Passive income ideas are one of the best ways to build wealth in the future. If you want to learn more about the most effective passive income ideas, then keep reading below. Passive income is a fantastic way to generate cash flow and an excellent source of extra income, especially if you’re not interested in working a traditional job. It’s also a great way to create an extra stream of income while maintaining your current lifestyle.
One of the best ways to achieve financial freedom is to build passive income streams from multiple sources. You can always start with the easy sources of passive income and then make your way to the more riskier passive income ideas.
In this article, we’ll cover second stream of income ideas that will help you achieve financial freedom in 2022 and beyond. We’ll also give you some tips on how to get started with passive income ideas.
Affiliate disclosure: Just to be transparent, some of the links on this website are affiliate links. If you make a purchase, we will earn a commission, but there will be no additional cost to you whatsoever. This is how we manage to keep creating free content. We never recommend any affiliate links that will not benefit our readers.
What Is Passive Income?
Passive income is money you earn without having to work for it. Even when you go to sleep, you are still earning money passively.
It can come from a variety of sources which can be through rent, commissions, or royalties from online businesses. We will discuss these in detail in the below sections.
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.
According to Investopedia: “The appeal of passive income is no doubt why the idea has become so wildly popular with investors, but this popularity may be contributing to its lack of credibility…Passive income is attractive because it offers the hope of financial freedom and security in an era where the average person cannot afford to retire comfortably.”
While there are many legitimate ways to create passive income streams—such as through owning stocks and bonds—there also some less-than-reputable methods that have been used by scam artists looking simply make a quick buck off unsuspecting people who don’t know any better.
For example, some real estate agents will tell their clients that the only way for them to get rich is to invest in commercial property deals. In reality, though, these so-called “commercial properties” are often nothing more than empty buildings with no tenants or business operations.
What Is Not Passive Income?
Passive income comes from a source that you don’t directly control.
A job is an active income stream, and as such it requires your attention and effort to maintain. For example, if you work at a 9-5 desk job for $20/hour, the income of $20/hour is considered active since you had to put in time and energy into maintaining that level of income. In this case, you are earning income actively, and not passively.
On the other hand, if you have a business where customers pay on average $400 per month for your services with little or no maintenance required on your part, this would be considered passive (since it requires less time and effort).
Side hustles are more often than not an active income stream since they can require quite a bit of maintenance – just ask anyone who runs their own blog or website!
Common scams to look out for
There are many legitimate ways to create passive income streams that actually work. However, there are equally (if not more) scams out there that promise passive income streams.
The following is a list of the most common scams:
- Make Money Online programs (MMO) – While there are some that are legitimately good, most of them do not provide passive income. The landing pages tend to overpromise and make it seem like you’ll earn way too much and be able to retire on an island that you will eventually be able to afford. In reality, they generally tend to be greedy marketers capitalizing off the vulnerabilities of people genuinely wanting to escape the 9-5 and make them lose even more money then when they first started.
- The Nigerian Scam – This is one of the more popular scams in the United States, where you are told you’ve won money or something else valuable but all you need to do is pay a fee for processing your prize and then send it back to Nigeria. If you decide not to send it back, they will freeze your account until they receive their share!
- Lottery Scams – There are so many variations on this scam, including those claiming that someone has won $50 million from winning the lottery but needs just $200 for taxes; others claiming that you’ve actually won a lump sum payout from an overseas lottery; still others telling you about fake “lotto winnings” worth millions of dollars (the only catch being that such payments go directly into foreign bank accounts).
- Investment Fraud – Another longtime favorite among con artists, investment fraud takes many forms: investment offers with spectacular returns that sound too good to be true; promises of secret insider information on hot stocks with huge returns; “miracle” investments guaranteed to double your money within months without any risk whatsoever (but which turn out not to exist)
What Are The Best Second Streams Of Income?
Let’s now look at the best secondary income sources starting with the easiest passive income sources to the more riskier passive income ideas. Since these are mostly 2nd stream of income ideas, your passive income earnings might be a little low compared to a full time job, especially when starting out. A powerful strategy to earn a lot from passive income is to diversify through multiple income streams. As you progressively build passive income streams, you will not only earn more, if one of your sources fails, you still have other sources working for you on your behalf.
Affiliate marketing is a form of marketing in which a third party rewards website owners, social media influencers, or bloggers for promoting a product. When you join an affiliate program, you will receive a special link to the product landing page that the third party wants to promote. If someone clicks on the link and makes a purchase, the affiliate (i.e., you!) receives a commission.
Affiliate marketing is a great way to generate passive income. By joining an affiliate program, you can promote products you believe in without having to create your own product. You also don’t have to worry about shipping products or dealing with customer service. All you have to do is include a link to the product in your blog post or social media post and wait for people to buy it.
