If you want to start generating passive income, but only have a little money to start, you are in the right place.
This article will cover 9 ways to start generating passive income each month by making small investments over time. All of these ideas cost less than $500 to start and have the potential to make some really attractive returns over the long term. Of course, as with any investment or financial undertaking, returns are never guaranteed and your results may vary.
Most of my ideas are somewhat unconventional and some of them will require a bit of work to get up and running. But I also included strategies that are basically just plug and play. I think you'll find a nice balance between the two in this article.
Here's a preview of the strategies we'll cover. You can jump ahead to any of them using the hyperlinks.
- 1. Rent Out Stuff You Already Have
- 2. Peer to Peer Lending
- 3. Blogging
- 4. Real Estate Crowdfunding
- 5. eBooks
- 6. Cash Back Credit Cards
- 7. Online Courses
- 8. YouTube
- 9. Stock Market Investing
I use many of these ideas myself, including #1, 2, 3, 6, and 9, so I can confidently say that if done right, you have the potential to generate some great passive income using these strategies.
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.
1. Rent Out Stuff You Already Have
How Much It Costs to Start: $0
There are a ton of ways to generate passive income from stuff you already own. What I like about this strategy is that you don’t need any money to get started and you can keep it as low-key as you want.
Rent out Your Extra Rooms through Airbnb
This one’s pretty obvious, right? Everyone knows you can rent out extra rooms through Airbnb and collect some cash on the side.
But you should be careful to make sure your activities are permitted by your local municipalities, your HOA (if you have one), your landlord (if you are renting out your place), etc.
Rent Out Your Extra Storage Space
If you’ve got a spare bedroom or closet, or some unused space in your basement or garage, you can rent it out to people looking for extra storage space and generate passive income each month.
Check out Neighbor, who is a leader in this space. I have used them myself – their platform is easy to use and you can get up and running in minutes. I participate in their “refer a friend” program, so if you sign up using this link, you (and I) will get a $50 Amazon gift card when you list your space.
If you want to learn more about this strategy, check out my article on the topic here.
Rent Our Your Cars Through Turo
You can also rent out your car when you aren't using it on Turo. According to Turo, you can make hundreds of dollars a month doing this. Check out their Carculator to get a sense of how much you could make renting out your car through this platform.
If you want to learn more about this passive income strategy check out my article on the topic here.
2. Peer to Peer Lending
How Much It Costs to Start: $25
If you want an easy and simple way to generate passive income, consider peer-to-peer lending. What's great is that you can contribute just a little bit each month and slowly grow your loan portfolio. If you do this, you will start to see passive income from interest payments increase over time until you have a really nice and steady source of extra income coming in every month.
If you don’t know what peer-to-peer lending is, it’s where you lend money to various borrowers through an online platform.
As of this writing, some of the major platforms in this space include Prosper (which I use) and Funding Circle. Many peer-to-peer lending platforms are not open to individual investors, so be mindful of that when looking around.
The process is simple.
Let’s take Prosper as an example. You go to their website and open up an account (takes about 3 minutes). You then link that account with your bank account and fund your Prosper account. You can invest with as little as $25.
Once your account funds, you can look for loans that meet your criteria and lend out your money. Then you get paid.
Simple and completely passive. I love it.
How Much It Costs To Start: $0 – $150/year
This is one of my favorites.
If you have a knack for writing, you can start a blog. You can write about any topics that you have some expertise in or that interests to you (preferably both!). The topic you write about is often referred to as a “niche.”
You don't need to spend a ton of money doing this.
You will need to get a domain name (around $15-$20), get a company like Blue Host or Siteground to host your blog (can be as low as $4.95 per month), and that's really it. You can choose to buy a bunch of extras, like premier themes (which are basically just website design templates) and paid plug-ins which can provide some nice features, like image optimization, etc., but honestly you can do just fine using a free starter theme, like Astra (which I use) and free plug-ins.
