In this article, we have aimed to help you find the right idea by focusing on passive income examples and strategies that you can try out today.
This article is for you if you are a forward-thinker and seeking to make the best out of your life especially if you are looking to leave your 9-to-5 job or even considering retiring early.
Our article focuses on giving you inspiration and real-life examples you should consider in building your passive income streams. There are many ideas and options that you can embrace, and our goal is to help you sieve what is good about each strategy to make it easy for you to make that plan to grow your passive income.
You can also learn how to generate passive income using cryptocurrencies in our article here.
What is passive income?
Passive income is often misunderstood as income that you do not need to work for at all. However, the true definition of passive income is quite different.
Let’s start by giving you the Growzania passive income definition.
Here at Growzania, we define passive income as making money while you sleep. In a few more words, passive income can be defined as money that you earn by putting in little to no effort daily to maintain it. The keyword here is ‘little to no effort’.
We are not promising that you will not have to do anything forever. However, with these strategies, you would need to put in little effort to keep the cash coming in.
Even if you earn money from the majority of passive ideas like renting out your property, you will still need to do some accounting and record-keeping work and maintenance. And even though you might hire experts to do this for you, there will still be some time element in making sure this is done correctly.
If you are simply here for the list of passive income ideas, use this quick guide to get to the specific idea you want.
- What is passive income?
- Passive income vs active income
- Why should I build a passive income stream?
- Types of passive income
- Some inspiration from passive income quotes
- Passive income from investing
- Passive income from real estate
- Passive income from content creation
- Passive income via marketing/advertising
- Final thoughts on passive income strategies
Passive income vs active income
Passive income is very different from active income. While passive income is making money while you sleep, active income requires you to use your time in exchange for money.
Some examples of active income include salaries, wages, commissions, income from freelancing, tips, and more.
On the other hand, passive income is where you do not need to use your time to earn money. For example, if you own a house and rent it out, other than the occasional call to your accountant, managing agent, or maintenance company, you pretty much do not do anything to keep the money coming.
Why should I build a passive income stream?
To achieve financial freedom, which you can read more in our article on the six (6) steps to achieve financial freedom. Accumulating assets is one of the two essential elements that will get you there.
We also discuss in detail the importance of passive income as a way to accumulate your assets.
Your income is your most important tool in helping you accumulate assets. And since we all have 24 hours in a day (except on daylight saving days where this may be 25 or 23 hours), relying on active income has its limitations.
When talking about the limitations of active income, I mean that active income is hard to keep growing unless you are willing to work for more hours. This is why we often see people working 2 or 3 jobs to increase their income.
With passive income, you can increase your wealth since your ability to increase your revenue is not linked to the time you put in. With passive income, you can:
- Increase your income exponentially
- Get the opportunity to retire early
- Have additional sources of income to bridge investment and savings gaps
- Have more income to spend on the little things that make you happy (of course, after saving and investing)
- Protect yourself from income loss if anything happens to your job
Types of passive income
In this article, we have divided the types of passive income into four (4) buckets.
- Investment passive income – here, we have grouped all strategies to earn money via investing in stocks, bonds, cryptocurrencies and much more.
- Real estate passive income – here we have all passive income strategies that are related to real estate, such as rental income and REITs.
- Content creation passive income – a list of passive income examples where you create content that earns you money while you sleep
- Marketing/advertising passive income – passive income examples where you can leverage marketing and advertising ideas to earn money with little to no effort on your part.
Some inspiration from passive income quotes
At Growzania, we love quotes as sources of inspiration. Throughout the articles, we have posted our top quotes related to passive income to help you on the journey.
Passive income from investing
1. Passive income from stocks
Better still, you can invest in ETFs (exchange-traded funds), which are investment funds that hold stocks, bonds, and other commodities and are traded similar to stocks. ETFs allow you to diversify your investment and reduce the risk since you invest in a wide range of stocks, bonds, and commodities.
