
Online courses have skyrocketed in popularity over the last five years. Once again, what are you passionate and knowledgeable about? Try making an online course.
If you love it, someone else does too. An online course can be the perfect complement to your blog or podcast: you provide free content to attract the right prospects, then offer a full-service, comprehensive, step-by-step digital course for the ones who are ready to take the next step.
I’ve built several online courses myself. Our blog and landlord software serve mom-and-pop investors looking for how to make passive income from rentals. But for our users who want to go a step further, we have courses on how to retire within five years on rental income, and on how to automate their property management.
Online courses are a tricky way to start if you don’t already have a website. But if you’ve been building good content and attracting an audience through your blog or podcast, consider an online course as a way to “level up” your business from affiliate products and advertisers.
22. Sublease to Housemates
After the highfalutin options available only to accredited investors, ready to come back down to middle-class reality?
If you’re just beginning your search for passive income ideas, this is an easy place to start. The first home I bought was a townhouse in a happening, historic neighborhood in Baltimore called Fells Point. I wasn’t ready to invite my then-girlfriend (now-wife) to move in with me, but I didn’t need this entire house to myself, either.
So I advertised on Craigslist and Zillow, and showed the property, and collected and screened rental applications. I ended up leasing to a woman named Erika, who later became a close friend, and whose rent covered nearly three-quarters of my mortgage payment.
As an added benefit, she paid for half the utility bills, and sometimes we even shared (or more often took turns with) cooking responsibilities.
Eventually, she met her future husband and moved out, and my future wife moved in, but the four of us have remained incredibly close over the years. We even traveled to northern Italy together a few years back—and shared those expenses, too.
23. Start an E-commerce Business
Yes, digital products help you avoid the logistics of shipping. But we all still live in the physical world, and we all still need physical products.
What physical products do your online users want or need?
While I don’t sell physical products in my business, if I were to expand into them, I could offer products like lockboxes for vacant rental properties, or smart locks that can be opened by anyone to whom the landlord grants access. No matter what your website’s niche, there’s almost certainly a set of physical products your users want or need.
And no, you don’t need to ship the products yourself. Use a drop shipping company to handle all the logistics for you. One more way to add passive income streams to your online business!
24. Buy an Existing Business
Starting a business is a lot of work. Trust me, I know. It’s been the hardest thing I’ve ever done, not just financially or strategically, but emotionally.
If you like the idea of owning a business, but don’t want to go through the hurdles of starting your own, you can skip all the early startup headaches and buy an already-profitable and functioning business.
Brick-and-mortar, e-commerce, online application, or software—you name it, you can buy it. Browse a few businesses for sale on BizBuySell to whet your appetite and see what passive income source best suits you.
But if you’re serious about the idea, do in-depth research into the industry, and don’t stop at a single business listing website. Buying a business is an enormous commitment, not just of your funds, but as a business owner, you hold the employees’ careers in your hand. It’s a responsibility that you can’t take lightly.
Do your homework on the business and industry in question. When you think you’ve done all the due diligence, go back and do even more. Remember, the goal is passive income, not active income. If you buy a business that you have to run personally, it’s not truly passive and you’ll have to continue to work for money.
25. Outsourcing Your Business
Although businesses profit from the hands-on activity of the owners, it’s sometimes more prudent to connect your service or product with outsourced labor.
Outsourcing labor can deliver quality results while you spend time working on other areas of your life. It can be a way to increase productivity for your firm, but it’s mostly about transitioning away from active income and giving you more time to live your best life.
Several services exist to connect your business to outsourced talents, like Cloudpeeps, Fiverr, Guru, PeoplePerHour, and Upwork. You can also create your own platform for outsourcing talent through social media or networking sites.
This requires a knowledge of highly technical programming skills, but automating online services like advertising or content creation can be a passive income booster.
For a truly passive income generation, automating modern services is an effective way to trawl the net and gain income. Such services are in very high demand and can be used in any other side hustle or passive income business you may create.
Sure, you can hire a manager to oversee any business. But some businesses are designed from start-to-finish with only one goal: stacking up passive income streams.
The classic example is a laundromat. Every washing machine, at every location, is a little automated worker, ready and willing to generate passive income every hour of every day.
