In this post I’m going to show you Best Passive Income Ideas in 2020.
The Passive Income Ideas in this post will help you to make $500, $1,000, $5,000 and more.
And today I’m going to show you the exact Passive Income Ideas to make some extra money and build your wealth.
You can click each link to jump to a particular section.
What Is Passive Income?
Passive income is money you earn while you’re not actively working or if you can make money while you sleep that’s an passive income source.
The Internal Revenue Service (IRS) says passive income can come from two sources: rental property or a business in which one does not actively participate, such as being paid book royalties or stock dividends.
Instead of trading your time for money — like most people do at their 9 to 5 jobs — passive income is all about having money trickle in even while you’re not there.
What It Takes To Earn Passive Income
Before we get into the passive income ideas I think it’s a good idea to first clear up a couple of misconceptions. Passive income doesn’t magically drop from the sky.
It is generated from existing assets. And no matter what those income-generating assets are, there are only two ways to build them: An upfront time investment and An upfront cash investment.
Passive Income Ideas That Require Time & Effort Investment
Most of us wants to make some extra cash. So, if you don’t have cash on your hand, you will need to manually work towards building your passive income asset or source.
1. Start a Affiliate Marketing with a Blog
Affiliate marketing is promoting other companies products and services to receive a commission on sales you generate.
Let’s say that you want to earn a commission when someone buys a phone online. Since most phone companies pay a 5% commission and the average price of a decent quality bed sold on the Internet is about $500, you would make $25 every time someone bought a phone on your recommendation.
Sounds good in theory, right? But how do you actually get started?
This method of generating income works the best for those with blogs and YouTube channel. Even then, it takes a long time to build up before it becomes passive.
I recommend the best way to get started is to launch your own blog. A blog is your very own website where you can write about whatever you’d like. You can write blog articles about product reviews, best product lists, specs comparison etc.
We recommend using Bluehost to get started with your blog. You get a free domain name and hosting starts at just $2.95 per month.
2. Create and Sell an Online Course.
Maybe you’re an expert about a topic. You can create an online course teaching about your expert topic and launch it on a platform like Udemy or Teachable. The beauty of this strategy is that once you created the course, you continue to get paid for each new student that enrolls.
So, which platform should you choose?
Teachable and Udemy are two of many, but these are the most prevalent, and they’re both intuitive and user-friendly.
Udemy is an online platform that lets its user take video courses on a wide array of subjects. Instead of being a consumer on Udemy you can instead be a producer, create your own video course, and allow users to purchase it. This is a fantastic option if you are highly knowledgeable in a specific subject matter.
- Create a course for free: All you need is an email address to get started.
- Upload your content: Seamlessly upload videos, audio, presentations, images, and text.
- Make it your own: Customize your school with your brand, colors, logos, etc.
- Launch: Attract students and sell your online courses.
3. Start a YouTube Channel
YouTube allows you to monetize your YouTube videos. What this means is that you allow advertisers to place ads at the start of your videos or show banners. When you get a certain number of views, you earn cash forever.
Whether you review products,makeup tutorials, travel guides, unboxing videos, give your opinion on local events or perform entertaining work, there are many ways to earn income passively through a YouTube channel.
Bonus Tip – You can do affiliate marketing with your YouTube channel as well. e.g if you make a product review video you can put your affiliate link in the video description. Example.
4. Sell an eBook Online.
If you like the idea of writing, consider self-publishing your own eBook. eBooks are often much shorter than normal books, which puts less of a burden on you to produce a masterpiece.
The most successful eBooks are usually non-fiction. Think how-to guides and other explanatory pieces on a certain topic, like fitness or graphic design.
Self-publishing on Amazon is easier now than ever. There are no startup costs, and you don’t have to convince a publisher to take a chance on your book.
Whenever someone buys and downloads your book, you receive author royalties. If you are serious about it, you can make thousands of dollars by self-publishing on Amazon!
5. Selling Stock Photos.
Do you ever wonder where your favorite websites, blogs, and sometimes even magazines get their photos? These are normally bought from stock photo websites.