Check out an article I wrote about how you can get started making money through affiliate marketing: How To Earn Your First $1000 With Affiliate Marketing As A Beginner.
Real Estate Rental income
Real estate rental income is a popular way to generate passive income. For example, you could buy a rental property and rent it out to tenants, or you could buy an apartment building and collect rent from each of the units. You could even invest in a condo or a hotel and take the collected rent as income. Collecting rent is generally passive income because it’s not dependent on the day-to-day activities of the property owner.
The only time you would need to be active is when the tenant reports a problem or when you need to pay some of the utility and repair bills. Even then, you can hire a property manager who handles all that for you in return for a small commission on your weekly rent. However, as long as the property is being properly maintained and the rent is being paid on time, this would be considered passive income.
While you do need to have a bit of capital upfront for purchasing property and deposits, you still can’t beat the easy passive income you get from real estate renta income alone.
The good news is that rental income is one of the most stable forms of passive income, and it can be a great way to support yourself in retirement.
Write an e-Book
Self-publishing e-books has become extremely popular in recent years, and many publishers are willing to work with anyone who has a good idea. You can write a book and hire an editor, a cover designer, and even a proofreader at minimal cost. There are reports of people earning anywhere between a few hundred dollars and a few thousand dollars per month through their e-books.
You need to make sure that you are passionate about the topic or niche that you are writing about. You have to be able to express yourself well, and you also have to know what proofreading is all about. When people are not passionate enough, they start making mistakes while typing their articles or just lose the motivation to finish writing their book.
Once you have your book ready to sell, you will need to invest a bit of time in promoting it. There are different ways that you can promote your e-book and make sure that people know about it. Amazon, by far, has the largest library of e-Books on the planet. You can list and distribute your book on Amazon KDP and put it up for a big discount upon launch to attract initial readers who may not have heard about you before.
Create an online course
Online courses are another great way to earn passive income. While creating an online course is more active than passive, the idea is that you do all the hard work to create your online course once, and then keep making sales for the lifetime of the course.
To create an online course, you would first record and edit your videos teaching a topic that you have a particular expertise in. Then you would upload them to a platform of your choice. The best platforms currently are Teachable, Kartra, or if you’re just starting out, Groove.
Here are some beginner tutorials if you are interested to learn Groove: Everything You Need To Know About Groove.
You can also publish your online courses on popular online course marketplaces like Udemy or Skillshare and keep earning passive income for years to come. A course I created 5 years ago that I don’t really maintain anymore still earns me around $200/month passively. It’s easy passive income and maybe one of the best sources of residual income out there.
Dividend stocks can be an excellent passive income idea. One area of dividend stocks you can look more into is ETFs. ETFs are investment funds that track specific markets or sectors. The best way to find dividend stocks is to look for companies that have a history of increasing their dividends for many years. You should also do your research and study the company’s financial statements.
ETFs are very cheap in comparison to mutual funds or index funds.
For example, the Vanguard Total Stock Market ETF (VTI) and the Vanguard Total International Stock ETF (VXUS) give you access to US dividend stocks and international ones, respectively.
Rent out your home short-term
There are a few different ways to rent out your space while you’re gone. You could post an ad on a website like Airbnb, or you could contact a company that specializes in short-term rentals.
Make sure that the company has insurance policies that protect your guests and property. Airbnb already has insurance policies in place.
Renting out your own home gives you some great passive income while you’re away on holiday. According to Airbnb, you can typically expect to earn around $500 per week if you’re renting out a one-bedroom apartment. That figure can be a lot higher if you have a larger house, or if your home is situated in a premium location, like near a beach or tourist attraction.
I myself have rented a small, 3-bedroom house near a lake in New Zealand for $300 a night. I’ve seen listings on Airbnb where homes are rented out for as much as $1000 a night. That’s much more than the average daily salary.
Create a blog or YouTube channel
If you want to earn a passive income online, you need to create more content. This can be on a blog or a Youtube channel. Creating more content on your blog or YouTube channel can also help you build an audience over time. This can help build passive income streams for you without much effort, as earnings can snowball over time.
However, you need to put in the work and time initially. During the early phases, it may be a little frustrating as it feels like your blog or channel is going nowhere. Eventually, if you’re consistent and continue to put out content, it will pay dividends eventually.
This mainly falls under the category of active income as you have to keep producing content. However, it eventually becomes mostly passive income once you meet the threshold requirements and start earning money. When you get to a point where you are earning money even in your sleep, that’s when it becomes a pretty awesome passive income stream.
This also requires you to have expertise in a particular niche or to be entertaining and engaging enough to attract and keep your audience coming back for more.
Sell designs online
If you have design skills, you may be able to make passive income selling printed designs to the public. For instance, you can sell t-shirts, mugs, hoodies and other merchandise with your designs on them.