27. Vending Machines
A lot of brick and mortar businesses have spaces that can be utilized by entrepreneurs to deliver small goods at a cheap price.
While vending machines require inventory supply lines and maintenance, they are a good way to increase passive income streams and develop business relationships at the same time. You can start small with just a few machines with minimal initial investment, then grow residual income slowly by putting the extra income you earn back into more machines and locations.
Other passive income ideas for automated machine services include arcade games, pinball machines, ATMs, and batting cages.
28. Start a YouTube Channel
Whether you review products, give your opinion on local events, or perform entertaining work, there are many ways to earn income passively through a YouTube channel.
While YouTube rewards channels that have higher viewer counts with built-in ad revenue, the easiest way to make money on YouTube is through product endorsements. These can be your other passive revenue products like ebooks or secondhand sales, or you can use affiliate marketing to create on-click revenue.
One video product review could net you several hundred thousand views depending on the item, and a site that perpetually draws in thousands of viewers per video can net a clean passive income.
29. Stock Photos
If you’re a photographer or have access to an extensive portfolio, monetizing your photos through the internet is possible on Dreamstime.com. You can sell the rights to your photographs to businesses and brands that would like to use them.
It’s also possible to start a small business photo exchange if you’re a passionate photographer. There are a lot of local art shows and exhibitions where you can display your work and create new consumers.
30. Buy and Sell Domain Names for Websites
A lot of people are building businesses online, and a catchy name is a significant part of a marketable brand. Having the right name is crucial to reaching out to a targeted audience.
Investigating new markets and using some creativity to purchase domain names that organizations would find useful can help you earn some cash. This is also great if you have business ideas and would like to do market research of your own.
31. Create Software
Technically inclined? If you have the skill to write software, you can create code that other people pay to use on an ongoing basis.
Or not—if you see a need that’s not being met, you can hire someone else to create the software, and then you can sell it as a passive income stream.
Many of us think of software as having a short shelf life, as becoming obsolete quickly. But that’s not always the case, especially for niche software in specific industries. Even when the software does need frequent updating, you can hire a software engineer once a year to modernize and improve it.
And “software” is a broad term. It can include mobile apps, WordPress plugins, online applications, and countless other types of digital property.
If you’re wondering how to make passive income as a software creator, the options don’t end with a one-time sale. You could offer the freemium model of “free with in-app purchases,” or the subscription model of a SaaS (software as a service) website, or annual subscriptions, or a reseller licensing fee.
The options are only as limited as your vision with any residual income idea!
32. Manage Social Media Accounts
Small businesses know that to be successful in today’s marketplace, you need to have a social media presence. However, many small business owners do not have the time to keep up with social media.
If you have a knack with social media, you can help local businesses maintain basic social media pages for contracted monthly fees. This isn’t as passive as other options on this list, but you can turn the time spent aimlessly scrolling in the grocery store line into profitable time spent posting for your clients.
33. Get Paid to Install Apps on Your Phone
Admittedly, you won’t get rich from this one. But every penny counts, right?
One option is behavior-tracking apps, which aggregate data from as many users as possible to create an accurate snapshot of how people use their mobile devices. Nielsen Digital and Mobile Expression are two such examples, which offer rewards to users who allow their usage to be tracked.
But these usage-tracking apps aren’t the only option. If having your behavior tracked is too Orwellian for your taste, why not use an app that helps you save money automatically?
Apps like Acorns and Chime move money to savings for you without you having to lift a finger. In some cases, they round up your debit card purchases to the nearest dollar and transfer the difference to your savings account. If you approve, some of the apps even invest the money into index funds on your behalf.
- See our list of all the Best Passive Income Apps to Make Money
34. Rent Out Rooms (or Full Units) on Airbnb
Don’t want a full-time housemate?
Consider renting your spare bedroom(s) to short-term guests with a service like Airbnb. You can set your own schedule and only rent out your space when you feel like it.
That means if your in-laws are coming next month, you can block off those dates on Airbnb.
But the possibilities don’t end with renting out spare bedrooms. If you’re going on a two-week trip yourself, why not rent your entire home on Airbnb?
Or, for that matter, buy rental properties specifically to rent on Airbnb, rather than screening and leasing to long-term tenants?
