How To Make Passive Income

Whether you’re looking to make just a few bucks or enough money to completely replace your employment paycheck, these are all great ideas that you can put to work and build your passive income streams!

If you’ve never heard of the term “passive income”, then read on.  Passive income can be thought of as money you earn passively, meaning that it only requires a little bit of effort on your part to earn that revenue.  There will dozens of examples of this below:

• Owning a rental house and collecting a monthly rental check
• Owning a website and collecting monthly advertising revenue
• Owing a dividend stock and collecting the dividend payments

I wasn’t necessarily sure if this was possible when I first heard about it.  But then I started making my own websites and after two years was able to take in an extra five figures in annual income!  Not bad for a part-time hobby!

So it doesn’t matter whether you’re looking to add $100 or $100,000 to your monthly income or have one to 40 hours a week to dedicate:  You just have to try out a few of these ideas and see what will work for you.  Trust me – you’ll be glad you did!

My List of Great Passive Income Ideas:

So in no particular order, here’s my list of great passive income ideas for you to try for yourself.

Easy Money:

1. Credit Card Cash Back / Rewards: Want to get paid for all the stuff you were going to buy anyways?  If you have a credit card (or debit card), then make sure you’re getting rewarded for using it.   If you drive a lot, find one that pays you for buying gas.  If you spend a lot on groceries, find one that rewards you everytime you go to the grocery store.  Etc.  I’ve been able to rack up as much as $1,000 per year for simply using these rewards programs to my advantage.  You can check out my entire credit card strategy here.

2. Online Rewards Programs.  In addition to getting cash back from your credit cards, why not double down and get even more rewards using a great online shopping rewards program every time you’re about to buy something.  Not only will you earn some fast and easy money, but you’ll also get coupons and offers to make the deals even sweeter.  Click here to see some of our tips and tricks for two of our favorite sites: Swagbucks and Ebates.

3. Airline Miles Programs.  Do you fly, travel, stay in hotels, or rental cars?  Airline mile and loyalty programs offer a lot of different cool free points these days for things above and beyond just flying somewhere.  Even if you’re going to rent a car or stay in a hotel, you could be earning credit that you can later apply towards a free flight or possibly even a semi-free vacation!  Here are my top 5 credit card picks for the best frequent flyer programs.

4. Paid Surveys: What could be easier than clicking a few boxes regarding your opinion about something?  Marketing companies are always after this kind of info and with the accessibility of the Internet they are willing to offer you cash and prizes to get it.  Most surveys are short and only take less than 5 minutes to complete.  You won’t make millions of dollars, but it is a simple way to earn a few bucks here and there.  To get started try this site here.

5. Selling Old Items on eBay.  Don’t mess around with having a garage sale.  Turn the entire world into your potential customer by listing your old things on eBay for top dollar.  Check out of you have any of these top selling items that you could be converting into hard cash.

6. Selling Crafts on Etsy: How about instead of selling your old stuff, you sell your crafty creations?  Etsy can be very profitable if you’re good at making things for weddings, baby showers, graduations, etc.

Being an Investor:

7. Saving for Retirement Using Your Tax-Advantaged Options.  The ultimate passive income is when you build up a great big nest egg (i.e. save up a lot of money) and live off of small chunks of it for the rest of your life.  This is the general principle behind “saving for retirement”.  There is obviously a lot more to the details than this, but that is the basic general idea.  In the U.S., the two most popular places to do this and receive tax breaks are with your 401k plan (a plan you setup with your employer) and an IRA (a plan you setup yourself).  There are a ton of great websites and resources out there that talk about different options and strategies for building up the best nest egg possible.  Use them to your advantage!  The only unfortunate thing about this passive income idea is that you have to wait until Age 59-1/2 to redeem them.

8. Dividend Stock Investing.  What’s better than a stock that goes up in value?  How about one that pays you along the way.  That’s the idea behind dividend stock investing: Picking stocks that not only have a high potential to show growth (capital gains) but will also pay you a handsome cut of the company earnings every quarter (the dividend payment).  If you can manage to collect enough shares of these high quality stocks, then you could set yourself up to receive thousands of dollars in annual income for doing nothing more than being a shareholder (now that’s passive income!)