If you want a step-by-step guide to getting started in blogging, check out my article on Passive Income Blogging. I cover all of the basics of getting started, including setting up your blog, finding your niche, writing quality content, and most important – how to write on topics that will rank on Google.
What I love about blogging is that you can grow your passive income without putting in any extra money. All you need to do is write articles. Each article you write is like a line in the water that can attract more visitors. The more articles you have, the more visitors you get, and the more visitors you get, the more money you will make (we'll cover how blogs make money later in the article).
If you don't enjoy writing, you can actually outsource that work to professionals on sites like Fiverr or Upwork. If you find great writers, you can really grow your blog rapidly. But it will take some money. I think of blogging as either an investment of time or money – you can pick which strategy is best suited for your situation.
Is Blogging Actually Passive?
Blogging is not passive in the beginning. Setting up your website, researching the right topics to write about, and actually writing the actual articles all take work.
But once you are up and running, the payoff can be awesome.
This is definitely one of those things where the more you put into it, the more you can get out of it.
If you have a bunch of good articles that are generating traffic, you can start monetizing your blog through two main channels: (i) display ads and (ii) affiliate links. Display ads are just ads that you allow companies to show on your website. You get paid every time someone sees those ads. Talk about passive income!
Affiliate links are customized links that you embed into your blog. These are customized links to products you are promoting. You can get paid if a visitor clicks on one of your affiliate links and winds up buying the product (or taking some other sort of qualifying action, like signing up or opening an account, etc.).
If you want to expand your monetization options even further, you can create informational courses or ebooks and market them on your blog too.
Once you have some traffic coming in and monetization channels set up, the business can be almost completely passive.
Remember, this business has no customers, no inventory, no employees, no physical location, and very few operating costs. That’s about as passive as you can get!
If you are in a rush and want to short-circuit the work of starting a blog, one option is to buy an existing blog that is already making money. It can be a fine source of passive income for you with some great potential returns. Some of the main sites that sell blogs are Flippa, Empire Flippers and FE International. You can buy starter sites on Flippa for very little money (like way under $500), but you kind of get what you pay for (and you must beware of scams).
To learn more about this strategy, check out my article on Buying a Blog for Passive Income: What You Need to Know.
4. Real Estate Crowdfunding
How Much It Costs to Start: $500
Owning rental properties is one of my favorite ways to make passive income. But buying properties can be expensive. Luckily there are ways to invest in real estate without buying actual properties and managing them.
It's called real estate crowdfunding and it has been gaining in popularity over the past few years.
Real estate crowdfunding is a method used by companies to raise money for real estate investments from a broad range of investors. These companies typically operate online platforms where investors can review real estate investment options.
If the investor finds something that they like, they can choose to invest in it.
The bad news is that, in many cases, these real estate crowdfunding platforms have steep minimum investment requirements (and some require that you be an “accredited investor” which is a fancy way of saying you need to be a millionaire or at least a very high earner).
A platform with one of the lowest requirements was DiversyFund. They will allow you to invest with as little as $500 and you don't need to be an accredited investor. Not a bad way to dip your toe into real estate investing without too much time and effort.
How Much It Costs to Start: $0 (if you do everything yourself)
If you like writing, but blogging is not for you, you can write an eBook and get royalties from selling it online. Amazon KDP (which stands for Kindle Direct Publishing) is a great place to do so. Another option is Apple Books.
Like with blogging, once written, the book can continue to provide you with passive income for years. I don't know, maybe it's the geeky English major in me, but there's something really cool about being a published author and being able to boast that you make money from royalties paid on your book sales.
If you don’t like writing but do like the idea of receiving royalties on eBooks, you may want to consider creating “low” or “no” content books and selling them on Amazon KDP. These can be journals (diaries), coloring books, guest books, music composition notebooks, planners, quote books, etc. Believe it or not, these are a thing and there is a huge body of information out there on how to do this.
A simple Google search for “low content Amazon KDP” should get you started.