My friend Zack just converted his rental property (also in Fells Point, incidentally) to a short-term vacation rental. And it took some work: he had to furnish the property, turn on utilities in his name, and create a system for guests to access the property without him being physically present.
But when the work was finished, he booked several months’ worth of mortgage payments within the first day of listing the property on Airbnb.
35. Financial Reward Programs
There are several opportunities to cash in on financial rewards from credit cards, promotional offers, and apps.
Many credit card companies offer cash reward bonuses for signing on to their credit line and cashback for purchases using the card. Several promotional offers can be found that offer discounts on prices for popular objects. Some apps incentivize use by offering a substantial percentage point decrease in price.
Although these offers are frequently limited and require spending to maintain, they can be part of a strategy of increasing overall cash flow.
36. Become an Angel Investor
Unlike lending or being an active participant in the decisions of the businesses, angel investing is about finding companies you believe in, pumping in capital, and waiting for the company to make it big.
Using a website like AngelList, get connected to several businesses looking for cash flow in exchange for equity or future profit indexes. This is good for a diversified portfolio or if you have plenty of savings on hand.
37. Inventory Investment for Small Businesses
A lot of companies need money to get off the ground, but what about businesses that need help supplying customers with their products?
A website, kickfurther.com, gives you the ability to invest in companies meeting their inventory needs. You’ll see a return on your investment when the business turns a profit.
This is a way of investing in a different part of the business cycle than usual.
38. Invest in a Food Truck
Food trucks are not only delicious, but they are an excellent source of revenue! If you know someone who wants to start a food truck but needs a little backing, investing in them can be a good financial decision.
Because they are low maintenance and can go right to the customer, food trucks have become a popular startup idea. People are always looking for delicious food, and food trucks are an excellent low-risk start-up idea to invest in.
When you invest in a food truck, you will receive a payout when they turn a profit. Or, you can structure the investment as a loan that is paid back in installments with interest, generating passive income for you monthly.
39. Rent Personal Items
Just like renting homes or rooms, renting out personal property is a way to increase your passive income stream.
Sites like FatLlama can help you advertise your things to people who may be interested in renting it. Although you might need to purchase insurance and perform maintenance to keep your stuff up to snuff, the benefits of renting out personal items means regenerating your cash flow and recuperating expenditures.
40. Rent Out Old Baby Gear
Baby equipment is a frustrating expense. Babies need cribs and highchairs, but they ultimately grow up, and that equipment becomes useless.
If you have any baby equipment, you can rent it to new parents on sites like BabyQuip.com. This can turn into a passive side hustle and put old baby gear to use again.
41. Lease Equipment
Own some equipment you’re not using? It could be anything: farm equipment, industrial equipment, office equipment, even your lawnmower. Someone could use it.
For that matter, you could lease furniture to Realtors looking to stage homes, or lease party tents, or those bouncy-houses that kids jump around in at the county fair.
Again, there’s a niche for everything. And an opportunity for anyone brainstorming how to make passive income.
42. Sell Retargeting Advertisements
One way that marketers increase their reach is through a process known as retargeting.
In retargeting, personal information scripts are taken from websites to recalibrate advertising in future page clicks for consumers. This means that consumer information from your website can be used by marketers to help them guide consumers to their own internal advertising processes.
If you choose this kind of advertising, this should be reflected in your terms of service for your site. If not, you could find yourself facing backlash for data use violations.
43. Freelance Graphic Design
Freelance graphic design can help build your toolkit for a career in design and also scratch your creative itch.
Similar to a social media manager, freelance graphic designers work with small businesses or brands who want to improve the look and feel of their brand. You would create content for their website, social media channels, or newsletters. If you are skilled in InDesign or Photoshop, graphic design is a great way to generate additional income.
44. Sell Your Clothes
Have you ever pulled a piece of clothing out of your closet and realized you’ve never worn it? Try selling it online!
Sites like Poshmark or ThredUp allow you to sell or trade-in your old clothes for cash or site credit. You can earn some of the money back that you spent on a clothing item. This means that the dress you bought years ago and never wore is not an entirely sunk cost.
Plus, buying clothes secondhand prevents them from ending up in a landfill. After all, one man’s trash is another man’s treasure!