If you enjoy photography you can submit your photos to stock photo sites and receive a commission every time someone purchases one of them.
One of the best sites to make money with your photos is Shutterstock.
Shutterstock has paid out over $500 million to its contributors. Due to its popularity and low barriers to entry, this site can work as a passive income source regardless of your experience level.
Set up an account, upload your images, and earn money every time a customer downloads your photos.
6. Build an E-commerce Business.
One of the most appealing online passive income ideas is having an e-commerce site that is open for business 24/7 — even when you are sound asleep.
Most e-commerce sites are a lot of work to get properly set up, but once you find a system that works, maintaining that system can be relatively passive. Here are the main types of e-commerce sites that are most popular:
- Sell your own product: you either manufacture or source your own product(s).
- Sell other people’s products: source goods from one or a variety of companies.
- Dropship: when a customer orders from your site, the manufacturer ships.
7. Design T-Shirts.
Sites like Cafe Press allow users to custom design items like T-shirts. If your design becomes popular and makes sales you’ll be able to earn royalties.
Even Amazon has gotten into this business. Amazon has a new service called Amazon Merch, where you simply upload your designs and Amazon takes care of the rest (making it, packing it, and shipping it).
8. Create an Alexa Skill.
Alexa is the new frontier in personal devices. Just like with apps on smartphones, there is a way to create content on Alexa that you can profit from passively.
The Alexa equivalent of apps is called skills, which are little programs that work with Alexa’s voice-based system to generate content for the end-user. Creating a useful skill can yield high returns to Alexa’s growing userbase.
If you have the technical skills to master this, you can see excellent returns on creating Alexa skills.
Much like data entry, transcription work is relatively mindless that can result in plenty of profit.
Transcriptionist work is relatively involved, but its flexibility makes it a qualifier for this list. As a transcriptionist, you are tasked with listening to audio files and transcribing them.
Simple enough, but it typically pays per audio hour. This means that if the audio file is one hour long, you are paid for one hour of work.
You usually are not asked to transcribe long periods, so this can make be a flexible way to earn cash.
10. Sell Digital Files on Etsy
I’ve been into home décor lately and I had to turn to Etsy to find exactly what I wanted. I ended up purchasing digital files of the artwork I wanted printed out!
If you’re into graphic design this could be an amazing passive income idea for you.
11. Start a Podcast.
Writing is a skill, and not everyone is interested in developing it. Another medium for generating useful, educational, or entertaining content is by, well, talking!
If you have a touch of charisma and don’t mind a microphone, try starting a podcast rather than a blog. Just like with a blog, you can earn money from affiliates, or advertisers, or by selling your products and services.
And no, you don’t need a $500 microphone or fancy home studio to get started. Start with a quick Amazon search for the best podcasting headsets under $50.
12. Advertise on Your Blog.
If you run a blog and get decent traffic, you can incorporate ads to your site. These will usually be on the sidebar, and perhaps at the bottom of your posts.
Different ads will have different characteristics, but you can get paid per click or per view on each ad. If you have a lot of traffic, this can add up to a decent chunk of change.
13. Become a Social Media Influencer.
This can be a little easier said than done, but if you have a large social media following, you can definitely earn money promoting a product or advertising for a company.
You can even combine this with different marketing campaigns if you are an influencer and have your own blog (advertisement + affiliate income).
This is how many bloggers make money! Again, it is not 100% passive but once set up correctly and then scaled, can be surprisingly lucrative.
14. Build an app
Know how to program? You can create an app, put it on the App Store or Google Play store, and then earn money for each download it receives.
You will have to put some work into researching the apps that sell as well as marketing the app, but after it is built, the income can be relatively passive.
15. Start an Online Advertising Agency.
Think about how many small businesses are in your city. Chances are, most of them are not effectively using social media (ie, Facebook) to attract more clients or drive more sales to their business.
Most will have a regular Facebook page, but that’s not enough to spread the word in today’s crowded news feed.