Dividend stocks can be bought either inside your tax advantaged retirement accounts (where you probably won’t be able to touch them until age 59-1/2) or with your taxable broker account (where you have access to them anytime and could potentially retire anytime you are ready).  Two very interesting strategies to start with if you’re just getting into dividend stocks are the Dogs of the Dow and the Dividend Aristocrats.  Check out this guide if you’d like to learn more.

9. Real Estate Investment Trust (REIT). If you like the concepts of receiving dividends and owning real estate, but would rather not directly own physical property, then an REIT might be a better choice for you.  REIT’s were very popular during the housing boom (as you might imagine), but they lost a lot of steam after prices fell.  However, don’t rule them out as they will be likely to make a comeback once housing stabilizes again.

10. Bond Ladders or Bond Interest. Are stocks too risky for you?  There’s a lot of people who think so – and technically they are correct.  When you compare the index funds of stocks and bonds, you’ll find that bonds have much more stable returns.  That’s because unlike a stock, a bond is a payment of debt where you collect interest for being a loaner.  If you can manage to purchase enough bond coupons, you could create a steady stream of passive income.  That is the idea behind a bond ladder: Basically each year you buy one set of long-term bonds with a fixed high paying interest rate and then stagger them over a long period of time.  After a while each year a bond will become due and you can use the proceeds to buy into another long-term bond; preferably at a higher interest rate.

11. CD Ladders. Similar to the Bond Ladder, you could use the same strategy with Certificates of Deposit (CD’s).   In this day and age, online banks seem to offer the best interest rates for CD’s.  Browse Bankrate.com to see what’s available.

12. Peer-to-Peer Lending. Although most people probably wouldn’t think of it as traditional investing, peer-to-peer (P2P) lending could be thought of as such because YOU get to be the bank.  That means with this type of service, you loan the money and decide what interest rate you want to charge.  That could be as high as approximately +30%!  The only catches are that the borrowers could default on their loans (which is why you need to thoroughly review your candidates before you loan the money) and the P2P service takes a cut for brokering the deal.  You can read a lot more about this at our post here.

13. Annuities.  An annuity is a type of insurance product where you pay them a certain amount of money and they pay you a set monthly amount for the rest of your life.  For the rest of your life!  There is obviously a lot to consider, but annuities have been around since the days of the Romans.  Basically in this case you are paying to create a stream of passive income.

Web Marketing:

14. Blogging. How in the world does a blog make you money?  Simple: Traffic.  The more people you get to come to your website, the higher the potential for those visitors to click on an ad and buy something.  Advertisers know this and depending on what your site can do for them they will be willing to pay to work with you.  This usually comes in the form of either direct advertising or some type of affiliate marketing.

Basically to be successful as a blogger, you need reliable web hosting (with someone like Bluehost is perfect!), to write articles that people will find interesting, and then to keep that audience coming back for more.  In one year’s time I went from never having done much more than look at a website to actually creating them and writing their content – all in my spare time!

If you’d really like to learn more about starting your own blog and how to make money from it, then click on the link to check out our free +7,500 word guide!

15. Affiliate Marketing: Sometimes bloggers and website creators concentrate their efforts on promoting certain products where they get a percentage of the cut if a product or service gets sold.  This can be done either on your blog or through the use of a niche site (see No. 17 for this topic).  Of all the passive income ideas, this is one is truly “passive” because as people click on your ads, you don’t have to do anything at all.  There are dozens of affiliate broker services out there (Google Adsense, Amazon Affiliates, Commission Junction, Flex Offers, Click Bank, etc) and they allow you pick from thousands of different products in your particular niche.  Here’s how you can get started.

16. Email Marketing: This is another form of affiliate marketing where you use your list of blog subscribers to promote a certain product.  Lots of successful bloggers swear by this process because they claim that your website subscribers are a “target audience” for your niche; thereby increasing the chances of more purchases.