45. Sell Your Plasma
If you’re at all queasy about blood or needles, feel free to skip this one.
A money-earning scheme commonly used by college students, selling your plasma can be a way to earn a few bucks when you need it.
There are undoubtedly other less invasive ways you can earn extra income, but it is worth mentioning if you’re in a pinch and you’ve already tried selling something a bit less… personal.
46. Start an Etsy Store
Crafty? Turn your crafts into cash with an Etsy store.
Etsy is one of the easiest ways to start an online business. Etsy is a platform that lets users buy and sell homemade arts and crafts. Many hobbyists sell their creations online and gain popularity through the site. Etsy also makes it easy to get paid and to ship through their site. Depending on what you sell and how popular it is, you can create a legitimate revenue stream through Etsy.
Selling physical products is great, but supply and logistics can take time to create and manage. If you’re personally hand-making each item, this would be considered active income.
However, if you create digital products like digital downloads, designs, or something that can be printed by the purchaser, orders can be fulfilled without your constant involvement. This is passive income!
47. Participate in a Sleep Study
When I say “learn how to get paid while you sleep,” I mean it!
There is plenty of research around sleep, and researchers are always looking for healthy participants for their studies. If you’re in good health, you may qualify for the study. They typically administer a physical and psychological evaluation to get a baseline. You are paid every step of the way, and you can make thousands of dollars from one study alone. If this isn’t a way to get paid lying down, I don’t know what is.
48. Become a Notary
Becoming a notary is a low-cost investment but can bring in a healthy revenue stream.
Notaries are officials that oversee specific legal processes, such as acting as witnesses in document signings. All you will need to do is witness document signings or oversee mortgage signings. It only costs about $100 to become a notary, but you can make thousands of dollars a month by acting as a notary.
49. Customer Interviews
Companies count on consumer feedback to understand a product’s success in the marketplace.
Respondent is a site that connects companies with customers willing to give feedback and facilitates those interviews. You can do this in person or remotely. By providing feedback on products that you tried, you can make an average of $140 an hour.
50. Raw Land Flipping
This one sounds strange, but it can be an alternative to rental properties.
Raw land flipping is when you buy vacant land and clean it up so that it sells for a profit. The premise behind raw land flipping is that people are willing to pay more for land that they can envision a home on. By cleaning up weeds or brush and marking up rough property lines, you can turn an easy profit without dealing with tenants.
Buying raw land can be quite cheap, some land parcels are as low as a few thousand dollars. When reselling the land, you can choose to accept payment over time, with interest, which turns your capital into passive income.
51. Become a Brand Ambassador
There are plenty of companies looking for people to be the face of their brand. Brand ambassadorship is one way that they accomplish this.
As a brand ambassador, you would help with local marketing efforts and post about the brand on your social media channels. Companies will typically pay you for your efforts and also offer you an affiliate marketing code for any commission sales. You are essentially getting paid twice, once for promoting, and then for any sales you make.
52. House Sitting
House sitting is one of the easiest ways to generate passive income.
When people go out of town, they pay people to stay at their place and keep an eye on things. You may be asked to water plants or care for pets, but it is a very low effort job that can pay pretty well. You get to hang out at their house and do everything you would otherwise do at home—all while getting paid for it.
53. Vehicle Advertising
If you don’t mind putting advertising on your car, you can make a nice chunk of change just by driving around.
By letting companies use your car as a mobile billboard, you can make a few hundred dollars a month. Sites like Wrapify can connect you with companies interested in placing advertisements on personal vehicles. This can be a good alternative if you aren’t into the idea of ridesharing.
If you have expertise in business or other fields, you could be paid simply for your opinion.
Clarity.fm is a site where you can consult businesses or startups remotely. People can pay for advice on consulting from experts on the site. Whether you are an expert in human resources, legal matters, or social media, your opinion can easily turn a profit for you.
55. Lose Weight
HealthyWage is a site that works like a bet. You make a wager on how much weight you will lose in a period of time. If you achieve your goal, HealthyWage pays you.
This can be a good incentive if you need to lose a few pounds. However, avoid this if you struggle with your relationship with food. This list is 62 items long for a reason.
56. Participate in Scientific Studies
Although not truly passive, participating in clinical trials and scientific studies can be a way to earn income while potentially doing good. You can find clinical trials that fit your schedule at ClinicalTrials.gov.