Most Facebook ad agencies — even one-man operations — will usually charge a flat monthly retainer in the neighborhood of $1,000 – $2,000 per month per client.
This is in addition to the money spent on the ads themselves, which obviously goes directly to Facebook.
Passive Income Investments That Require Cash
If you are sitting on a bunch of idle cash, you can put that cash directly into an investment. These types of passive income streams usually require minimal effort. Think of them as a way to “put your money to work” to generate returns for you in the background.
16. Dividend Stocks
Dividend stocks are tried and true way to earn passive income. You will have to do plenty of research to find good stocks and invest a significant amount of money to receive large dividend checks.
However, if you consistently invest money into dividend stocks you can amass a nice residual income over time.
This is amazing for investing in dividend stocks because you can build your portfolio of, say, 30 stocks. Then, your investments will be auto-allocated to your entire portfolio every deposit – for FREE!
You can even auto-rebalance. Then, your dividends can also be reinvested. It’s a fantastic platform, and it was made for this.
Robo-investing is a method of investing that diversifies your portfolio and uses algorithms to enhance yields.
In other words, robo-advising gives your investment strategies that AI edge that is currently all the rage in trading.
Robo-investing is a fantastic time-saver (no more wasted time in laborious research on which stocks to invest in).
Instead, tools like Betterment allow you to opt for flexibility – automagically ride the market while reducing volatile risks that come with traditional investing.
18. Invest in Crowdfunded Real Estate.
Many people consider investing in real estate to be the ultimate form of passive income.
Nowadays, there’s a way to invest in real estate while not dropping hundreds of thousands of dollars on a single property.
A real estate investment trust (REIT), for example, is a pool of money from many investors that is managed by professional real estate investors.
The money in the pool goes towards investing in real estate. Investors put money into the REIT, the REIT buys properties, and the returns are disbursed back to investors.
All-in-all, it’s an easy way to diversify your investments and get exposure to a market that may have been previously inaccessible.
19. The AirBnB of Storage
Don’t want to make the jump to renting out your home to strangers?
Consider making money off storing people’s “stuff”.
That’s right, a company called Neighbor proclaims itself to be the AirBnB of storage.
It’s easy to turn your basement, garage, spare office room, even closet, into passive income and a great side hustle earning up to several hundred dollars a month.
In New York City, they estimate a spare basement rental to generate almost $10,000 per year!
What’s even better is both the renter and host are protected from mishaps.
Neighbor’s Host Guarantee protects you up to $1,000,000 for personal liability and renter’s are eligible for up to $25,000 in case items are damaged during storage.
List your space on Neighbor today!
20. Peer to Peer Lending
P2P lending is the practice of loaning money to borrowers who typically don’t qualify for traditional loans.
As the lender you have the ability to choose the borrowers and are able to spread your investment amount out to mitigate your risk.
What’s great about Lending Club is that investors are earning 4-6% returns on average – and that’s all passive income.
You simply lend your money, and you get paid back principal and interest on that loan.
21. Certificates of Deposit (CDs).
Certificates of deposit are about as exciting as late-night poker reruns on ESPN. Still, if you want to park your money somewhere safe and insured by FDIC, CDs can at least help you reduce your losses to inflation.
Just be aware upfront that CDs require a minimum deposit period. For example, you may need to deposit the money for at least a year.
This seems like a big sacrifice to me, considering you’re only likely to earn up to 2.00% on your money, at maximum. But it’s your money. Check out today’s best cd rates.
Consider using CDs in conjunction with other investments when you need to set money aside in a 100% secure place, for example, to store a tenant’s security deposit.
If the alternative is parking it in a savings account, a CD can present an attractive alternative.
22. Refinance Your Mortgage.
While this may not sound like a source of income, you could unknowingly be paying way more for your mortgage than you need to.
By refinancing your mortgage, you can take back the portion of your income going towards your interest rate and reinvest it.
By shopping around for lower interest rates, you can save yourself tens of thousands of dollars over the course of your loan.
Even lowering your rate fractions of a percentage can save you hundreds each month depending on the size of your mortgage.