17. Niche Websites: If blogging sounds too time intensive, then why not make a smaller one focused on one particular topic.  These types of websites are called niche sites.  This very website is example of a niche site: It is focused primarily on the topic of discussing passive income ideas.  A niche website may be as small as 5 pages (also called a micro-niche site) or as big as 100 pages.  It all depends on how much work the creator wants to put into it.  Webmasters make money from niche sites either through the advertising or by selling them at auction websites like Flippa.  The really successful ones take it to the extreme and create a portfolio of niche sites.  Think about it: If you had 10 sites each bringing in an average of $500 per month, that would be $5,000 of passive income.

18. Website Services: Anyone who starts a website can tell you how frustrating it is in the beginning; especially for the technically challenged.  There’s all kinds of setup, programming, and small tricks to know if you want things to look right.  The good news is that people are willing to pay for someone else to deal with that nonsense, and that someone could be you!  If you have any talent at anything reltated to website creation such as search engine optimization (SEO), post writing, creating graphics, creating website themes, programming, etc, then you could sell your services to those in need.  The easiest place to market yourself to those who are looking would be through a broker such as Elance, Freelance, or 99designs.  Surprisingly you could also market yourself through an add on eBay.  And there’s always your own network of friends and referrals via your own website (or Facebook account).

Real Estate:

19. Rental Property: Renting out a house is one of the oldest passive income ideas in the book.  People will ALWAYS need a place to live, but they might not always be able to afford a full mortgage.  That’s where being a landlord can be lucrative.  You not only collect monthly rent and make a profit from it, but you can also use the rent to payoff the actual mortgage of the property (bringing you closer to actually owning the asset).  This is all of course assuming you have great tenants and they pay their rent on time.  If that bothers you, there are also rental management companies you can hire to take care of the dirty work.  Another nice thing about rental properties is that you can buy them in different locations and thus spread out your chances for success and income.

20. Apartment Owner: Why mess around with one rental property when you could diversify by leasing out 10 or more at a time?  The big-time, experienced real estate marketers advocate going big by buying large properties like this and then taking on multiple tenants at a time.  Although it requires a lot more management to be successful, the payoff is potentially much quicker than you would find with a single family home.  Think college towns or places where lots of young people live and work.

21. Commercial Real Estate Leasing:  A business is no different than a person: If they can’t afford to buy the building, then they will have to lease.  Unlike single family homes or even apartments, commercial buildings can command much higher rental fees.  The only thing to keep in mind is that the risk is that much higher if you struggle to find any tenants.

More eBay:

22. Selling Unique Items on eBay: Didn’t we already cover eBay?  Not like this: Sometimes when you go to antique fairs or estate sales, people have no idea that they may be incredibly under-selling something.  Why not turnaround and sell it for more?  In just a few short sales you could potentially double or quadruple your money.

23. Selling Things for Other People on eBay:  For whatever reason, sometimes people are scared to sell stuff on eBay.  Maybe it’s the intimidation of not knowing what do, the fear of getting ripped off, the fear of not getting paid, etc.  That’s where you could step in and agree to do it for them.  All you need to do is skim a percentage fee off the final sale price.  Sell enough high dollar items (iPad, guitar, golf clubs, etc) and those fees could really add up to make it worth your time.

24. Re-Selling Other People’s Stuff on eBay: Sometimes people aren’t very smart about how they list their items on eBay: No picture, terrible descriptions, no reserve, awkward end times.  Why not snatch up the item and sell it for what its really worth after putting all the right eBay setup in place.

25. Drop Shipping: Got a cool idea for a product that could be mass-produced for cheap?  Drop shipping might be an opportunity for you then.  Drop shipping is when someone places an order with you, and someone else (usually an assembly company in another country) makes the product inexpensively and ships it directly to the customer. You never see, handle, or do anything with the physical product other than manage the whole process (and even that can be outsourced if you really want). As a seller, this is incredibly efficient because you don’t need to have any inventory, overhead costs, storage costs, and very little liability.

If you want to see some proof of this concept at work (and read a really good book in the process), then check out how entrepreneur Timothy Ferriss, author of The 4-Hour Workweek, used drop shipping and other outsourcing techniques to create an entirely automated company – where he has no part in it!  All he does is check his email for 4 hours each Monday (hence the title of the book), and then collect the paychecks.  That’s pretty creative!