57. Design Logos
This goes along with freelance graphic design, but designing logos is a great way to improve your portfolio and flex your creative muscle.
99Designs is a service that allows graphic designers to submit ideas for logos to businesses. The business will then pay for the best one. This one can feel like a waste if your design isn’t chosen, but the payout and chance to improve your creative portfolio can help you in the long run.
58. Be an Extra in Movies
If you are in a major production city like L.A. or New York, being an extra can be an easy way to make a few bucks.
Being an extra involves a lot of sitting around, during which you can do other productive things. Ultimately, you can make some money and maybe see a celebrity or two while you’re at it.
59. Email Marketing
Small businesses are looking for all the marketing help they can get. Email marketing, while it may seem mundane, is still a prevalent form of small business marketing.
Many small business owners don’t have the time to do their own email marketing. Through technologies like MailChimp or Emma, you can easily create email templates that you can personalize and automate. From there, you just schedule the emails and forget about it.
60. Create an Audiobook
Creating an audiobook increases the reach of your potential audience.
There are tools out there available to help you, which can partner you with producers or allow you to sell your already created audiobook, such as ACX. The more channels you employ for your product, the broader your scope of sales increase.
The best thing about digital products is that you create them once, but resell them over and over again with no ongoing effort. Audiobooks are a great passive income source.
61. Purchase Bonds
Bonds are the classic, traditional passive income stream. An old standby for retirees given their relative safety and stability.
The premise is simple enough: you lend money to a government or corporation by buying a bond for a certain length of time, say ten years. For the next ten years, they make their interest payment to you. Then, upon reaching maturity, you get your original investment back.
Of course, by that point, the original balance will have lost money to inflation. So, the question with bonds becomes, “Does the interest I receive justify the money lost to inflation and the opportunity cost of not investing in a higher-yield investment?”
In a study of returns over 145 years between 1870 and 2015, bonds’ average returns were less than half those of the stock market, at 2.5% compared to 6.89%. But their volatility—and therefore their risk—is also far lower than stocks.
Personally, I don’t like bonds. There’s too much opportunity cost for anyone under 50. But if it makes sense for you, try Ally Invest with trades at $1 per bond per transaction.
If you’re young, you can tolerate the added risk and volatility of stocks. As you close in on retirement, start looking closer at bonds as a more stable passive income stream within your retirement account.
62. Refinance Your Mortgage
While this may not sound like a source of extra income, you could unknowingly be paying way more for your mortgage than you need to. By refinancing your mortgage, you can take back the portion of your income going towards your interest rate and reinvest it.
By shopping around for lower interest rates, you can save yourself tens of thousands of dollars over the course of your loan. Even lowering your rate fractions of a percentage can save you hundreds each month depending on the size of your mortgage.
You can even find lenders that will offer credits to reduce (or eliminate) closing costs. This money can then be reinvested or boost your overall savings.
See how much you can save with my Mortgage Refinance Calculator.
4 Types of Passive Income
Not all passive income is created equal. There are many different ways that you can make money while you sleep!
In general, passive income is money made from assets that you control, whether that’s things you own that aren’t being used, spare time that you need to occupy, or using existing wealth to increase your cash flow.
The four types of passive income that we cover in this article are:
1. Cash-Flowing Assets
If someone’s ever told you, “you need to spend money to make money,” they were probably talking about building cash-flowing assets.
Cash-flowing assets are investments that require wealth but create steady cash flow in the long run. These are assets like real estate, buying an existing business, or a dividend mutual fund.
It takes money to get started on these, but the investment payout can also be pretty high.
2. Build Assets
Building or creating something that can be used by others for a cost is a great way to generate an income stream. Rather than existing wealth, these assets typically take time and skill to build properly.
If you have ever wanted to create software, build a website, or write a book, they could be a great way to test out your skills and create a passive revenue stream for yourself.
3. Reverse Passive Income
This form of passive income cuts down on existing monthly expenses to create extra expendable income.
You may be unintentionally spending more than you need to on things like your power bills, recurring streaming TV subscriptions, or mortgage payments. By refinancing or changing a few simple habits, you could free up some of your existing income and reinvest it back into opportunities to make even more money.