You can even find lenders that will offer credits to reduce (or eliminate) closing costs. This money can then be reinvested or boost your overall savings.
23. High Yield Savings Accounts
If you don’t want to think much about your money, but want it to work for you, a basic place to put it is in a high yield savings account or money market fund.
The difference is in the account type and where it’s located. Typically, high yield savings accounts are located at banks, and are FDIC insured.
Money market funds can be located at both banks and investment companies, and are only sometimes FDIC insured.
Interest rates have been rising, so putting more money into a savings account can generate a safe passive income stream.
24. Build a CD Ladder.
A CD ladder is a great way to maximize the interest rates you earn on your savings without tying your money up for long periods of time.
This is accomplished by staggering several different CDs so they all mature at different times.
The purpose of a CD ladder is to keep your money liquid (or available to withdraw) like with a savings account while earning the higher interest rates that usually come with CDs.
To create a CD ladder, the first step is to choose a bank with high interest rates on its CDs. Let’s say you find a bank with that offers the following CDs:
- 6-month CD at 1% interest
- 12-month CD at 2% interest
- 18-month CD at 3% interest
25. Private Equity Funds.
Speaking of accredited investors, typically, private equity funds are only available to these wealthier investors.
A private equity fund is a pooled fund that invests in a large-scale project, whether a large real estate investment project, a startup company, or some other investing venture.
The fund is managed by an individual or management group that oversees the fund’s investments.
Often private equity funds require medium to long-term investment, measured in years.
While these are not viable passive income investments for most of us, they can make excellent passive income streams for the wealthy, and are worth mentioning as a possibility after you make your first million or two.
How to Pick the Best Passive Income Stream for You
Ultimately, you can pick a combination of these passive income ideas or try them all.
The right path for you will depend on your short and long-term goals, how much time you have, how much money you want to earn, and how many hours of work you’re willing to put in.
How to Get Started
While it can be tempting to want to pick five passive income ideas to get started with I’d really encourage you to pick one in the beginning.
You need time and the ability to focus to really a grow a passive income stream. Master one thing before moving on to the other.
It’s going to take a substantial amount of time or money in the beginning but I promise earning passive income is everything it’s cracked up to be!
Pick an idea, make a plan, and dedicate yourself until that income stream comes to fruition.
4 TYPES OF PASSIVE INCOME
Not all passive income is created equal. There are many different ways that you can make money while you sleep!
In general, passive income is money made from assets that you control. Whether that be things you own that aren’t being used, spare time that you need to occupy, or using existing wealth to increase your cash flow.
The four types of passive income that we cover in this article are:
1. Cash-Flowing Assets
If someone’s ever told you, ‘you need to spend money to make money,’ they were probably talking about building cash-flowing assets.
Cash-flowing assets are investments that require wealth but create steady cash flow in the long run. These are assets like real estate, buying an existing business, or dividend funds.
It takes money to get started on these, but the investment payout can also be pretty high.
2. Build Assets
Building or creating something that can be used by others for a cost is a great way to generate an income stream. Rather than existing wealth, these assets typically take time and skill to build properly.
If you have ever wanted to create software, build a website, or write a book, they could be a great way to test out your skills and create a passive revenue stream for yourself.
3. Reverse Passive Income
This form of passive income cuts down on existing monthly expenses to create extra expendable income.
You may be unintentionally spending more than you need to on things like your power bills or mortgage payments. By refinancing or changing a few simple habits, you could free up some of your existing income and reinvest it back into opportunities to make even more money.
4. Share or Sell Assets
You can use, sell, or rent out items you already own that are collecting dust.
Have an extra room in your house that you can rent out to a housemate or Airbnb? Maybe you have old baby equipment that don’t need anymore? This is a way that you can create wealth with things that are no longer useful to you.
This doesn’t have to be limited to physical items. You can use extra resources like time or skills to build wealth. If you go for an evening walk and can make money walking a neighbor’s dog, go for it.
If you have any assets that can easily be used to create income quickly, don’t let that opportunity go to waste!