What we like about dividend stocks:
Stocks and specifically dividend stocks, are a great way to earn passive income. Dividend stocks mean finding great stocks that consistently pay out a dividend year on year. Allowing your dividend to be a passive income stream.
- You can consistently invest money into stocks based on your budget or savings plan
- Once you buy the stocks, you do not need to do anything other than just monitor price movements at least once or twice a month to ensure your portfolio is not reducing.
What we don’t like about dividend stocks:
- You will have to do a lot of research to find good stocks to invest in
- You need a significant amount of money available to invest to receive a large dividend
- Stock prices can move sharply over short periods. Since stocks’ pricing depends on the investor sentiment, they can move up or down quite sharply.
- Find a good stockbroker who provided analysis and rewards and with a low commission on each trade.
- Build a portfolio so that you have no more than 30% of your investments in stocks. Stocks are often great investments. However, they experience huge swings due to investor sentiment.
- Do not let emotion be your primary driver in decision making. Do solid research to choose which stocks to invest in and stick to your decision, unless the research factors you considered earlier change drastically.
2. Passive income from bonds
A bond is a loan that you, as an investor, give to a borrower who could be the government or a corporate. When you buy a bond, you lend the money to the government or a corporate, who then pay you back on the maturity date inclusive of your interest, which is the bond yield.
The best strategy to make passive income from bonds is to create a bond ladder. This is where you own several bonds maturing at different times. By staggering the bonds’ maturity date, you decrease your risk considerably and allow yourself time to research the best bonds to invest.
The best bonds to invest in are treasury bonds which are government-backed bonds.
What we like about bonds:
- You can consistently invest money into bonds based on your budget or savings plan
- Once you buy the bonds, you do not need to do anything else. You just wait for your bond to mature, and you get paid. Alternatively, if you need the money sooner, you could sell your bond on a secondary bonds market and unlock your cash.
What we don’t like about bonds:
- Corporate bonds, in particular, are often very risky since not all companies will survive the bond’s term to pay you. Therefore, consider diversifying your risk by investing in several bonds through bond laddering.
- There are also bond ETFs that allow you to invest in a diversified fund of bonds, and you can also set up a bond ladder using bond ETFs. They are often safer compared to the risk of investing in a single bond.
3. Passive income from money market funds or high-yield savings accounts
If you have a good chunk of money, you can invest in a high-yield savings account or certificate of deposit (CD).
On the other hand, a money market fund is a pooled fund managed by an experienced fund manager and which invests the money in treasury bills, bonds, and stocks. You then get a return based on the investment income that the fund generates after deducting the fund manager’s commission.
What we like about savings and money market funds:
- You can consistently invest money into savings accounts and money market funds based on your budget or savings plan
- Once you put your money into the high-yield savings account or money market fund the stocks, you do not need to do anything else.
- Provided your bank is regulated by your country’s central bank or relevant authority, your principal is safe.
What we don’t like about savings and money market funds:
- The returns are usually relatively low because these are often safe places to store your money. Therefore, they are best used to accumulate cash before investing in a higher return item like real estate, treasury bills, or stocks.
- Use your money market fund or savings account as a collection point to grow your capital through monthly savings before investing in higher return instruments like bonds, stocks, or real estate.
4. Passive income from peer-to-peer lending
Peer-to-peer (P2P) lending is a loan between you and a borrower but through an intermediary like Prosper, PeerStreet, or Lending Club.
P2P lending has been popularized in recent years since it has a low entry barrier (in most cases, you only need $100 to get started) and with relatively good returns (averaged 4 – 6% per annum).
What we like about P2P lending:
- You can earn income via interest payments made on loans you have given out without much effort on your part.
What we don’t like about P2P lending:
- Loans given via P2P lending platforms are often unsecured. Therefore, you face risk in case the borrower defaults.
- Diversify your portfolio by investing smaller amounts in several loans. In most platforms, the minimum amount you can invest is $25, thus diversifying with ease.
- Research the borrower’s historical repayment data based on data on the platforms, and reviews that other lenders left the borrower.
