In this post we will explain what passive income is and why it can become an important method of income. We will also explore several different ways to make passive income streams with 14 ideas below.
What Is Passive Income?
Passive income is money earned in a way that requires little ongoing active involvement. Some passive income streams require a little more time and effort initially to create. But once set up will earn you money without any or minimal further intervention. This means you can literally earn money while you sleep.
As stated, some of these require a little more effort to set up. But if you put in the hard work first you will be rewarded later. Remember these are not get rich quick schemes – you aren’t going to become rich overnight. You do have to put some effort in at first but over time you will reap the rewards.
The importance of generating passive income can be best explained in the following quote from legendary investor Warren Buffett;
If you don’t find a way to make money while you sleep, you will work until you die.Warren Buffett
Ways To Make Passive Income Streams
We have compiled a list below of 14 different methods you could utilize to make passive income streams.
Peer-to-peer lending (known as P2P) is an alternative type of investment that allows you to make passive income. Simply put you are lending out your money. You deposit your cash with an online peer-to-peer lending platform. This money is then lent out to other individuals or businesses. You then receive interest payments on the money you have loaned out.
Some platforms have a general pool of loans. So your cash will be automatically split across dozens, even hundreds of these to mitigate risks. But some platforms allow you to select your own underlying investments.
Peer-to-peer lending will usually offer much greater returns than cash savings for instance. But there are risks involved as the borrower could be unable to repay the loan. Although most platforms will have provision funds to cover for loan defaults you are not guaranteed that this will cover any losses.
This can be a good source of passive income as you accumulate interest on your cash that you have lent out. You can then continue to automatically re-invest this income into further loans. This will allow your capital to grow over time. It is a good option to help diversify an existing investment portfolio.
You can find more information on P2P lending.
Create An App
As mobile device usage continues to grow so does mobile app usage. There were 218 billion app downloads in 2020 generating revenues of over $318 billion. According to data by Statista mobile app revenue is predicted to reach over $613 billion by 2025.
That’s a huge market and one you could look to exploit by creating your own app. They can be created for just about anything; eCommerce, dating, games and much more.
Apps offer a wide array of monetization options including paid apps, premium content, subscriptions, advertising and donations. This can be dependent on the type of app and the business model you require. Once the app is created and published, little ongoing work is needed making them a great source of passive income.
And the really great thing is that app creation isn’t just restricted to coders and developers. Companies like AppyPie are democratizing app development with no-code app builders, allowing literally anybody to create an app easily.
We have a full guide with more information on how to create an app.
Passive Real Estate Income
There are different ways to make passive income from real estate. You can receive income from rents on a property that you own or you could receive income from dividends through a REIT.
Property can be rented out to long term residential tenants or short term through options such as Air BnB. Either of these provide a rental income. The downside is that property can be very expensive to purchase and there are ongoing costs such as insurance and maintenance.
An alternative to acquiring your own real estate is to invest in a REIT (Real Estate Investment Trust). REITs are companies that hold a diversified list of income producing real estate assets. Most of their rental income is paid out to shareholders as dividends.
REITs offer good diversification, regular income payments and are more liquid (easier to buy and sell) than actual property as they are traded on a stock exchange.
They can also offer investors access to property sectors that ordinary individuals would not such as cell phone towers, data centres, warehouses and commercial buildings etc. Invest in REITs with Realty Mogul, the specialist online marketplace for investing in real estate assets.
You can read more about REITs, how they work and the advantages and disadvantages in this post; earn passive real estate income with REITs.
Dropshipping is a form of eCommerce where the seller doesn’t handle, store or ship the products to customers. A third party supplier manages inventory including shipping the products for you.
Put simply, a customer purchases a product from your online store. You then purchase this product at a cheaper price from a wholesale dropship supplier. The supplier then ships the product directly to your customer. Your profit is the difference in price between what the product cost you and what you charged the customer.
This can save time and money as you do not have to order products upfront, only when the customer pays. Your main focus will be on branding, marketing and customer service.
