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Passive income is something that everyone strives to generate at some point in their lives. There are many ways to make passive income investments after you put in the initial time, effort, and money to get them started. We have found eight passive income investment ideas that you can check out below.
- What is passive income?
- What is not considered passive income?
- How do I get passive income?
What are the best passive income investments?
- 1. Investing: Dividend stocks
- 2. Real estate: Property and REITs
- 3. Peer-to-peer lending
- 4. Vending machines
- 5. Asset building: Digital products
- 6. Affiliate marketing and sales
- 7. Asset sharing: Property rentals, transportation rentals, car advertisement, and parking spaces
- 8. Online creations: Ebooks and blogs
- The bottom line
What is passive income?
Passive income is money that you earn without much active effort on your part. Usually, passive income comes from another source besides your employer or contractor.
Passive income can come from sources such as rental properties or a business in which you are not actively participating at every given moment, for example, royalties, or stock dividends.
Some people believe you do absolutely no work to get passive income, but that is not the case. You may have to do some initial work before the passive income can come in; for example, building a business takes time, money, and effort to start up. Over time, once the company can run on its own without you, the income becomes passive.
If you have rental properties, you will have to do the initial work of renovating or minor repairs before you can put a tenant in, which is when you will make a passive income.
Once you are committed to the strategy of putting some initial work in, it will pay off tremendously later on when you are enjoying your passive streams of income.
What is not considered passive income?
Passive income is not considered:
- Your current job. If you have a regular job that you are employed at, that is not considered passive income because you are committed to doing tasked work to get paid.
- A second job or side hustle. A second job or side hustle works just like your current job. You need to do the work before getting paid for it.
- Non-income-producing assets. Investing is a great and sure way to generate passive income, but only if the stocks pay out dividends or interest can they be considered passive. Non-dividend-paying stocks are not considered passive income.
How do I get passive income?
- Investing: When you invest, you put your own money to work to make more money.
- Asset building: This is when you acquire assets that have the potential to earn money over time.
- Asset sharing: This can mean when you sell or rent out your assets.
What are the best passive income investments?
1. Investing: Dividend stocks
In terms of passive income, investing can mean many things. What we mean here is investing in dividend stocks. Dividend stocks reward investors with regular payouts of company profits.
Accredited investors, financial advisors, and brokerage firms are all aware that the stock market is one of the best ways to bolster your personal finances and achieve your financial goals, whether short-term liquidity needs or a long-term diversification strategy designed for a retirement account.
As a source of passive income, options like index funds, mutual funds, and exchange-traded funds (ETFs) can also help beginners prosper as high-yield savings accounts.
Investment strategies are practically infinite in a money market, seeing the cohabitation of old financial institutions and upstart cryptos, low-risk investment properties, and high dividend income strategies that carry more volatility.
Amid all these passive income opportunities, dividend stocks may be one of the best ways to generate more passive income. The caveat to passive income from dividend stocks is that you must invest a large lump sum of money into these stocks to see gratifying returns.
The risk of investing large sums of money into dividend stocks is that if the company you are invested in falls on hard times, they may not be able to pay out dividends or may have to decrease their payout percentages.
Investing in preferred stocks or dividend aristocrats yields higher dividends.
2. Real estate: Property and REITs
Owning real estate is deemed one of the oldest and most traditional passive income ideas. It is not as easy as everyone may assume, but (if done correctly) it does generate a cash flow that rivals any other passive income stream.
To have a successful rental property, you must maintain and repair the property when needed, which can be time-consuming and costly. And if you decide to hire a property manager, that can cut into rental income even further.
The sweet thing about owning commercial real estate is that while you may earn small amounts of passive income from the monthly rent, you are also sitting on an appreciating asset growth over time.
If you do not want the responsibility of a rental property, another way to invest in real estate and make passive income is by investing in real estate investment trusts, also known as REITs.
As opposed to direct real estate investing, REITs allow individual investors to make money on real estate without having to manage or own physical properties. This is also known as crowdfunding, which can make you passive income.
Opting for a REIT cuts down on the upfront investment; however, you lose some control over the property, leading to less residual income.
3. Peer-to-peer lending
Peer-to-peer lending is when you act as a lender to a third party, often through a designated platform, where the middleman is cut out. You will gain passive income from the interest you earn on the initial amount you loaned.
P2P lending is also known as “social lending” or “crowd lending.” It is a newer form of investing that has quickly gained popularity and already has some prominent lending competitors on the market.
Lending websites connect borrowers directly to lenders for a fee. Usually, the interest rates depend on the borrower’s credit.
4. Vending machines
Owning and operating vending machines can give you passive income with minimal work and initial device investments. The hardest part of running these vending machines is finding the best location for them.
Once you find the perfect place with enough traffic, all you need to do from there would be to upkeep and refill the vending machine and ensure it is running well.
5. Asset building: Digital products
Asset building can give you passive income, but you must put in some upfront work to build the asset before it can become passive. The risk of this type of passive income is that there is no guarantee that your asset will produce.
Digital products are one type of asset you can build. With the internet at our fingertips, it’s easier to create and sell digital products than ever before. A digital product can be an ebook, an app, or an NFT. Once you have made your digital product, you can sell it again and again online.
6. Affiliate marketing and sales
Affiliate marketing sales are when someone purchases after clicking on a link or using a referral code that you publish on a website, video, or podcast. With this type of sale, you will earn a commission on each sale generated from your affiliate marketing.
This can be a great way to make passive income if you have a lot of traffic to your website or blog. For influencers on social media, bloggers, or people with massive YouTube channels, affiliate marketing is an easy supplement to other sources of passive income.
Some other ways for influencers to generate passive cash include online courses or merchandise shops run as small businesses (such as t-shirt ecommerce pages that operate similarly to Etsy or Amazon, just personalized).
While there are many ways to make passive income as an influencer, it would be hard to get more passive than affiliate marketing.
It is crucial to remember that this space is very competitive and the most successful are those creating ongoing quality content.
7. Asset sharing: Property rentals, transportation rentals, car advertisement, and parking spaces
With asset sharing, you can make money from the things you already own, like a room in your house or car. Asset sharing is when you rent out a piece of your property for the use of others.
Some examples of asset sharing that can generate easy passive income for you are renting out space in your home, renting out your car or trailer, putting advertisements on your property or your vehicle, or renting your parking space or driveway.
With a space rental, you can easily rent a room in your house or backyard for parties, where you do not have to do anything further. People have made loads of money renting their houses with Airbnb, and because of that, people are now renting their cars for a few hours a day, a weekend, or even their parking spaces.
If you live near a big arena with frequent events, you can rent out space in your driveway for the duration of an event at a lower cost than the stadium itself.
8. Online creations: Ebooks and blogs
Another type of digital creation that can make a lot of passive income after you have put in the initial work would be creating an ebook that you can sell multiple times, or an ecourse, which you can charge subscriptions for or just charge per purchase.
Also, creating blogs and running traffic through the site that the blog lives on can generate passive income. Once you create the initial blog, you may have to keep up the content to keep frequent traffic, but you can passively make money when others visit your website.
The bottom line
Making passive income does not necessarily mean you have to do no work to receive money. Passive income means that you need to put in an initial investment of either time, effort, money, or all three before you see bountiful returns. Put in the work today to receive the benefits tomorrow.
If you are looking to build wealth but do not know where to start, we can help you. Visit us at Entrepreneur.com today for more information.
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