You’ve seen them – the ads online that tell you that you can make a passive income just by investing a gerbil and an eyebrow hair! You’ll make thousands each month, guaranteed, with this simple plan!
Just stop. They’re not true. There’s no such thing as a passive income that you can generate without putting in a little work. We’re not here to sell you anything, we’re here to help. That’s why, in this guide, we’ll teach you:
- How to create a passive income that will pay a few of your bills each month
- How to determine which passive deals are scams and which are legit
- Which passive income schemes might work for you
You can generate a passive income, but it’s going to take some work. Thankfully, you have us. Here’s what you need to know about passive income, what it really is and how you can earn it.
Passive Income: What it Is and Why You Want It
What is passive income? Well, it’s income that continues to stream into your checking account every week, month or quarter … and you don’t even have to think about it.
Now, you’ll see the ads online. “You can earn $6,000 each month in passive income when you…”
No. You can’t.
But you can create a product or a service that will allow you to collect money each month. That’s what having a passive income is all about – putting in a bit of initial work and some work on maintenance, then not really having to work so hard in the future but collecting money anyhow.
This guide will teach you how to do that, but you may be wondering why? What’s so great about having a passive income? Well, that’s easy. It’s money you’re earning without having to even think about it. Now, sometimes your “passive” income will require a bit of upkeep. We’ll talk about some of those examples in this guide. For instance, renting out property is going to take a bit of work on your part.
But for the most part, a passive income requires very little input from you. You can collect royalties, invest money and more, and simply watch money come in to your bank account.
How Much Money Can You Earn?
The amount of money you passively earn will definitely depend on what you plan to do to create passive income. Obviously, you’re going to earn more when you rent out property than you’ll earn with an interest-bearing bank account.
The amount of passive income you earn is also going to depend on how much work you put into it. That may sound counterintuitive, but it’s true. For instance, if you write a book then never market it, you may earn a few bucks each month. If you spend time marketing what you’ve written, you’ll earn much more, maybe a few hundred each month – or more!
There are very few passive income strategies that are truly hands-off. Even owning a fast food franchise and having others run the business will require work on your part. There’s licensing, landlords or mortgages and more to deal with.
But as you go through this guide, determine how much work you can realistically put into your new income-generating strategy, then figure out whether the money you’ll earn is worth it to you.
Alright! Are you ready to explore some of the most popular and best ways to generate passive income? Let’s get started!
1. Invest in real estate
Initial cost: $$$
Initial work required: Varies
Ongoing work required: Moderate
Money earned: $$
Risk: High
There are two ways you can invest in real estate to earn a passive income. The first is to flip houses. You’ve probably seen it done on television – your favorite TV personalities will buy a house for a lower than usual price, then will spend money fixing it up. Sometimes a lot of work is required, and other times there’s not much to be done at all.
They’ll then list the house on the market to sell for higher than the original price of the house and the cost of the repairs. In the end, if they’re lucky, they’ll walk away with a nice little profit.
The thing they don’t show you on television is that this can be really risky. You can invest a lot of money in a house, whether it be the purchase price or the repairs, and then it never sells. Fortunately, there’s a way to get around it – the second way to earn a passive income is to rent out your properties.
The rental market is absolutely huge. For instance, in the United States, the apartment rental market alone is over $174 billion dollars. That’s billion with a B. You can get in on the action by renting out the houses you buy.
When you’re a landlord, you’ll run into some problems sometimes. Things break, people need to be evicted, and properties get trashed. Be sure you’re ready to deal with these things should you decide to be a landlord.
- You can earn a passive income by investing in real estate
- You can make money either by flipping or renting out the homes you purchase
- There are risks associated with real estate investing so be sure you consider them all before you begin
2. Rent out your room
Initial cost: $
Initial work required: Very little
Ongoing work required: Moderate
Money earned: $
Risk: Moderate
If you don’t have the resources or the desire to invest in real estate, you can still provide someone a place to live while you earn a passive income – just rent out a room in your home! Whether you live in a one bedroom apartment or a two story home, you’ve probably got a way to rent out space to someone who needs it.
