When it comes to personal finance, one of the best ways to achieve financial freedom is by building passive income streams. As Warren Buffett has famously said, “If you don’t find a way to make money while you sleep, you will work until you die.”
Of course, you don’t need to quit your job to create passive income. It’s just a good way to generate extra cash flow whether you’re trying to build it as a major hustle or whether you want to stay in your primary job.
If you’re thinking about earning passive income, you might find it helpful to consider various passive income ideas. This post will cover 21 of the best passive income strategies that could help you make some extra money.
Most of these passive income ideas will require an upfront time investment but, if managed well, will be paying you dividends for a long time to come. Use this list wisely and you can start building passive income streams today.
What is Passive Income?
Before getting into various passive income ideas, it’s important to get clear on what passive income really is. The IRS defines passive income as money that is earned from a rental property, limited partnership, or any other trade in which the person is not actively involved.
In recent years, though, the term has grown to represent any form of income that is generated on a consistent basis with little to no effort being put in from the recipient of the money.
Though to many, passive income may sound like a “get-rich-quick” type of deal, to build up the streams of cash flow still requires a lot of work. Compared with active income, though, most to all of the work is done upfront.
If you’re thinking about establishing passive income for your future, don’t expect it to be an easy ride. Due to how sought-after passive income is, you’ll need to work extra hard to acquire and maintain good passive income investments.
That being said, if you’re committed to making passive income, it can turn out to be a great way to give you some extra cash and also provide you with another layer of financial security.
21 Best Passive Income Ideas
If you’re considering creating a passive income stream, check out these 21 ideas below for some starters. Each one will have its own unique advantages and disadvantages but they can all work to generate you great passive income.
Invest in Dividend Stocks
One way that you begin to easily build passive income is by investing in dividend-yielding stocks. Certain companies on the public market offer dividends, a type of periodic payment as a way of rewarding investors of the stock. All you need to do to participate is own the stock (the more stock you own, the more money you’ll get in dividends). A great way to build wealth over time is to slowly start buying dividend stocks and reinvest the dividends, compounding your cash flow.
- Investing in dividend stocks doesn’t require any kind of work other than the upfront financial investment, making it an extremely passive asset.
- Dividends don’t take away from the principal of the investment, meaning you can use the dividends to reinvest into the same stock (or other stocks), giving you more chances at growth.
- Investing in stocks inherently has its own risks, and using dividend bearing ones as a passive income idea are no different. When you buy a dividend stock, there is still the chance that the price tumbles to zero and you lose all your money.
- Building real, usable cashflow with dividend stocks requires an immense amount of time and/or capital to begin with. Because dividends pay so little, dividend stock investing is a long term strategy (and not a “get rich quick” type deal).
Own Rental Properties
Robert Kiyosaki’s favorite passive income stream, real estate investing is a popular way to build long-term wealth while also providing you with cash flow along the way. If you can find a good rental property to buy, it could start paying for your bills on day one and continue to benefit your family for generations to come. As one of the best forms of passive income, rental income offers you the ability to take advantage of appreciation as well as cash flow.
- Because of leverage (taking out a mortgage for the property), the returns on the appreciation of the rental property are amplified.
- Depending on how good of a deal you get, you can buy rental property and start earning significant cashflow right from the get-go.
- Due to the leveraged nature of real estate, when an investment goes bad, it can seriously damage your financial health (potentially even bankrupting you).
- Though real estate seems passive on the surface, there’s a lot of work that actually goes into managing rental properties.
Buy Certificates of Deposit (CDs)
Investing in certificates of deposit (CDs) offer you an easy and low-stress way to generate some passive income. A certificate of deposit is simply an asset offered by banks and credit unions that provide you with an interest payment as long as you agree make a lump-sum deposit that you won’t touch for a period of time.
When looking for CDs, make sure to shop around as (unlike other asset classes) returns can vary greatly from vendor to vendor. An online bank may very well offer up to three times higher of a rate than a traditional brick-and-mortar bank.
- Because of their official nature, CDs are extremely secure and you’re unlikely to lose any money by investing in them.
- Sometimes there are certain offers made by online banks that can boost your returns drastically with CDs.
- The interest rates offered on CDs are usually quite low, meaning it’s hard to create usable cashflow without already have a solid chunk of capital.
- In some years, the interest rates don’t even beat inflation, meaning that CDs can sometimes have a negative “real return”.
Open a High Yield Savings Account
If you’re not so fond of the lack of liquidity in CDs, consider opening up a high yield savings account instead. You can do so at one of the major banks or through an online bank. With a high-yield savings account, you can leave your money in the bank and earn interest on it without having to lock up your capital.