Passive income from real estate
5. Passive income from rental properties
Rental property is a great way to earn passive income every month. Besides, one of the best things about rental income is you can outsource the management of your properties to a managing agent making the income 100% passive.
What we like about rental income:
- It is a risk-free investment provided your home is in a great area with high demand and a great return on investment.
- You are not limited to residential properties only. You can also build a portfolio, including commercial properties such as offices, hotels, and much more.
What we don’t like about rental income:
- There are some risks involved in a rental property. For example, your tenant might pay late or might damage the property.
- Rental income often requires a huge investment since you usually have to own (or at least mortgage) the property before you can rent it out.
- Do some outstanding research on the return on investment of the property you are looking to buy to rent out.
- Understand, plan, and budget for the financial risks such as tenants not paying, damage and maintenance, and improvements that you need to make to keep attracting tenants.
6. Passive income from REITs
A REIT is a real-estate investment trust. A REIT is simply a company that owns and manages various real estate. With REITs, you often have the advantage of investing in companies with the structures to own and manage real estate, and you simply are a shareholder in this company.
You can purchase REITs directly on the stock market, similar to how you would buy other companies’ stocks. Then you earn from the dividends that the REIT pays out.
What we like about REITs:
- Similar to stocks, you can consistently invest money into REITs based on your budget or savings plan.
- REITs often have a tax advantage where their income is not taxed as high as other corporates. Therefore, the amount available for shareholders may be higher if the REIT is performing well.
What we don’t like about REITs:
- You need to research the best REITs, similar to how you would research dividend stocks.
- REITs are riskier than investing in stocks or bonds. This is because they are not diversified, and they do not guarantee any returns on investment. If the REIT does not generate sufficient income, they will be forced to cut their dividend or not pay out any dividend.
- Do not put all your eggs in one basket. Build a diversified portfolio using REITs since they are often risky. Use dividend stocks to balance out your investment.
7. Rent out your home in the short term
This strategy has become quite common recently with the growth of services such as Airbnb and Booking.com. If you have a home in a great area that tourists often visit, you can rent out some space in your home, or even the whole house, if you are away for a few days.
What we like about renting out your home in the short term:
- You can list your home on a number of websites such as Airbnb and Booking.com, not limited to participating in only one website.
- You get to choose when you want to rent out and how much you charge (though you may have to do some competitor research).
- With minimal effort, you collect the cash on your own (though remember to pay the platform commissions or you will get blocked/banned from the platforms).
What we don’t like about renting out your home in the short term:
- Letting strangers come into your house may be a bit of a risk. Always do some due diligence, such as checking the visitor’s reviews and legal documentation to avoid running into any problems.
- Tenants may damage your property or even steal from you. However, some insurance providers may help with this issue.
- List your property on reputable platforms where you can lodge complaints in case of any damages or theft.
- Always research the person you are letting into your home – check out their reviews and always ask for copies of their legal documentation just in case.
Passive income from content creation
8. Create a blog
In 2021, blogging is still a thing, and many bloggers still earn more than $10,000 monthly from their blogs. Of course, it takes time to build your blog as an authority in your chosen niche, but by making sure you post consistently and leveraging quality over quantity, you can make a lot of money via your blog.
Quick intro to Blogging
Key is to do some keyword research using Ahrefs.com, SemRush, Google Keyword Planner, Keywords Everywhere or other online available. Then draft great content on this subject or niche to drive traffic. You then make money through advertising, affiliate marketing, and sponsored posts.
What we like about blogging:
- It is a pretty low cost to get started, and you can start today. You just need to get your hosting sorted, get a great theme for your WordPress blog, and start writing your articles.
- There are many great tools available online to guide you on the journey, and there are many great bloggers and influencers around the blogging topic that you can reach for guidance. Thankfully, most of these resources are available for free.
What we don’t like about blogging:
- It takes time to build your website as an authority website. It can take up to 6 – 12 months to start ranking high in search engines. Of course, depending on your niche & competition within the niche.
- There is always a possibility that you can spend a lot of time building out great content with little to show. If your content does not add value, it will not rank highly in search engines, and visitors will also not share it.