4. Share or Sell Assets
You can use, sell, or rent out items you already own that are collecting dust.
Have an extra room in your house that you can rent out to a housemate or guest on Airbnb? Maybe you have old baby gear that you don’t need anymore? This is a way that you can create wealth with things that are no longer useful to you.
This doesn’t have to be limited to physical items. You can use extra resources like time or skills to build wealth. If you go for an evening walk and can make money walking a neighbor’s dog, go for it.
If you have any assets that can easily be used to create extra income quickly, don’t let that opportunity go to waste!
How to Save for Passive Income Investments
Many of the passive income ideas on this list require a financial investment on your part.
So, where does that money come from? From your savings, of course.
What’s your current savings rate? In other words, what percentage of your after-tax monthly income are you setting aside for investing?
Current Budget Audit
Take an uncomfortably close look at your current budget. Start with the revenue side: four weeks’ net pay as your monthly income. (Four weeks’ pay is all you can count on in any given month, so your budget should be based on that, not your annual income divided by 12.)
Next, list all fixed monthly expenses. This includes your rent or mortgage payment, your car payment, your home internet bill, and any other monthly expenses that are consistent month-to-month.
Then list out your variable monthly expenses that you incur every month, but which vary. Food, entertainment, water, gas, and electric bills are all examples. Go back six months to form a long-term average.
Finally, look at irregular expenses. These hit you every year, but not every month. Examples include holiday gifts, birthday gifts, wedding and baby shower gifts, insurance, travel, healthcare costs. Review every statement for the last year, and then form a monthly average.
Spoiler alert: you won’t like what you find. Most Americans spend far too much on variable and irregular expenses and don’t even know it.
Armed with this knowledge, uncomfortable as it was to compile, you can start hacking away at all of your fixed, variable, and irregular expenses. Set to work on a new budget, brainstorming creative ways you can cut your fixed expenses, not just your variable expenses.
The best way to do a free budget audit is with help from the free tool: Personal Capital. Learn more in my Personal Capital review.
Automate Your Savings
Once you’ve tightened up your budget and set a higher savings rate, it’s time to ensure you achieve it every month.
You probably have a checking account for day-to-day expenses. Perhaps you also have an emergency fund. That’s a great start. Now, set up a separate high yield online savings account for irregular expenses. You’ve set a budget for each irregular expense; now set up automatic transfers to take place every payday for your irregular expenses. Then, when the holidays come around, or your insurance bill comes due, you can pay from your irregular expenses fund.
Consider opening an account in a different bank to use for passive income investments. Then, just as you did with your irregular expenses, set up automatic transfers to take place every time you get paid. This portion of your paycheck is your savings rate.
Discipline fails all of us sooner or later, so automate your savings so you don’t have to rely on it. Out of sight, out of mind, and what’s left in your operating checking account is what you can live on month-to-month.
As the months go by, your investment funds will pile up, and you’ll be ready to start investing to build passive income streams.
Increase Income Streams
To help make enough money to invest in passive income ideas, you need to increase your income streams. Do you have a side hustle?
A side hustle is anything you do to make extra money outside of your full-time job. Anyone can go out and make a few hundred extra bucks a week on the side.
You can do anything—mow lawns, walk dogs, shovel snow, babysit, code online, tutor, make deliveries, drive people, flip items on eBay, sell a product on Amazon, participate in focus groups, blog… the possibilities are infinite. But not all side hustles are created equal since some can make you a lot more money than others. The best side hustles are the ones where you own your time.
Put Your Money to Work with a Passive Income Stream
If you take nothing else from this list, remember this: increase your savings rate, automate it, and then put that money to work for you.
Habeeb Akande says, “Make your money work for you, don’t work for your money.” Most of the passive income ideas above come with some degree of risk. Many require education on your part if you are to succeed.
Just because passive income doesn’t require work, it doesn’t mean it doesn’t need work and money upfront!
Build passive income streams while you’re young and fit and can harness the power of compounding interest over time. By doing so, you set the stage for retiring young and wealthy. We feature success stories all the time on our website, of everyday people who retired at 29, 32, or 36 based on their rental income.
But if you don’t learn how to make passive income while you sleep, prepare to work until you die.