If you are looking for a complete guide on how to make serious passive income, you are in the right place.
We have collected over 25 proven methods for making passive income and organized them to meet your specific situation and goals.
Don't have any money to get started? No problem, we've got an entire section devoted to “no money” strategies. Are you a complete beginner and want something that is simple to implement? We've got you covered. Are you a seasoned pro looking for more complex or unconventional strategies? That's actually my specialty – I think you'll discover some hidden gems later on in the article that are perfect for you.
So whether you're new to the world of passive income, an experienced pro looking for advanced tips, or somewhere in between, there'll be something for you.
Here's a preview of what we'll cover. If you want to jump straight ahead to any of the topics, just click on the desired hyperlink.
- Introductory Questions
- Passive Income Strategies for Beginners
- How to Make Passive Income With No Money
- How to Make Passive Income with Minimal Effort
- How to Make Passive Income That Generates High Returns (20% or more)
- Passive Income Businesses
- How to Make Passive Income with Alternative Assets
- How to Make Passive Income with the Stock Market
We've got a lot to cover, so let's get into it!
This post may contain affiliate links. If you click on a link and complete a transaction, I may make a small commission at no extra cost to you.
The information contained in this post is for informational purposes only. It is not a recommendation to buy or invest, and it is not financial, investment, legal, or tax advice. You should seek the advice of a qualified professional before making any investment or other decisions relating to the topics covered by this article.
What is Passive Income?
Passive income is money you receive from an investment, business, or other asset or enterprise that does not require significant effort on your part. Some common examples of passive income include income from interest payments, stock dividends, cash flow from real estate, and royalties.
I like to think of passive income as operating along a spectrum.
The level of effort will vary based on the type of investment or asset that's generating the income. For example, interest income is going to be completely passive – once you buy the asset (whether it's a savings account, CD, bond or other interest-producing asset), all you need to do is wait for the checks to come in.
That's the upside. The downside is that these assets tend not to have really high yields (unless you invest in junk bonds, but you are really rolling the dice if you do that).
If you choose to earn passive income from something more complex and risky, like a business, that will require more investment, oversight and effort on your party, but you can earn really high rates of return (I am talking life changing rates of return that can be enough to replace income from your job).
What's right for you is going to depend on your priorities and situation, but we are going to start with the easy to implement stuff first and get increasingly more complex (and profitable) as we progress through the article.
Why is Passive Income Important?
Passive income is important because it gives you options. Hate your job? If you generate enough passive income, you will never have to work for anyone else again.
It can also give you unlimited upside and protect you on the downside.
In a job, your boss controls how much you can make. But if you start building up your own passive income streams, the sky is the limit. As for downside protection, if you get fired, it's awfully nice to have a stream of passive income that can act as a bit of a safety net. Even if it doesn't cover all of your expenses, it's a whole lot better than facing sudden financial ruin because you have nothing coming in.
In other words, it can start you on the path to financial peace of mind – isn't that what we all crave?
If you want to learn more about why passive income is important, check out my article on the topic here.
Passive Income Strategies for Beginners
If you are a complete beginner and want to know how to get started earning passive income, you will want to focus on strategies that are cheap, simple and easy to implement. While they won't give you the super-juicy returns of more complex and risky strategies, I think these strategies can be a perfect way to get your feet wet in the world of passive income.
So without further ado, here is my list of top passive income strategies for beginners:
High Yield Savings Account – I know, this is pretty conventional and lame, but you have to start somewhere. In fact, you can open a high yield savings account just to park your money and earn a little bit of interest while you explore cooler options. It beats earning 0.1% at your brick and mortar money center bank.
If you don't know where to begin, CIT Bank is a great online option that is easy to open, is FDIC-insured, and offers competitive rates.
Cash Back Credit Cards – I love this strategy. Now you won't become a millionaire doing this, but the best cash back credit cards pay you at least 2% cash back from purchases you are going to make anyway. Free money doesn't get easier than that.
Cash Back Apps – Another solid way to make money passively is by using cash back apps. Generally, these types of apps provide cash back when you buy something or give you a coupon for an additional discount. Some of these apps give you points that you can use for discounts on later purchases.
Here are some of the most popular cash apps:
Index Funds – With stock market investing, you can make it as simple or as complex as you want. Since we're talking beginner strategies, I would open up a free brokerage and start with a nice 60/40 stock to bond ratio. For some quick tips on how to get started, jump to the section below on stock market investing for passive income.