If your home is small – one bedroom or so – you may need to find another place to live. You can go crash with a friend or with family and pay either nothing or a minimal amount in rent. Then, you can charge a tenant to live in the space you’ve bought or rented.
If you have a bigger space and extra room to share, you can rent your room to someone who will essentially become a roommate to you. It’s best if you do a criminal background check and a credit check on whomever you’re renting to – the fewer surprises the better!
- You can earn a passive income by renting out a room in your home
- You can then move in with friends or family to save yourself on rent money
- You also have the option of living with your renter in a roommate situation
3. Rent out your garage
Initial cost: $
Initial work required: Some
Ongoing work required: Very little
Money earned: $$
Risk: Low
If you own your home, you can consider renting out your garage to someone. There could be a number of reasons someone might want a garage. They may want to:
- Park their car or small boat for cheap
- Practice the drums where Mom and Dad can’t hear
- Use it as a workspace
- Use it to breed puppies
- Hold religious services
You get the idea – your garage can create a passive income for you for all sorts of reasons! If you’re comfortable giving someone access to your garage, you can simply list it for rent and watch the money come in each month or week.
As with your roommates, be sure you do a criminal check on these people you’re renting to. After all, you don’t want to be liable for any illegal or unsavory stuff that’s happening on your property.
- You can earn a passive income by renting out your garage
- Make sure you do a criminal background check on whomever you rent to – people are weird
- There are a huge variety of reasons someone might want your garage space – be sure you find out why
4. Rent out your house
Initial cost: $$$
Initial work required: Lots
Ongoing work required: Moderate
Money earned: $$$
Risk: High
If you own your own home, you can earn a somewhat passive income by renting out your home. Now, we say “somewhat” because there’s a lot that goes into maintaining a rental property. It’s similar to if you were renting out a room, but there may actually be even more involved.
As a landlord, you’ll be responsible if things break. That includes things that are the tenant’s fault, like windows and walls. You’re also going to be the one they call when the water heater stops heating water, the dishwasher stops washing dishes and the refrigerator stops refrigerating.
As a landlord, natural disasters also suddenly become your fault. The power is out for a week due to ice storms and the pipes freeze and burst. That’s on you. The freezer thaws, causing water damage to the floors. Also on you. A tree falls through the roof. You get it – it’s up to you to fix it. If you can’t, you’re in charge for putting your tenants up in another rental or hotel until you can.
Do your research before you sign up for this type of passive income, as it may become more expensive than you think. If you’re game for it, it’s actually quite an interesting opportunity.
- You can rent out your home for a somewhat passive income, but there are risks
- As a landlord, you’re responsible for all repairs, even those caused by natural disaster
- Be sure you’re familiar with the industry before you sign up to rent out your home
5. Rent out your car
Initial cost: $
Initial work required: Little
Ongoing work required: Very little
Money earned: $
Risk: Moderate
Do you have a car you’re not using? Whether you’ve switched to public transportation or just have a second vehicle that’s just sitting there, you can earn a passive income when you rent your car for others to drive.
Of course, there are going to be insurance issues you’ll need to take care of. You’ll need to have insurance, of course. You’ll also need to check if there are any riders you need to buy to add to your existing plan, and you’ll need to ensure your renters have insurance, too!
Keep your car clean and in good condition. Then, list your car for rent on one of the many websites that are used for this purpose. Or, simply use word of mouth and advertise to locals that you’re renting your vehicle.
As far as rates, they’re up to you! You can charge by the day or by the mile. You should also decide (and put into a contract) what you want to do with fuel for the car. Either you can provide them with a full tank and expect a full tank in return, or you can allow them to drive the car and return it with just however much is left in the tank.