- Once you have chosen your niche, ask yourself what is missing in that niche or what can you do better than the competition. Then use this as the basis to create your unique area of interest around that niche. The more unique you are, the more likely you can draw a good following.
- Excellent quality trumps quantity. Strive to write excellent quality content and maintain consistency in posting. Posting one (1) great article a week consistently for six (6) months will give you more mileage than posting 50 great articles at once then going silent for a year.
9. Create a YouTube channel
It is no secret that video currently rules the world. You can see the switch to videos through the growing popularity of YouTube, Facebook Videos, and other short video platforms like TikTok and YouTube Shorts.
Quick intro to YouTube
Like blogging, to get success in YouTube, you need to research the niche you would like to create videos in and become an expert. At first, you will start by building a suite of content to drive traffic, then steadily, you will start to make your income through advertising, sponsored content, and other sources like affiliate marketing.
What we like about YouTube channels:
- YouTube is a free platform, and you do not need to pay anything to post content. That said, with significant keyword research and good quality content, you can get good views and start building your audience.
- Suppose you love being on camera and spending time creating video content around topics you are passionate about. In that case, it is easy to be motivated to continue posting and grow your audience and subscribers.
What we don’t like about YouTube channels:
- You need to be on camera to create a connection with your audience/community. If you are like me, who is largely camera shy, it might be a turn-off. That said, there are many YouTubers who are successful without ever showing their faces on camera.
- Great video making equipment is a cost you will need to incur. While at the start, you can use your Webcam or iPhone and its internal microphone, these don’t give excellent quality video and audio output. You will need to invest in equipment which is often expensive, ranging from $500 upwards.
- Similar to blogs, I will emphasize the importance of consistency in posting great content. Posting one (1) great video every week for 6 – 12 months will give you a lot more visibility and community engagement than posting 50 videos at once then going quiet for a year.
10. Create an eBook
The internet is fast becoming the source of information for many people, and many rely on eBooks with great content to learn. The best thing is that most of these people would be willing to give you their email address in exchange for downloading great content from your website. This is what is called a lead magnet.
What we like about creating eBooks:
- Selling digital eBooks is a great way to make money, and it is mainly passive. Other than the occasional hour you will spend to renew your promotions and respond to review, comments, and questions, there is nothing more you need to do after you have written the eBook.
- There is no limit to how much you can make through self-publishing. Especially with platforms like Amazon’s Kindle Direct Publishing (KDP) and Lulu, you can virtually become a success without a lot of effort.
What we don’t like about creating eBooks:
- An excellent eBook that people would be willing to buy is more than 50,000 words long. To write 50,000 words of great content can take between 3 – 6 months.
- Do a lot of research so that your eBook not only contains valuable content, but it is unique and solves problems for your audience.
- Find out what is missing in the niche or topic you are writing about. research about it, and then write a lot of great content on this topic.
- Do not forget to keep promoting your eBook. The occasional giveaway and advertising will help keep your eBook selling.
11. Create an app
If you have the technical know-how or the money, you can always create an app. First, do some research to know if other apps solve this problem or if you can solve the situation better. If so, you could consider embarking on this project.
What we like about creating an app:
- In today’s world, it is easy to get your app ready. If you have the technical skills, you can do it yourself. Alternatively, you could hire a programmer to create the app for you. Thankfully, it doesn’t cost as much as it used to cost.
What we don’t like about creating an app:
- You will need to maintain your app to make sure it remains relevant and secure. In today’s world, it is easy to get hacked or become out of date. If, for example, Apple or Google update their software, you might need to update your app to support the operating system’s latest version.
- Research your app idea, check whether there is money to be made in this niche. Is there enough traffic on this topic? Are people willing to pay to have their problems solved?
- Offer a freemium model where you give some features free while for the best premium features, your users will need to pay.