If you prefer a ready-made solution that will invest your money for you, take a look at Titan. They were voted the top robo-advisor of 2020. Check them out below if you want to learn more:
Peer to Peer Lending – Instead of buying a bond on wall street and lending your money to companies, you can act like a bank and lend money to people. Peer to peer lending platforms like Prosper allow you to lend out as little as $25 to various borrowers on their platform.
Real Estate Crowdfunding – This is similar to investing in the stock market, but instead of investing in companies, you are investing in real estate investments. Crowdfunding pools your money with money from a lot of other people and buys real estate assets that you wouldn't be able to afford by yourself.
The good news is that you don't need to manage any of these properties and the investment is 100% passive. The bad news is that many of them require you to be an accredited investor (which basically means you are a millionaire or super high earner) or have high minimum investment requirements (thousands or even tens of thousands of dollars).
The lowest cost option I found was Diversyfund. They are designed for normal investors (you don't need to be an accredited investor) and they let you get started for as little as $500.
How to Make Passive Income With No Money
If you are completely broke and have no money to spend, there are still strategies you can use to generate passive income. Some are very easy to implement, while others are going to require some effort on your part (but the payoff can be impressive).
Let's dive into it!
Rent Out Stuff You Already Own – did you know you can rent out your car on Turo and make hundreds of dollars a month? You can also rent out any extra storage space (basements, attics, spare bedrooms and even spare closets) on platforms like Neighbor. Of course, you can also make money renting out extra bedrooms for tourists or other people who need temporary housing through Airbnb.
Start a Blog – if you have a knack for writing, you can start a blog. It can be a terrific way to generate passive income (once the articles are written). If you want a step-by-step guide on how to get started, check out my article on How to Start a Blog From Scratch.
I cover all of the key areas you need to know, including how to set up your website and most importantly, my best tips for writing great articles, getting traffic to your blog, and monetizing that traffic.
Affiliate Marketing – if you have a media platform that has visitors (website, youtube, facebook, pinterest, etc.), you can make money by promoting products to people who visit your site. In fact, you can even do this via email – just casually mention to your social circle that you read a great book, tried a great product, etc. and provide them a link. If they click on that link and buy the product, you can earn a commission.
Start a YouTube Channel – if you prefer making videos, you can start a YouTube channel. In fact, all you really need is a phone to record videos and a computer to edit them. If your content resonates with people and you get traffic to your site, advertisers will pay you to insert their ads into your videos.
Write an eBook – if you like writing, but blogging is not for you, you can write an eBook on any topic that interests you and sell it on platforms like Amazon KDP and Apple iBooks.
If you want a complete guide to making money with eBooks, check out my article: Making Money [Passively] Writing eBooks: A Simple 5-Step Guide.
Share Your Mobile Browsing Data – If you agree to install an app on your phone that tracks your browsing behavior, mobileXpression will pay you a weekly credit that can be redeemed for gift cards at a number of large retailers or online websites.
Honeygain – When you use Honeygain, you install an app on your devices and Honeygain securely shares the internet with no access to personal data. They use your internet data to run various queries for their clients.
How do you get paid? You get credit based on how much data is shared. These credits are then converted into money.
Note: Make sure you are on an unlimited data plan because it may use a lot of your bandwidth.
Wrap Your Car with Ads – you have probably seen cars with ads plastered all over them. Companies like wrapify will pay you to do this and drive around. According to them, you can make hundreds of dollars a month.
Make Money Watching TV or Playing Video Games – If you are watching TV or playing video games anyway, you can earn a little extra cash on the side. Check out inboxdollars for more info.
This can be viewed as passive because watching TV and playing video games is not really work, but I can see it being a bit of a hassle.
Cash Back Credit Cards – we covered this already, so I won't go into it again. The trick is to pay off your balances each month, so you don't pay interest on the credit cards.
Cash Back Apps – we covered this too. It's a cool little way to make some extra income without too much hassle.
Ok, I think that's a pretty good list. But if want to learn even more great ways to make passive income with no money, check out my full article on the topic.
How to Make Passive Income with Minimal Effort
Ok, some of the strategies I listed above require some serious effort to get up and running (blogging, affiliate marketing, YouTube, eBooks, etc.). But what if you don't have the time to get these passive income strategies off the ground? After all, we live busy lives and time may be a luxury you don't have.