- If you have an extra vehicle, you can earn a passive income
- Be sure to check with your insurance provider about any riders you may need
- The rates you set are up to you – list your car through an app or just by word of mouth
6. Use your car as a billboard
Initial cost: None
Initial work required: Little
Ongoing work required: Very little
Money earned: $-$$
Risk: None
Did you know that people will pay you to advertise with your car? While you have to be actively driving, this form of passive income is actually one of the most legit out there. If you have a newer model car that’s in good shape, do a Google search for “car wrap.” You’ll see what we mean, and you can get started right away!
Now, there are a few requirements for advertising with your car. These may include:
- Having a car that’s less than ten years old
- Having a car that’s in good shape
- Driving a certain number of miles each day (usually around 30)
- Having a good and clean driving record
- Giving an app permission to track your location – constantly!
If you can say “yes” to all of these things, you can definitely advertise with your car! You’ll have what’s called a car wrap installed, which usually just takes a few hours. Then, you’ll get paid for just making your daily commute! You may also be eligible to be paid to park in certain places – sometimes upwards of $30 per hour.
This is truly a passive income; it requires very little effort on your part and you can earn a few hundred each month. That said, campaigns aren’t ongoing, so you may experience a few “dry” months. In other words, don’t count on a steady income.
- Companies will pay you money to use your car to advertise
- The risk to you is super minimal – you just need to drive as usual
- There are requirements you’ll have to meet, but they’re easily attainable for most people
7. Rent out your land
Initial cost: $
Initial work required: Very little
Ongoing work required: Some
Money earned: $$-$$$
Risk: Low
Do you own a large plot of land? If so, there’s a good chance you’re not using all of it. If that’s the case, why not earn a passive income by renting out a portion of your plot to either campers, RV travelers or tiny house owners?
This way of earning passive income requires very minimal work on your part. You’ll have to make sure your plot is maintained, of course. You’ll also have to make sure that if tiny houses are legal in your area the plot is up to code. Other than that, you can meet some super interesting people, earn a passive income and you probably won’t even notice you have tenants.
Tiny house owners, campers and others are very clean people. They are usually very committed to making each place they visit even cleaner than when they arrived, so you don’t have to worry too much about people wreaking havoc on your land.
You will, however, need to set down some rules. Do you disallow people from hunting or fishing on your land? Would you prefer they not have an open fire on your property? Are there visitor or noise restrictions you’d like observed? Put it all in writing and have your “tenants” sign.
- There’s very little risk to having someone camp out or park their tiny house on your property
- Be sure your land is up to code so that you don’t face fines from the government
- Be sure you also set your rules in writing so that everyone knows what’s up – it’s still your property, after all!
8. Investing – the best and almost only one real passive income
Initial cost: $-$$$
Initial work required: Little
Ongoing work required: Very little
Money earned: $-$$$
Risk: Low to High
We don’t claim to be financial advisers. We never have and we never will. But we do know a thing or two about making money work for you, and investing is one of the only ways you can truly “set it and forget it” when it comes to earning a passive income.
Our advice to you is to hire a financial adviser who’s licensed in your area. He or she can walk you through the steps you need to take to make your investment earn, whether you’re looking for a long term or a short term investment opportunity.
Depending on where you live, you can be eligible to invest in a number of things. Choose from stocks, bonds and more, and choose your risk level. You can invest as little as you want or as much as you can afford, and watch your money grow.
Remember that investing isn’t guaranteed to earn you a passive income. You can gain a ton of money or you can lose it all. That’s why we recommend you speak with a professional who can help you manage your risk in a way that suits your budget and your lifestyle.
- You can earn a passive income when you invest in the stock market
- There are low and high risk options available – you can choose which suits your budget and comfort level
- We recommend that you talk to a professional to decide how much and where to invest your money
9. Open a high-interest savings account
Initial cost: $
Initial work required: None
Ongoing work required: None
Money earned: $
Risk: Low
If you want a no-frills way to earn a passive income, you’ve got one – just open a high interest savings account. It’s really that easy. You can deposit any amount into your savings account, then watch your income grown, month by month and year by year.