Affiliate marketing is one of the most popular ways to make passive income online. With affiliate marketing you earn a commission by promoting another company’s products and services. This has got to be one of the simplest ways you can make money online. You are not creating or selling your own product or services. All you are doing is promoting existing products.
You will usually be provided with a tracking link or other promotional materials by the vendor. Each time somebody clicks through one of your links and makes a purchase you will earn a share of the proceeds.
Your own blog or website is a useful tool to have. You can utilise for affiliate marketing. There are many other ways you can start to promote products including on social media such as Facebook and Instagram, and forums.
There are a multitude of online platforms that connect vendors and affiliates, sometimes called affiliate networks. You can browse products in a variety of categories and select the ones you prefer. It is ideal to start with a type of product you are familiar with and where you know the correct audience to target.
Essential to know; 10 affiliate marketing mistakes to avoid.
You can create eBooks and publish them yourself on Amazon’s Kindle Direct Publishing platform. Once published you will receive a royalty payment from Amazon each time somebody purchases one of your e-Books. You can earn up to 70% royalty fees through Amazon Kindle sales.
This may sound like there’s a lot of work involved to write eBooks. But as we show you in one of our posts, there is a way to quickly and easily create dozens of eBooks and start earning in minutes.
And don’t forget once it is set up you don’t need to put in any additional work. You leave it and collect royalty payments.
Find out how to make passive income from eBooks and turn KINDLE into a daily cash cow!
We’ve discussed the benefits of eBook publishing above. If you are a creator of books, eBooks or other written content you could earn more passive income by publishing your work as an audiobook.
An audiobook is a version of a book that is spoken out loud for people to listen to in audio format rather than read it.
You can either narrate your own work or pay a narrator to do it for you. It is more cost effective to do this yourself but you do need a good, clear speaking voice and be able to articulate the subject effectively.
Websites such as ACX can help you produce your audiobook. As this platform is owned by Amazon you can easily distribute your work to the Amazon and Audible platforms. Once published you will usually earn royalty payments on all future sales with no other active work on your part.
There is a way to earn an income from cryptocurrency and that’s with something called cryptocurrency mining.
Cryptocurrency mining is the process of gaining cryptocurrency through the solving of complex cryptographic codes by high powered computers. When this problem is solved, a transaction record is added to a public ledger known as a blockchain. Blockchain is what cryptocurrencies are built on.
It does require a lot of computer processing power, a lot more than your traditional desktop PC. Specialist high-powered computer equipment is available. It is designed specifically for mining cryptocurrency and is able to run around the clock. Allowing you to literally earn while you sleep.
Learn how you can make passive income by mining your own cryptocurrency.
Blogging can be a good method to make passive income and you don’t need to be a professional writer to start. Platforms like WordPress are popular options for starting a blog, in fact you can start for free.
The main ways to monetize a blog are through advertising and affiliate marketing displayed within your content. In order to make anything worthwhile it will be reliant on the amount of traffic that you receive on your blog.
There are many ways to drive traffic to your blog, both paid and free. These include search engines, paid advertising, social media and email marketing.
The key is in the content you create. Take the time to write long form high quality content and optimize for search engines with keywords and images. This will get you ranking higher in Google and attract more visitors.
Use of evergreen content can continue to yield great results over time. This is content that will remain relevant and useful over a long time period with little updates required. It can rank well in search engines and continue driving traffic over the longer term, making it truly passive. publish posts to sites like Medium and Quora to increase earnings.
View more information in this post on how to start blogging to make passive income.
Get $25 off your first purchase in WordPress when you sign up here.
There are lots of alternative ways to earn money from writing articles and blog posts as a freelance writer.
This one may seem out of place but cash saved in high interest accounts is producing a passive interest income, albeit a nominal one. Keeping cash in a savings account is not going to generate you much income due to generally relatively low interest rates coupled with rising inflation.
You are depositing a cash lump sum and then you leave it to keep earning interest on your capital through compounding.
It is prudent to keep some easy access cash on hand for emergencies or to take advantage of investment opportunities. But it is not advisable to hold large amounts of cash in a bank savings account with low interest rates.. Not only will the return be small. But depending on the rate of inflation, your cash could actually end up losing value over time.