We got you covered. Here is a list of some of the best ways to make passive income with no effort. Of course, you will note that many of these methods require investments of money. That's life, isn't it? Nothing in life is really free (sigh).
These strategies are pretty self-explanatory (or I have covered them already), so I will just provide them in an easy-to-digest table. I did provide a hyperlink to one of the options (Get Paid to Chat with People) because that's one I didn't cover that I think is pretty interesting. The link will take you to my full article on how to do this.
|High Yield Savings Account||Get Paid to Chat with People||Money Market Funds|
|Alternative Asset Investing (Art, watches, etc.)||Rent Out Stuff Your Own||Honeygain|
|Share Your Mobile Browsing Date||Wrap Your Car with Ads||Cash Back Credit Cards|
|Real Estate Crowdfunding||Cash Back Apps||Peer to Peer Lending|
|Index Funds||Certificates of Deposit (CDs)|
How to Make Passive Income That Generates High Returns (+20%)
If you have some money to invest and are willing to deal with a bit of complexity and risk, you can invest that money to generate passive income that will give you an outstanding return on investment.
These types of investments fall into two categories: (i) business that are run passively; and (ii) high cash flowing alternative assets. Most of these ideas are fairly unconventional, but can yield rates of return well in excess of 20%. You can see evidence for these types of returns in my article here.
Passive Income Businesses
Most businesses cannot produce passive income because they require constant involvement of the owner. The typical mom and pop small business is going to have an owner operator who goes in everyday and actively runs the business.
But there are some businesses that can be run “absentee,” which allows the owner to receive the profits from the business without having to run the day-to-day operations.
What types of businesses can produce passive income? In short, you are looking for a business that has really simple operations or is profitable enough to support a management team and employees that can take care of normal everyday operations.
Below is a list of 7 great businesses that can produce passive income (with links to articles that I wrote showing you how to get started):
This one's pretty obvious right? The machines do all of the hard work of washing and drying the clothes while your customers provide the labor needed to load and unload the machines. It's an ideal set-up for a business that can be operated via absentee ownership.
If you want to learn how to start a passive laundromat, check out my article on how to start in passive laundromat in 6 easy steps.
Have you ever seen those car washes in gas stations that don't have anyone operating them? These are called in-bay automatic car washes and they are ideal for an owner who wants to generate passive income. There's a reason why these car washes are open 24 hours and have no dedicated staff supporting them.
For more information on how to get started, check out my beginner's guide to passive income with automatic car washes.
This is a business with no employees, inventory, customers, physical location and limited fixed costs. Talk about a simple to run business that is perfect for generating passive income. Plus, if you are buying an existing blog that is profitable, your ROI can be well in excess of 20%.
Interested in learning more? As referenced, see my detailed article on How to Start a Blog From Scratch, which will take you step-by-step on how to start your own successful blog.
If you own a billboard with great visibility on a busy road, you can make great passive income by renting it out to companies in the area.
My article on owning billboards for passive income will show you how you can get started earning money with billboards.
Did you know that you could buy a FedEx delivery route that covers a designated territory? That means that you will make money for each delivery made within that territory. It can be a highly profitable business and, if you structure it right, it can run itself. Once you have a manager and reliable drivers, the day-to-day operations of this business can be run without your involvement.
If you want to learn how to buy a Fedex route for passive income, check out my article on the topic here.
Like a FedEx route, you can buy a bread route that covers a territory. Once you own that territory, you can sell bread to various retailers and pocket a commission for each sale. Best of all, you can have drivers run these routes for you. At that point, the business basically runs itself.
If you are interested in this business, you can access my full article on how to buy bread routes here.
I am sure you have seen bounce houses before and understand the appeal that they can have for parents who want to do something special for their kid’s birthday or other special occasion. The great thing about this business is that it is really easy to structure this business to run itself.
After all, these bounce houses are just plastic structures that you deliver, set up, and inflate. It is not complicated and you can train people to do this for you pretty easily.
If you want to learn how to start your own bounce house business, see each step of the process in my article here.
Passive Income with Alternative Assets
If you don't have the money to start a full blown business, you can piecemeal it.