The interest you earn on your savings account won’t be enough to fund your retirement. In fact, it may not even be enough to pay the electric bill. But you’ll earn some money when you take this step, and depending upon how much you deposit, you can make a few hundred each year on your savings.
Research banks in your area, then choose one that you feel meets your needs. Look for local branches, internet access and more – whatever suits your needs the best. Then, start saving! Begin with an initial deposit, then commit to investing a certain amount each month. Then, just sit back and watch your savings account grow.
- You’re not going to make a fortune with a high interest savings account, but you will earn money
- Do your research and find a bank that works for you, whether it’s online only or a local branch
- Invest as little or as much as you want, then make regular payments to your savings account
10. Lend money with peer to peer financing
Initial cost: $
Initial work required: Little
Ongoing work required: Minimal
Money earned: $$
Risk: Moderate
If you have some extra cash you’re willing to lend to a peer, you can earn a passive income with peer to peer lending. You can get started on some networks for as little as $25,
So how does peer to peer lending work? Well, you simply loan your money to another person. This person could be looking to start a business or simply to pay off some bills. There is a credit check involved, so you can have a good idea of how likely the person is to pay you back.
You’ll “meet” your recipient through an online platform. Usually the money is held in escrow with a third party, and payments are processed online. There’s usually risk involved (as with lending to anyone) but the payments themselves are secure transactions.
With that in mind, you can make crazy money with peer to peer lending. Interest rates range from 7 to 39%, depending on the area you live in. If your debtor pays you back (a big if in some cases) you’ll make a lot of money with peer to peer lending.
- Peer to peer lending is high risk but can really pay off
- You can get started for as little as twenty five dollars
- You’ll be accepting a bit of risk, but if you do decide to become a peer to peer lender you’ll be well on your way to earning passive income
11. Create a scalable online business
Initial cost: $-$$$
Initial work required: A lot
Ongoing work required: Moderate
Money earned: $$-$$$
Risk: Moderate
If you start selling custom-made jackets on the internet, there’s going to come a point where you just can’t keep up with demand. But when you create a scalable business online, you can definitely earn a passive income with very little effort.
So what does scalable mean? It means that you can continue selling your product to more and more people with very minimal work on your part. So, for instance, and online course would be scalable. You can create it once, then many people can take it. On the other hand, custom jewelry is not scalable – you’ll be creating a product with every new order that comes in.
Think about some things you can do that are scalable, like writing an ebook and selling it, or creating creating software or apps that people can either buy or purchase in-app purchases. These are scalable and will create a passive income that’s pretty hands-off for you, once you’ve created the product.
- You can open just about any type of business online, but for passive income try to create something scalable
- E-books and software are examples of businesses that are scalable
- Creating bespoke items to sell online is not scalable
12. Get into affiliate marketing
Initial cost: $
Initial work required: Some
Ongoing work required: Moderate
Money earned: $$
Risk: Low
If you’re interested in creating a presence online, you can earn a passive income with affiliate marketing. You’re going to need to put in some ongoing work for this, but after a while the amount of work does begin to taper off a bit.
So what’s affiliate marketing? Well, you’re basically earning a commission for selling someone else’s stuff. The key to affiliate marketing is getting a large amount of traffic to your website. Then, as visitors come and either click through ads or buy products from, say, Amazon, you’ll earn money without even doing anything.
But you have to be good at search engine optimization, or at least be willing to learn as you go. It’s not terribly difficult – there are some hard and fast rules to SEO – but it does take some knowledge and practice.
Once your website is up, running and popular, you may also be able to monetize your site by offering companies a space on your site to advertise. This is going to take a little work on your part, but you can actually make a healthy chunk of change when you do it.