- You can take your money out of the account whenever you want, ensuring your liquidity.
- A savings account is extremely secure as it’s usually backed by the bank’s own resources.
- The interest rates on savings account are usually very low. If you’re trying to earn passive income you can actually live off, a savings account probably won’t cut it.
Start a Blog
One extremely popular passive income idea is to start and run a blog.
Do you have a passion for a subject? Perhaps you have a specific niche that you’re an expert in? If so, starting a blog could be a great way to build an online asset while also providing you with some cash flow.
In the beginning, you’ll need to devote lots of time and energy to it to build up a sizable audience, but once you have many readers, you can monetize and start earning all those costs back.
- A blog is low cost and affords you many work from home opportunities that a 9-5 job otherwise doesn’t.
- The growth of online entities is usually exponential, so you can expect to see an explosion of growth if you’re successful.
- A blog takes lots of time and effort to succeed. In the first few years, expect to not make any money (or even be out of pocket a couple hundred of dollars) before you start generating some cashflow.
Invest in REITs
If you’re too scared to invest in real estate directly, a good alternative to consider is a REIT. REITs are Real Estate Investment Trusts, basically companies that own and manage real estate. By buying shares of the Real Estate Investment Trust, you are providing your money for them to use to buy public and private real estate, and you’ll be compensated in the form of high dividends.
- REITs are easy to buy on the public market and offer an easy way to get started in the real estate world.
- Some REITs offer consistently high dividends, meaning you’ll have lots of room to compound your growth and start earning some passive income right away.
- Just like regular stocks, how much money you make from a REIT depends on the direction of its stock price. If it tumbles, then so too will your earnings.
Invest in Private Equity Funds
If you have tons of money and are looking for a way to deploy your capital, investing in private equity could be a lucrative option for you. Private equity firms essentially buy businesses, make them better, and sell them later on.
You can partake by signing up to be a Limited Partner and let the private equity firm use your money (and in exchange you get a piece of the return).
- Successful PE firms have the ability to earn you up to 20% or even 30% on your investment.
- PE firms are extremely passive and you really don’t have to do much to partake (other than make an upfront investment and also attend annual meetings).
- You need to be an accredited investor to invest in asset classes like private equity. What this means is you need to already have a ton of money to your name. Private equity is not available to the you if you’re just starting on your wealth journey, but could prove a valuable asset later on down the line.
Write a Book
One of the most passive forms of income is money made from writing a book. All you need to do is write the book, and if successful, you’ll earn a few cents on every single copy sold from the day it’s published to the day you die.
Nowadays, there’s an audience for almost any topic so if you have something you desperately want to write about, there’s sure to be buyers for it.
- Writing a book is both a wealth building and a knowledge building activity. As you write, you’ll learn more about certain topics of interest.
- Having a book to show for your efforts can be extremely gratifying and provide you with a sense of accomplishment that’s hard to replicate elsewhere.
- Writing a good book takes time, and if you’re looking for a way to make passive income instantly, you’ll be extremely disappointed.
License Royalties Through Music
Similar to the income from book writing, royalties are something you work hard to earn, but once you have it, it will provide you with cashflow forever.
If you’re musically inclined, you can create music and license it to the likes of YouTube channels, Twitch streamers, or even TV commercials.
- Music creation for royalties has a low barrier to entry and almost anybody can partake. If you can create music, you can start earning money right away.
- For a lot of people, music is a passion and licensing royalties can be a way to both enjoy their passion while making money off it.
- The competition for music creation is steep and there are some big fish out there that you need to beat if you want to start earning consistent and sustainable passive income.
Start Up a Podcast
If you have a love of talking and an irresistible charisma, consider starting up a podcast to earn some passive income! Similar to a blog, you can earn money via affiliates, advertisements, or by selling your own products. Who knows, maybe one day you’ll get as big as Joe Rogan or Bigger Pockets.
- Podcasting is easier to get started now than ever before. You can do a quick search online for the best microphones and start your podcast almost immediately.
- You’ll get to meet a lot of cool people on your podcasting journey who have the ability to provide you with even more opportunities.
- Similar to a blog, a podcast takes time to grow. There will be frustration along the way, and it’s likely that the first few years will have little/nothing to show for them.
Create and Sell a Course Online
Do you have a specific skill that’s highly sought after? Are you comfortable sharing this skill with the world? If so, you might want to consider creating a course and using it to make money online.
You can do this through sites like Coursera, Udemy, and Skillshare, or through your very own blog/podcast. Another alternative is to run a freemium model where you make certain lessons / content free, but then charge for more advanced topics.
