The 18 Most Profitable Passive Income Streams To Consider
Creating several passive income streams is a dream for many entrepreneurs. It can accelerate plans to make extra income, pay off debt, and invest in building wealth. But what exactly is passive income? Are these streams truly passive? What can we do to begin tapping into this hidden stream of profits? Read on to find out how you can start producing passive income today.
What Is Passive Income?
Who doesn’t want an extra source of income or some extra cash to splurge here and there? Well, passive income is the best income stream that you can have. It’s cash flow without considerable effort.
Passive income is all about money making money 24/7. You know the famous make money while you sleep idea. It’s about buying money-producing assets and investing time to build products that generate income without future effort.
Your ability to generate an income, become rich, and accumulate wealth is infinite. Sure, you may have to find multiple income streams to keep it going depending on market cycles and economic conditions. But it’s there for the making. There are two main ways to generate passive income: purchasing and creating assets that earn money.
Truly Passive: Purchase and Forget It
Passive income that is always passive is usually found in the form of investments. With this type of income, you make a purchase and forget it. Therefore, you don’t have to devote time or energy to generate money from these passive income streams.
- Income From Stocks
There are two main ways to make money from stocks. First, you can start investing. Purchase and forget it. Then make money when you sell the stock down the road through capital gains. That isn’t a continuous form of income, but it can come in handy when you’re ready to retire.
On the other hand, you can see regular passive income in the form of dividends from dividend stocks. Here, dividends are directly paid to you in cash, but you can reinvest the dividends. Large and well-established companies usually offer dividend-paying stocks with profits that they want to return to shareholders. As a bonus, these stocks may be less risky and less volatile than growth stocks.
Although you may choose to buy dividend stocks individually from well-known companies, you can also find them in index funds and exchange-traded funds (ETFs) as a group of stocks that mimic the market or industries. This form of investing minimizes risk by diversifying investments while still offering regular income through dividend stocks.
Some investors may argue that income from dividends isn’t passive income. But I argue it’s passive because you don’t have to actively do anything to make it.
- A Bond Ladder
A bond ladder is a portfolio of multiple bonds that mature at different times. When the bonds mature, you can reinvest the returned principal in new bonds and start a new ladder or continue adding on to your current one.
Bond ladders provide current income while limiting rate risks. Investors can have predictable passive bond income depending on maturity dates. However, bond ladders may need to be re-balanced depending on rate changes over time. Investors should consider different types of bonds when creating their portfolio for passive income with bonds.
- Income From Interest
You can earn passive income with interest when you loan money to someone else. For example, you can loan banks money in the form of a high yield savings account, and you can lend businesses money in the form of bonds. But you also earn interest when you loan money to peers.
Peer-to-peer loans are personal loans between you and a borrower using third parties like Peerform, Upstart, Lending Club, Funding Circle, or Prosper. You have to keep in mind that peer lending is high risk due to the unsecured nature of the loans. But with higher risks, you’re likely to make more interest than using high-yield savings accounts.
Rental properties are expensive and time-consuming. If you love real estate but don’t feel like putting in the work or money to flip or manage properties, check out real estate investment trusts (REITs). Real estate investing with REITs is like buying and selling stocks on major stock exchanges. These funds include commercial real estate, movie theatres, apartments, office buildings, and more.
- Invest In Crowdfunded Real Estate
Invest in real estate without buying property through crowdfunding real estate platforms. These platforms connect investors to real estate investment properties. Money is pooled together to buy multifamily properties, commercial or retail properties, office buildings, single-family homes, and more. In addition, investors collect passive income through the form of dividends.
- Rent Your Parking Space
There’s nothing like owning a piece of asphalt that can make you some easy money. Renting out your parking space in crowded cities where parking is precious can earn you a few hundred extra dollars a month. Of course, location matters, but size can also be important. Some renters may be willing to pay more for lighting, security, electric charging stations, and cameras. Check out third-party platforms like CurbFlip, SpotHero, or ParkingCupid to look for renters. Just keep in mind they may take some of your profits while serving as the middleman.
Requires Upfront Work, Then Becomes Passive
Despite its name, passive income is rarely 100% passive. Instead, many forms of passive income take upfront planning and work to produce a continuous money flow.
- Income From Royalties
Earning passive income from royalties is more popular than you might think. It’s the money you earn as people pay you for a percentage of the sales of your intellectual property. It can be anything like copyrighted music, pictures you sell on a stock photography platform, books, or more. Royalties are paid every time a third party sells your creation. And if you get famous enough, your name can earn royalties too.
Although freelance writing may not be passive income, writing a book once could be.
- Income From Publishing
Of course, if you want to put in a little extra effort, you can publish books and music yourself instead of earning money from royalties. You’ll make a more significant profit because you’re removing the third party from the equation. The process is also faster than working with publishers and agents because you’re making the calls. Only you can weigh the pros and cons of working with a larger agency.