6. Cash Back Credit Cards
How Much It Costs to Start: $0
Ok – you won't become a millionaire using this strategy, but it 100% works. Depending on how much you use the credit card, you can generate hundreds (or even thousands) of bucks per year.
The passive income strategy using cashback credit cards is simple:
- Get a cashback credit card that offers a good cashback rate (2% seems to be pretty decent)
- Put as many of your expenses as you can on your cashback card
- Pay off your balances in full each month (can't mess this part up!)
- Collect the cashback rewards for some nice passive income
Bonus tip: This cash back is basically free money so consider reinvesting that money into one of the other strategies. You can really supercharge your returns that way. You want your money to make you more money.
7. Online Courses
How Much It Costs to Start: $200 – $5,500+ Source
Another passive income idea that you can pursue is developing an online course and getting income from the sale of that course. If you are an educator at heart, this can be the perfect side hustle for you.
Video is the prevailing medium for these types of courses, although audio courses and courses with slides and other written materials also exist. There are a lot of tutorials on how to create online courses. A simple Google search on the topic will give you some great places to start.
Once you have created the course, you can market it through various channels, such as you own website (if you have one), social media, and online course platforms such as Kajabi, Udemy, and Teachable.
How Much It Costs to Start: $0 (if you are completely broke but have a phone to record video). But realistically, expect to spend between $249 and $500. Source
If you prefer making videos instead of writing, you can start a YouTube channel. The use of video as a media channel is exploding, so you can ride that wave and make some great passive income along the way.
As with blogging, you will start to earn passive income (through ad revenue) once you get enough traffic coming to your channel.
But getting there can take some work. Creating a quality video is not easy. You have to create informative (or at least entertaining) videos and have compelling titles, and great thumbnails. You also need to unlock the mysteries of getting traffic to your channel by understanding how YouTube’s search algorithm works.
If you want to learn from the experts and fast track your success, check out incomeschool.com. They've got a great blogging course (which I bought), but they have a terrific course on successfully starting a YouTube channel too (which is included in the cost). Now I don't do YouTube, but I can say that the blogging course is outstanding and has definitely worked for me.
9. Stock Market Investing
Investing in the stock market is pretty conventional and obvious, so I hesitated to include it in my list, but ultimately chose to do so for the sake of completeness.
Here's how it works.
You can make small investments in the stock market each month that can generate passive income. For example, if you invest $50 per month in a stock index or an individual stock, you can start to generate passive income if the index or stock pays dividends. So every month (or quarter), you can receive a check (or at least a deposit into your account) that reflects those dividend payments.
Of course, you don't have to buy stocks. Bonds also pay periodic interest payments. You also get dividends from real estate investment trusts (REITs). Bottom line is that there are tons of options for you to explore once you set up your brokerage account.
Speaking of that, setting up your account is very easy. Go to one of the big brokerage houses like Vanguard or Fidelity and just follow the instructions to open up a free brokerage account. Then fund the account and start buying the investments you like.
If you want a well-diversified stock index, check out ticker symbol “VTI”, which is Vanguard's total stock market index. It gives you broad exposure to the entire US stock market (thus reducing your concentration risk) and also pays you a dividend.
Once you have figured out what you want to buy, just start investing a small and consistent amount each month. If you do this, you can also take advantage of “dollar cost averaging,” which just means that you will buy more when prices are low and less when prices are high.
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:
So there you have it: 9 strategies for generating passive income through small investments.
If you want more great passive income ideas, check out my ultimate beginner's guide to passive income [25+ strategies that work], where I cover tons of effective strategies that generate passive income.
If you have no money and no time, but still want to generate passive income (I am talking really passive, like no upfront work involved, no ongoing work, etc.), check out my article on 15 ways to make truly passive income with no money.
On the flip side, if you can manage to invest more than $500 and are willing to devote some time and effort to a real business that can generate awesome levels of passive income, check out my article on the 12 best passive income business ideas. They include things like vending machine routes, laundromats, bounce house businesses, ATM routes, and much more.