One thing we could add to this is that once you have a product that can be drop shipped, use the leverage of eBay or Amazon to reach a wider audience.  Have you ever been on Amazon and seen a cool iPhone cover that seems to be cheaper than the ones you see in the mall?  It’s probably an inexpensive design that someone put together and is going to have drop shipped to you once you place the order.  That seller was smart to play off the popularity of a hot electronics item, the inexpensiveness of using drop shipping, and the visibility of Amazon to tap into the millions of visitors they receive every day.

Being Creative:

26. Licensing Photos and Music.  Have you ever wondered where businesses find pictures for their websites and products so easily?  Or how about the music you hear when you’re on hold or watching a promotional video?  Both of those things usually come from stock photos or stock music.  And that means an opportunity for you!

You DON’T have to be a professional to make money at this.  If you simply like photography or recording yourself playing an instrument, don’t let what you create waste away on your computer hard-drive.  License them through a royalty free website that specializes in stock photos or music.  You’ll collect a small fee each time you license something.  Depending on the quality and quantity of the items you have available, you could put together a very lucrative portfolio that could translate into some very healthy side income.  Learn more about how to do this by clicking here.

27. Free-Lance Writing: If you really like writing blog posts, or just like writing in general about certain topics, you could always sell your services to people who need some good content.  You could offer your services on eLance or Freelancer.  Another place you could score writing deals are at the really popular sites like eHow, About.com, and Yahoo.  Sometimes offering to write for bigger blogs and publications can help build up your reputation which will then help you command better and better rates.

28. eBooks:  Do you have an iPad or Kindle?  Then you’ve probably noticed that eBooks are all the rage and people are willing to spend a few bucks to download ones that seem like they will be worth the read.  If you’ve got a lot of knowledge about a particular topic and love to write, technology makes it really easy for you to assemble your own eBook and make it look really good!  I’ve seen eBooks go for as little as $0.99 all the way up to +$100.  It just depends on how good it is and how badly people want to read it.  One of the nice things about putting an eBook together is that you could leverage the traffic of Amazon to list it and sell it.  You could also use other means of marketing such as eBay, ClickBank, or even your own blog.

29. eProduct / eCourse: Along the same lines of an eBook, do you think you could put together something instructional or informational that would help people and solve a problem for them?  Then perhaps you could put together some kind of eProduct such as a DVD series, software, app, instructional CD set, online course, podcasts, technical papers, etc.  One of the unique things these kinds of products is that depending on your skill set and reputation you can command upwards of a hundred to a few thousand dollars for each of these products.  Just Google something arbitraty like “how to sell restate” or “how to make money in the stock market” and you’ll find a dozen different examples of guru’s marketing their products.  What makes this one of the great passive income ideas is that any of these things can be sold online without any interaction or involvement from you.  And at a few hundred dollars per sale, I’d call that some passive income!  A lot of people who do this use their own website to market the products, but you could also use marketing power of a well known site use a eBay or ClickBank to help enhance your chances for sales.    

30. App Creation: Apps are all the craze right now.  Every kid and adult with smartphone or tablet knows what an app is and is usually not shy about spending a few dollars to get one.  For those who don’t know what this is, an “app” is short for “application” and it usually involves creating a piece of software that does something for someone.  This might be something useful like telling you every time your stock goes up in value to something completely ridiculous like making farting sounds.  Apps are nice because they generally don’t require as much programming as a full scale software suite would take.  If you know anything about programming, you could make one yourself.  Or you could outsource the creation of the app to freelance programmers.  Apps make great passive income opportunities because all you need to do is list them at a popularly traveled app marketplace such as Google Play, Amazon or Apple.

Small Business Ideas:

31. Party Tent Rental & Favors. When people like to have celebrations for graduations, birthdays, anniversaries, etc, they need out-door tents, tables, and chairs.  By simply owning these items and having them available to rent every weekend, you could turn a couple of hours of setup into a profitable venture.

32. Hall Rental.  Along the same lines as the Party Tent Rental, why not renovate a large building into a place where people can come to host their celebrations?