- With an online course, you put in all of the work upfront, then (ideally) sit back and reap the rewards of your labor.
- The best side hustles are borne out passion. If you’re genuinely interested in certain topics, creating courses for them can feel extremely gratifying and fun.
- There’s a lot of competition out there for online courses. Your course must be excellent for you to have a shot at generating usable passive income from it.
Sell Stock Photos
Do you have a knack for photography? Are people always impressed by the pictures that you take? If so, you could potentially make a killing off selling stock photos.
You can either go through organizations like Shutterstock, Alamy, and Getty Images or decide to sell your own photos online (through your social media or through your blog). With bigger organizations, every time someone purchases your photo, you get some money and the organization gets a cut too. When you sell your own photos, you get to keep all the profits.
The great thing is that you can take photos of almost anything: news-worthy events, landscape photos, or even photos in the office.
- If you’re really good at marketing, you could scale your work over time and earn exponentially more as you grow. You can even take the same photograph and sell it thousands of times.
- If photography is your passion, you can have fun while building your portfolio and your passive income over time.
- Photography is an extremely hit-or-miss industry. In other words, you can produce hundreds of photos and have only one or two generate any meaningful sales. It can sometimes be hard to maintain motivation with this kind of business model.
Sublease to Your Roommates
One of the simplest ways you can begin earning some passive income immediately is by renting out a portion of your house to roommates.
For a lot of people, the rent can cover a huge amount of the mortgage payments, and some housemates even offer to pay for utilities. Renting out a part of your house is a great start especially if you’re looking to eventually buy actual rental properties.
- Subleasing a portion of your house to roommates is extremely easy to start and (with the housing market so hot) you’ll have no lack of tenant supply.
- Because of appreciation in real estate, every dollar you earn that you put towards your mortgage is earning much more down the line.
- Renting out rooms can be hard and if things go sour between you and your tenants, it can be hard to get rid of them.
Buy a Pre-Existing Business
If you have the capital to do so, buying an existing business could give you all of the benefits of being a company owner without the hassle of having to start a business.
You’ll need to do a ton of research into which industry you want to own a business in. Then, you’ll also want to do research on which business to buy. Not all businesses are passive, and if you choose the wrong one, you could be buying yourself a very stressful job. Some popular business types to get you started are car washes, laundromats, and storage facilities.
- Starting a business from the ground up is hard. By buying an existing one, you don’t need to go to go through all the stress, trouble, and late nights that you otherwise would have if you started your own company.
- There are tons of businesses in every single industry available for buying. You have lots of options to browse to find the right business that will suit you best.
- Businesses are expensive to say the least, so you need a fair bit of capital to begin with to take advantage of this passive income stream.
- Some businesses are more passive than others. You need to do lots of research to make sure the business you’re buying is actually passive and that it can sustain itself far into the future.
Do you have a technical inclination towards coding? Or maybe you see a need in the market that could be fulfilled by a program? If so, you can write software (or hire someone to write software) and earn passive income.
“Software” can include mobile apps, online applications, WordPress plugins, and tons of other digital properties. After coding the software, you can offer it via a freemium model or a subscription model to earn consistent cash flow.
- With the digital world growing exponentially, there are more and more opportunities for useful software to be written.
- Writing software can be done anywhere, as long as you have a computer. You could be travelling the world or sitting on a beach and still manage to build this stream of passive income.
- The downside of the digital world growing so fast is that things are also constantly changing. Your software may be super successful in its first few years, then completely lose traction as the world shifts in a different direction.
Rent out Rooms with Airbnb
If you want to generate some income via real estate, but don’t feel comfortable renting to a full-time tenant, consider renting out rooms for a limited period of time with Airbnb.
The great thing about Airbnb is you can choose how long you want to rent for and also how much of your house you want to use. You can offer month-long rentals of your basement when you’re not too busy, or rent the whole house out for two weeks while you’re on vacation. The opportunities are endless.
- You have lots of control over various factors when you rent with Airbnb.
- If you have a house (or space to rent out), you can get started earning some decent income immediately.
- It can take some time and energy to get your living space “rent-ready.”
- Though you don’t need to suffer the hassle of long-term tenants, that also means you need to constantly be trying to rent out your space (adding an active element to the investment).
Rent Out Personal Stuff
Did you know that nowadays you can rent out almost anything? If you have idle household items that are sitting around your home collecting dust, consider renting them out!
These items can include lawnmowers, power tools, tents, large coolers, or even your very own car. Try to identify high-value items that people would only need for a short period of time, but wouldn’t necessarily consider buying outright.