12. Create a course to sell via Udemy or your platform
Udemy is an online platform where users can watch classes on a wide range of topics. By creating a video course, you can sell it via Udemy at your price to get some high passive income. This is an excellent option if you are knowledgeable on your topic or niche and are comfortable being on camera.
What we like about creating video courses:
- Once you create your course, you can spin a lot of content into blog posts or eBooks that can help you drive traffic to your course.
- Income from video courses is usually very passive if you create a great course that draws solid reviews and ratings.
What we don’t like about creating video courses:
- Udemy and other video course platforms do have very high traffic on the most profitable niches. Therefore, it is crucial to do research and have high-quality content.
- Better to create a great quality course than publish many low-quality courses. An excellent quality course will drive engagement and help you build your audience and student community for future classes.
- Always keep your courses up to date. Create a schedule to update your courses with new research and content whenever available so that your course continues ranking well in Udemy’s and Google’s search results.
13. Create stock photos or music
Blogs, magazines, and YouTube videos all need great stock photos, videos, and music for their content. As a blog author, I rely a lot on stock photos to create visually appealing articles. YouTubers and Podcast owners require music beds and sound effects for their videos, and some use stock video as well in their videos.
Therefore, if you enjoy photography, videography, or creating music, you can submit your content on stock websites and receive a commission every time they are purchased.
A good example is if you have a dashcam, you can record your daily drives and upload this content on YouTube, and other platforms, and other YouTubers will reach you for the rights to use your content in their video.
What we like about creating stock music, videos, or photos:
- Stock content is truly passive as it does not need you to do anything after posting your content.
What we don’t like about creating stock music, video, or photos:
- It has become highly competitive to rank highly in stock marketplaces. This is because many content creators have posted their content on these platforms.
- Upload your content to a good marketplace that has lots of traffic and content. DepositPhotos is one of the great marketplaces out there.
Passive income via marketing/advertising
14. Affiliate marketing
Affiliate marketing is where you sell other people’s products or services to your audience in exchange for a commission. A good example is creating a review of the best shoes for deadlifting, then linking to these shoes on Amazon so that any person who wants to buy these shoes can buy them from Amazon, and you get a commission on each sale.
What we like about affiliate marketing:
- For great content that is evergreen (remains relevant for years), affiliate marketing can be a consistent income stream.
What we don’t like about affiliate marketing:
- You may need to sign up on many affiliate networks to get a wide range of products and services that you can market.
- Keep updating your affiliate links and articles to remain relevant. Using the same example of deadlifting, when Nike or Asics releases a new shoe, you might need to update your article to review this shoe as well to remain relevant.
15. Drop Servicing
In simple terms, drop servicing, also known as service arbitrage, is where you market a service you pay someone else to offer.
You sell a service on your website. However, when a client purchases the service from you, you buy the same service from freelancers offering a much lower price. You keep the profit between what you charged your client and what you paid the freelancer for the service.
You simply earn money as the middle person in the transaction where you are delivering services to your clients.
What we like about drop servicing:
- You do not need a lot to get started. You simply need to understand the product you are marketing and get your website going.
- There is a higher value per sale since services attract a higher price tag compared to products. Typical services are sold for between $99 and $199 to the right audience.
What we don’t like about drop servicing:
- You have to deal with freelancers who may not be honest in letting you know when they cannot deliver your work on time.
- Customers differ, and providing excellent customer service is critical for you to get high ratings and reviews.
- Do niche research to find the right profitable niche. The niche that you choose will make all the difference between what being profitable or not.
- Make sure you identify the freelancers with who you can work to get the work done. Make sure to try them out before you engage them to know how good they are at communication and sticking to the agreed timelines.
Final thoughts on passive income strategies
Building your passive income is an essential strategy for you to achieve financial freedom as per the six (6) steps to financial freedom outlined here.
If you want to replace your 9-to-5 job with a more reliable source of income, you would need to grow your passive income by leveraging one of the 15 strategies we have outlined here and based on the type of passive income that appeals most to you.
Most important in this strategy is to get started today. No matter which passive income strategy you pick you will have a learning curve and therefore there is no better day to start than today.