We recommend holding an emergency fund as a cash safety net. Learn more about the importance of an emergency fund.
Ensure you deposit your cash into a high yield savings account to maximize the return on your savings and make passive income from interest. Find some of the market leading savings accounts.
If you want your money to be working harder for you then it may be better to invest it. Investing offers the potential for greater future rewards. Although remember your money could also be at risk. See this post for 10 investment ideas to build wealth.
Many company stocks pay shareholders an income known as a dividend. There are 2 things you can do with dividends. You can elect to receive the cash as an income or re-invest them into more stock.
Investing in stocks may not be for everybody as you require money to invest in the beginning and your capital is at risk. However if invested in the correct way, then as well as dividend income you can also benefit from capital growth over time. If you aren’t sure what’s right for you, read this post first; should I save or invest?
Whilst cash dividends are the most common there are other alternative types of dividends a company can distribute to shareholders instead of cash. Learn what these are and why a company might pay a different type of dividend.
Print On Demand Stores
The way they work is simple. You upload a design and apply it to a range of products such as t-shirts, mugs, stationary and other gift items. These are then sold via the online platform.
This process requires very little effort. You do not pay for, order, stock or distribute any of these products yourself. So it does not require any capital, an ideal way to make passive income as a beginner. All you do is upload your designs and create your storefront. The company takes care of the rest – they will print, produce and ship products for you.
This means they make some of the profit. However you will receive a commission from each sale. Meaning once you have set up your store for free, you will continue to receive a future income stream from all future sales. Without having to do any of the work. And you don’t even have to create your own designs, simply hire someone on Fiverr to do this for you.
We have an article explaining how to make passive income with print on demand.
Create YouTube Videos
Creating a YouTube channel is free, simple and a great way to make passive income. Anybody can start and upload videos in minutes.
YouTube channels can be grown and monetized through sponsorship, advertisements, YouTube Premium, channel memberships and live stream superchats. To be able to access all of these features you will have to meet certain criteria such as minimum numbers of subscribers.
Monetization can vary depending on your niche you are operating in, the quality of your content, number of subscribers and user engagement.
You can find more information on how to create a successful YouTube channel with this free webinar.
Use Passive Income Apps
There are lots of free apps available that allow users to make passive income simply by leaving them running in the background of phones and computers.
There are some quite unique ways to earn passive income with apps like Honeygain. This allows you to sell some of your internet bandwidth to be used by web intelligence companies and researchers. See how to earn free passive income with Honeygain.
This type of passive income doesn’t offer the potentially lucrative future payouts as things like dividends, apps or YouTube as we’ve written about above. But they are a very easy way of earning a little extra cash for doing nothing.
Make Passive Income Streams Conclusion
To recap, passive income is any type of income that requires little active or ongoing work. It may take a little upfront work to put into place but once set up will provide an income stream into the future with minimum intervention required.
There are lots of different ways to make passive income streams and we have listed 14 different methods above. Some of the most rewarding options are dividend income, dropshipping and affiliate marketing among others.
A good point of passive income is that it is generally quite easy to set up multiple streams running concurrently. This can create good regular income. It can also be beneficial to have multiple streams of income so that if one is not performing well then you have others to balance them out.
Some methods can take more time and effort to learn and set up and some will require a financial investment upfront. For instance if you want to receive an income from dividends then you will require money to purchase shares first.
It’s important to note that the more you put in the more you will get out. Hard work, time and dedication are required to achieve success in anything. Read more here; 13 steps to riches and 30 causes of failure to avoid.
More Ways To Make Passive Income
If you don’t feel ready to start a business or invest then there are still options to earn extra income such as through passive income apps. Everybody should be able to create their own passive income streams.
We’d recommend you give some of these a try, after all they could allow you to achieve financial freedom.
More essential reading;
- Financial lessons to master.
- Make money investing in luxury goods.
- 10 investment ideas to build wealth.
- Make money freelancing with Insolvo.
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