- Affiliate marketing takes a bit of work to get started, but that work tapers down after a while
- You’ll need a popular website, so be sure you learn about search engine optimization
- You can get paid commission on products you sell, or on ads companies place on your site
13. Create YouTube videos
Initial cost: $
Initial work required: Minimal
Ongoing work required: Moderate
Money earned: $$-$$$
Risk: Low
Have you ever wondered why some people are so excited about posting videos on YouTube? It’s because they get paid, that’s why! YouTubers can make money from ad revenue, affiliate links, sponsorships and by selling merchandise, so there are a few ways you can earn. Ready to give it a shot?
First, you’ll create a channel on YouTube. Then, it’s up to you to come up with some killer content. You can do anything from unboxing videos to instructional clips – just use your imagination. Then, start sharing your video. With luck, you’ll have a video that goes viral and gain tons of followers.
YouTube is super competitive, as everyone wants to make a passive income. You’ll need at least 1,000 followers (at time of writing) and a certain number of hours of watch time within the past 12 months. Currently that number is 4,000 hours.
As you can see, that’s a lot of work, making YouTube one of the most labor-intensive methods of earning a passive income. But if you’ve got a lot to say and don’t mind putting in the work, creating these videos could be a good option for you.
- You can make money in a few ways when you post videos on YouTube
- It’s not easy – there are strict requirements to monetize your channel
- This form of passive income could be fun for you, but don’t expect to sit back and watch the money roll in
14. Try your hand at dropshipping
Initial cost: $$
Initial work required: Some
Ongoing work required: Moderate
Money earned: $$-$$$
Risk: Low
Do you want to open your own store without owning any inventory? Dropshipping is a type of passive income that allows you to do just that. You’ll set up your website in the way you want, name it what you choose, and select products you’d like to sell. Then, you’re off to earning income without ever touching a shipping label!
Dropshipping can take as little or as much work as you like. Some dropshippers say they work upwards of 60 hours each week, while others work just a few hours a day. You’ll need to choose your platform, select your supplier and set up your store. Then you’ll have to actively market yourself – social media is a great way to do this.
Once you’ve got a good customer base and the orders start coming in you’ll have to keep tabs on your “inventory” – the products your supplier is and isn’t selling. You’ll have some accounting to do, too, to keep that in mind!
If you set up your store well and market yourself, you can start making money right away. First timers say they made between $200 and $3,000 their first month. Others have actually lost money. Make sure you do your research before you spend your money setting up your business.
- Dropship businesses are stores that sell products without ever handling the inventory
- You can choose whatever you want to sell – pick something that interests you
- You can earn a lot of income with dropshipping – or you could lose money. Do your research
15. Collect royalties on items you create
Initial cost: $-$$$
Initial work required: Moderate
Ongoing work required: Minimal
Money earned: $-$$$
Risk: Low
The last way you can earn a passive income is to collect royalties on things you’ve created. This is actually quite simple. If you have:
- A patent
- A play you’ve written
- A musical piece you’ve performed or composed
- A book you’ve written
- Artwork you’ve created
- Photography you’ve captured
… you can collect royalties. You can charge people to play your song, share images of your art, use your photos on their website or copy excerpts from your book.
There are some simple ways to do this. For instance, you can simply self-publish a book on Kindle, or sell your images to a stock photo website. Patents and performance royalties are a little trickier, and it may be a good idea to talk to a lawyer about how to collect them.
In short, if there’s something you’ve created you can probably earn a passive income from it. The initial work is usually pretty intense, but then you’ll literally sit back and watch your bank account grow.
- You can earn a passive income by selling the rights to use something you’ve created
- This can be art, a patent or any other creation
- Collecting royalties on your work can be as simple as selling photos to a stock photo website
Conclusion
After reading this guide, you’re probably thinking there’s really no such thing as a true passive income – and you’d be kind of right! All income takes a bit of work, at least to start up, and usually passive income does require some ongoing effort on your part.
However, what we love about passive income is that it’s relatively easy in most cases, and you can do what you love to do! Whether you love to create YouTube videos or take photos, you can create income in a way that makes you happy!