- You can start really small and slowly work your way up once you get the hang of it.
- With renting out items for one-time use, you’ll be able to easily recoup the full cost of the item after just a few rentals.
- There’s the possibility that the item you’re renting gets damaged or stolen. This could be an especially big issue if you just plan on doing this on the side (and don’t want to set up an entire corporation for it).
Start an Etsy Shop
Etsy offers one of the easiest ways to start an online business. You get to start selling your items immediately without having to go through the hassle of setting up a website and doing all the marketing yourself.
This idea could be especially passive if you’re not making crafts but instead selling online digital prints or pdfs.
- Etsy is a legitimate company, and it’s growing. There’s no better place to be if you want to take advantage of the rise of e-commerce.
- If you sell digital products, this stream of income could be extremely passive for you. All you need to do is create the product once, and you can sell it infinite times.
- Due to how successful Etsy is, the competition is extremely steep and you’ll need to make sure your products stand out if you want to make some actual money.
Start an E-Commerce Store
Nowadays, you can sell anything as long as you have the internet and a determination to succeed. Figure out what your area of expertise is and start connecting with suppliers to sell your own products.
The best part? You don’t even need to ever see the products or ship them yourself. You can hire a dropshipping company to handle all of the logistics for you (and make your venture even more passive).
- There is an extremely low barrier of entry for selling things online. A lot of producers simply take an existing product, jazz it up, and resell it for a profit. You don’t need to become a social media influencer to profitably sell stuff online.
- There are tons of suppliers out there to fulfill your needs. If you have an idea, you don’t need to worry about not having the resources to see it through.
- With so many vendors on the internet, it can sometimes be hard to differentiate yourself. You need to make sure your product brings actual value to your customers if you want to make a consistent income.
Lend on Peer-to-Peer Platforms
Different from a bank loan, a peer-to-peer loan (p2p) is made directly between you and the borrower. These loans are usually facilitated through third-party intermediaries like Funding Circle, Prosper, and LendingClub. Because these aren’t secured by the bank, you can earn a decent interest rate on your money without having to do much at all.
- You can lend on various platforms and slowly narrow down which one works best for you over time.
- The interest rates you can earn on peer-to-peer lending are comporable to the returns of the stock market (and way higher than the interest rates on CDs).
- There is the risk that the borrower you lend to defaults on the loan and you end up getting nothing.
- Due to the fact that you need to constantly screen new loan opportunities, the income stream still requires some work to maintain and isn’t fully passive.
Write an Ebook
Writing an e-book is one of the best ways to generate passive income. An e-book can be short (30-50 pages), extremely cheap to create, and can be about something that you have genuine expertise in. Every time a person downloads your e-book, you earn some money, meaning you have the potential to make passive income for years to come.
The cost of publishing is lower than ever, and with an e-book, you an even leverage platforms like Amazon to get your book seen by potentially millions of people.
- Not only can you earn money through your e-book oferring, but you can also drive traffic to other endeavors (like your blog or other products).
- Due to the fact that e-books are so easy to write, you can figure out what works quickly and build your library of e-books over time.
- There is a ton of competition in the book-writing world, so you’ll need to ensure that your e-book is the absoltue best work for it get noticed and for you to build a following.
Other (Less Passive) Ways to Make Money
Here are some ways to make and save money that are semi-passive:
- Use cash back rewards credit cards (and pay it off on time every time).
- Invest in crowdfunded real estate.
- Start a YouTube channel.
- Sell designs online / sell digital files.
- Download and use cash back apps.
Recap: Passive Income Ideas
One of the most important aspects of achieving financial freedom is figuring out how you can generate cash flow while you sleep. Passive income is one popular way to do so. Though it’s true that to earn passive income you need to commit an upfront financial investment and sometimes even an upfront time investment, a solid passive income idea can help you minimize both these resource spends.
This post has given you 21 of the best passive income streams. Though it might seem overwhelming to have so many options, the great news is that you don’t have to stick to just one source to generate passive income. In fact, millionaires reportedly have seven different streams of income.
Just make sure that your new efforts at generating passive income don’t impede on your current streams of income. A balanced effort and keen awareness of your abilities will give you the best chance of succeeding at building profitable passive income streams.
Jeff is a Harvard 2025 student passionate about making smart financial decisions both in school and in the workplace so that he can spend more time doing what he loves (like playing golf, spending time with family, and travelling). He has experience working in the financial industry and enjoys sharing all things personal finance, academic, and golf-related. Outside of blogging, he loves to cook, read, and golf in his spare time.