What I mean is that you can start buying income-producing assets that can eventually turn into a real passive income business. I am talking about things like vending machines, ATM machines, cars, and rental properties.
You can start by buying one of these items, making a little money from it, using that money to buy more assets, and continuing until you have built an empire.
Owning a vending machine route can be an amazing way to earn passive income.
You just place it in a high-traffic location and make money every time someone buys something from your machine. The cost to get started varies, with a simple gumball machine costing only around $200 to a more expensive vending machine running between $3,000 to $5,000.
Still, that’s far less expensive than most businesses and it’s a terrific way to start generating some stellar cash flow.
The only part of this that requires some work is restocking and collecting money from the machine, but you can easily outsource this function.
Want to learn how to get started in the vending machine business? Check out my article on the topic here.
Like vending machines, this type of business involves you placing ATMs in high traffic areas and receiving a fee every time someone makes a withdrawal.
But it’s even simpler to operate than a vending machine route. You don’t have to worry about buying 17 different types of snacks and drinks and lugging them around in your van.
There is only one type of inventory you need and that’s cash. Fortunately, there are services that can restock your ATMs with cash for a fee.
For a step by step guide on how to get started in the ATM business, check out my detailed article for beginner's here.
This is a pretty cool one.
Now I mentioned renting out your car as a strategy before, but this is taking it to the next level.
Instead of just renting out your existing car when you are not using it, you buy a car just for the purpose of renting it out. This a legitimate business model and there are people who own fleets of cars and rent them out through Turo.
Of course, the more you cars you have, the less passive the income will be, but having an extra car or two that you rent out full time can be a great way to generate some extra passive income without too much hassle.
Want to learn more? Check out my full article on the topic here.
Rental properties are a classic example of an alternative asset that can generate passive income.
I own nine rental properties and self-manage them, so it does require a little bit of work. But even then, it’s hardly a daily grind. I may spend on average about 5 hours a month managing these 9 properties (I do outsource all of the repairs, etc. to my team of contractors).
That’s pretty much a self-running operation in my view. But if you want to totally outsource the work, you can simply hire a good property manager to take care of your properties for you.
If you are interested in learning more about how to get started in rental property investing, check out my article on the topic here.
Passive Income with Stock Market Investing
One of the most popular ways to make money without a lot work is by investing in stocks, bonds, mutual funds, etc.
It's not hard to get started – you just need to open up a brokerage account, fund it, and then buy the investments that you like. Many online brokerages allow you to start trading for free (i.e., no fees for buying and selling most securities). If you don't know where you start, check out Fidelity – they are a huge brokerage, but they are very easy to use.
If you pick the right investment, then you will make money with absolutely zero effort on your part. But that's the rub, isn't it? Choosing the right investment is hard. The fancy analysts on Wall Street don't always get this right and they are supposed to be experts. So you will definitely want to research your investments before taking the plunge.
If you want to reduce your risk, you may want to look at funds that aggregate individual stock holdings. I like ticker symbol “VTI”, which is a Vanguard fund that is supposed to reflect the performance of the entire US stock market. These funds are often less risky than investing in individual stocks and may be better suited for you if you are a beginner.
If you want to get cash flow on a regular basis from your investments, consider dividend paying stocks. They typically pay you money each month or quarter. There are funds that pay dividends as well, if the underlying stocks in the fund pay dividends. VTI is one of them.
If you want to roll the dice and hand pick your dividend paying stocks, you can, but it will take a bit of effort and will carry some risk.
Generally speaking, you want to look at a company's dividend yield (how much it pays relative to its stock price), dividend history (has it consistently paid the dividend? has it raised its dividend overtime? etc.), financial health, projected growth, cash flow, debt, and a host of other factors when determining which dividend paying stock is right for you. You can check out Investopedia's article on the topic if you want to learn more.
Other traditional cash flow investments include bonds, bond funds, preferred stock and even simple financial instruments like money market mutual funds, CDs or even high yield savings accounts. Just remember that, as a general rule, the higher the yield, the higher the risk.
So there you have it – the ultimate guide to passive income.
For more great passive income ideas, check out my series on passive income, which has tons of articles that tackle a host of passive income topics. I think you'll find some unique ideas there that you haven't seen anywhere else.
One of the most popular ones is “How to Make Passive Income with a Computer” – check it out for some ninja tips on how to generate passive income at home with just your computer.