- Income From Patents
Do you have the next best solution to the world’s biggest problem? If so, patent the invention and start a stream of passive income. Once you have the patent, you can create the product and sell it or license your patent to be produced by someone else who can then sell it. You’re the brainchild, but you don’t have to do much work when you license it. You can also sell patents if the price is right or used as collateral for loans.
- Income From Affiliate Sales
Affiliate marketing is becoming a popular source of passive income. According to PayScale, the average base salary for affiliate marketers is $51,788 per year. Affiliate marketers promote products through email marketing, social media, or paid advertising for various products. Once marketers have built a large audience, they spend less time promoting the products. It only takes a few high ticket items and good blog posts or email evergreens to make a noticeable passive income.
- Create An App
Who hasn’t used an app? Very few people, that’s who. Mobile apps can create millionaires overnight or at least a few extra thousand for the right person. If you have a knack for coding and programming, maybe it’s time you create an app to make money online. Once you publish it, you’ll earn passive money for quite some time. Even if your app is free to use, you can make money through advertisements.
And don’t worry about the time you’ll have to invest later to update the app. You might make enough to hire someone to help down the road.
- Advertise On Your Car
If you’re looking to make some extra money while doing all the things you usually do, try advertising on your car. Think of making money on the commute to work or while running errands. If nothing else, you’ll offset the costs of gas while getting things done. Check out companies like StickerRide, Wrapify, Carvetise, Free Car Media, and ReferralCars.
- Create A Blog, Podcast, Or YouTube Channel
Become a content creator to make passive income online with a YouTube channel, podcast, or blog. You can generate revenue through advertising, affiliate marketing, and sponsored content. Of course, there’s a lot of upfront time invested. However, you only have to write an article or make a video once with blogging and YouTube, even though the article or video has traffic multiple times over. Once you establish a community and rank content with high traffic, you can outsource more to grow without doing the work. That’s less and less on your effort and time over time.
- Sell Designs Online
Now is prime time to sell your graphic designs and artwork online. Bloggers, store owners, virtual assistants, influencers, and others need graphic designers to help market and promote their products. You may find that you enjoy designing templates for social media or website designs, or maybe you create cute shirt designs. Your imagination is your only limitation. You can sell your designs directly on sites like Etsy, Creative Market, or a personal website. You could also try building a membership community where people can access all of your designs for a monthly or yearly fee. Selling designs online requires a little upfront time investment, but you can put it on autopilot once the work is done.
- Purchase A Blog
Everyone knows that blogs can generate money through advertising and products. But sometimes, people don’t want to build a community, which can sometimes take years. You can buy a blog that is already established for 2-3 times its annual earnings to get a head start on owning a successful blog. It will probably take a few years to see a return on your capital, but it shouldn’t be a problem if you keep the blog well maintained. You may even run an email program to the already established email list that regularly sends visitors to your site.
- Create An Online Course
Put in a little work to create a course or product and watch the money steam in without much more effort from you. While this form of income does require you to have a strong brand and presence, it’s still doable. You can successfully earn passive income for a significant amount of time after you create an online course. People are looking for systems that teach them everything from exercising and losing weight to stress management and personal finance. There’s something for everyone. What’s your passion? What can you teach the world?
- License Your Photos
If you’re the sole owner of your photography, you can consider licensing your work for commercial use, non-commercial use, exclusive rights, non-exclusive rights, one-time use, or creative commons. Every time someone purchases a license, you get a kickback even though you only had to take the picture once. It took a little upfront work, but the return can be infinite.
- Start An ATM Business
Have you ever wondered who owns the ATMs you see in the gas station, movie theatres, restaurants? Well, it’s probably everyday people like you. You can purchase an ATM and set it up anywhere to collect passive income. Starting a passive business with ATMs is simple. You’ll need to find a location, set up a contract with the business owner, and stock the machines regularly. You’ll have to share some of the ATM fees you receive with the business owner and the ATM processor, but the rest is yours, and you only have to put in a little work to get it.
It’s essential to have different streams of income. So, if you genuinely want to generate passive income, look for ways to make money without big-time commitments and work. Building a steady income stream may take a little time, but it’s worth it.
Imagine building wealth and financial freedom with relatively little long-term effort. This list of 18 passive income ideas is a perfect first step to generate more income and additional revenue with multiple income streams for years to come.
This post originally appeared on Savoteur.
Theresa is a personal finance blogger. She writes content for busy professional women to take control of their money and investments. She enjoys reading, traveling, cooking, and writing. Her work has been featured on GoBanking Rates, Your Money Geek, Savoteur, the Corporate Quitter, Thirty Eight Investing, and more.