33. Storage Rental.  People will always need a place to keep their stuff.  If you own land and it’s not in a particularity good place for a business, consider developing it into storage units.  For a small rental fee every month people will fill them with their belongings.  The best part for you – very low maintenance.  So long as each storage unit has its own key, the operation would be basically self service.

34. Vending Machine Operation. A colleague of mine used to make passive income through a series of vending machines he had set up around different local businesses in the area.  He bought the food from very cheap through a distributor and then sold it at those above normal prices that we’ve all seen in vending machines.  But people love snacks and they don’t really think twice about the price when they are hungry.  The only effort my colleague had to put into it was stocking them once a week.

35. Car Wash.  There is a self service car wash near my house that has both the “quarter machine” style car wash ports as well as a more sophisticated automatic washer that does all the work for you.  And in 10 years I’ve never seen one worker at this car wash.  But you can guess that over this 10 year stretch I’ve used that car wash countless times.  Whoever it is that owns that place, they’re probably making off like a bandit collecting passive income everyday from people visiting their property and pumping money into their machines.

36. Laundromat.  Go to any college town and you’ll find a self service Laundromat on just about every street corner.  Why?  Because they know that college kids aren’t going to have laundry services available in their cheap apartments, and so this serves a need that they have.  Like a lot of these other businesses I’ve described, I recall rarely ever seeing anyone working at this place.  So that means that everything you make above your operational costs becomes passively earned income.

37. Ice Cream Parlor.  Have you ever visited a tourist area on a warm day and just seen it swarming with moms and dads buying $20 in ice cream treats for their kids?  The overhead for the shoppe is probably next to nothing when you consider that everyone who works there is about 16 years old and the ice cream really doesn’t cost that much.

38. Temp Employee Agency.  I deal with temp agencies a lot and they can pose as a very interesting way to earn side income.  Temporary worker agencies or staffing services as they’re also called find jobs for people who need them.  Once that person gets the job, the temp agency acts as a middle man to lease out the person to that employer and collects a fee on top of whatever that person makes.  Say for example I need an employee and I hire someone from a temp agency at $10 per hour.  The temp agency finds me an employee and I end up paying them $15 per hour ($10 to the employee and $5 to the staffing service).  As a business, the more people you outsource, the more fees you can collect.  Just also be prepared to deal with a lot of human resources management such as turnover, terminations, and disciplinary action.

39. Fitness Gym.  I don’t know about in your area, but all over these 24-hour gyms seem to be spouting up and offering memberships at ridiculously low rates like $12 per month (or similar).  How can they do that?  Simple: No one works there!  It’s nothing more than a rented building with a bunch of exercise equipment inside.  The patrons come and go as they please.  If you had enough people sign up, you could surpass your operational costs and keep the rest as pure profits.  Just remember to invest in a great security camera system and have lots of liability insurance since injuries at the gym can be somewhat frequent.

40. Owing a Small Business: Remember the movie “The Blind Side”?  Do you recall how Sandra Bullock’s character’s family was so rich and they never seemed to work?  They owned a series of fast food franchises.  While franchising may be a tall order for some given the high initial investment, you could certainly take this to a lesser extreme by owning a small sandwich shop, coffee shop, ice cream store, restaurant, etc.  As the owner you can find good help to keep the place running and customers happy.  Most small business owners will tell you that beyond keeping the business organized and having good help, all that really matters is location, location, location!

41. Consulting: Maybe consulting is not technically passive income, but I would argue that it does fit.  If you do something really good and people demand your service, you’ll be able to command pretty much whatever fee you want (or the customer is willing to pay).  So while a traditional job might pay you $30 per hour, let’s say you are able to sell your services at $150 per hour?  That means you’d only need to work one day for every five days that you used to work.  I’d call the opportunity cost of gaining four free days a great passive income opportunity!  By the way – this idea came from the consultant in the cubicle next to me who only works one day a week.  With consulting it seems like who you know is just as important as what you know.  If your network is a little light, try going digital on LinkedIn or by starting your own free website to gain some traction and make yourself stand out.

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That’s it for now with my suggestions.  But feel free to check out the rest of the website for other topics related to making side income.