The money you make from selling designs online doesn’t have to be spent on materials because you will be selling an already-made product. You also don’t have to deal with refunds, manufacturing, shipping and handling.
Businesses such as Redbubble allow you to sell shirts, mugs, etc with your own printed designs on t-shirts, masks, hats, hoodies, etc. There are many people making a living online just selling printed designs on merchandise.
You don’t even need to be a great artist either. A lot of the popular selling designs are simple text on a white shirt that is either a fun and memorable quote or a popular slogan.
Get a high yield savings account
A high-yield savings account is as passive as it gets. It’s a really easy passive income idea. You have to deposit money into the account, and then you don’t have to do anything but let it sit there. The interest rate is generally low, but it’s one of the most stable investments you can make. You won’t get rich off of this, but the money you’ll save over time will be significant.
In general, you would need to invest a large amount of money to see any worthwhile returns, but it’s often worth the time and effort to do so. For this reason, it’s not recommended if you’re just starting out.
If you have some money sitting in your bank account doing nothing, you might as well drop it into a high-yield savings account and earn some extra income completely passively.
Sell stock photos
Selling stock photos is another great way to earn easy passive income. You can make passive income with just a smartphone. There’s no need to have fancy equipment. There are many stock image businesses that will buy good-quality pictures taken on a smartphone and pay you for them.
One of the most well known stock image websites is Shutterstock.com, but there are hundreds of others such as Bigstock.com, DepositPhotos.com or Alamy.
Build an app
Instead of offering your technical skills for hire pretty much hourly, you could develop a passive income enterprise by building an app that people can download.
The app doesn’t have to be the next biggest revolution or even cost anything to download to make you money.
Angry Birds is a free-to-download smartphone game built-in 2009 that made approximately €272.3 million in 2020!
Even if you’re not a technical whizz, you could still make money by building an app. Apps are essentially mini software applications for smartphones and tablets that perform specific tasks such as checking the weather or making phone calls.
If it sounds like too much hard work, then there are still ways to make easy cash from apps without any development experience whatsoever using simple app builders.
A social media influencer is someone who has a large following on one or more social media platforms and can persuade their followers to take an action, such as buying a product or service. Due to their large follower counts, they get paid commissions through sponsored posts (mentioning a specific product in one of their posts or videos), affiliate marketing or selling their own products/merchandise/courses.
This isn’t the easiest form of passive income stream out there. It’s not easy to become a social media influencer and it’s definitely not something that can happen overnight. It might even be more work than a full-time job.
However, once you gain traction and have a large audience, it gets easier and more hands-off. At that point, you will be making commissions almost effortlessly. While it’s a lot of hard work, once you get over that initial hurdle, this can potentially be one of the most profitable passive income businesses out there.
If you are prefer to earn by doing something more social, then getting paid to be an online friend might be another option. You won’t need to build any following but it’s more active income rather than passive income.
Rent your car or garage space
If you have a car or two available, you can rent them out to people who want to drive them. This is pretty much like Airbnb for cars.
If you have a garage in your neighborhood that is currently empty, you can earn an insane amount of passive income by renting out your drive or garage. The more premium your location is, the higher you can charge.
For example, if you live close to a major sports arena, concert hall, or shopping mall (pretty much anywhere where there’s likely to be demand), consider listing your car or driveway as an alternative to that pricey parking ticket. Big cities will be particularly profitable in this way; New York City is already compact enough that owning a car can be inconvenient at times, and people are willing to pay premium rates when they need somewhere safe and convenient to leave their vehicle while they’re shopping or sightseeing.
Sell ad space on your website
One option for making money through website advertising is to sell ad space on your own website. If you have a lot of traffic, this can be a lucrative way to earn money. However, you need to be very careful with ad space. You want to make sure that you are only placing ads on your website that you would want there. I know some people who have made good money placing banner ads on their own websites, but it isn’t for everyone.
If your website doesn’t get sufficient traffic, you could also look into buying existing websites that do get traffic and selling ad space through them. This is a pretty easy and painless way to generate passive income that can always later potentially grow if you decide to put more work into it.
You can check out Flippa to see which websites are currently on offer and whether they currently make an income.
If you know what you are doing, websites can be one of the best businesses that generate passive income.
Participate in sleep studies
Sleep studies can pay upwards of $1000 just for sleeping. You would need to take a couple of exams to ensure you’re the right fit for the task. Then just sleep away. You literally earn money while you sleep! It’s one of the easiest passive income ideas on this list.
Sleep studies are best for those who can get a decent amount of sleep. If you don’t, then you might not make it on the list for the next test.
Become a dropshipper
Dropshipping is where you buy physical goods at wholesale prices and then sell them at a higher price to consumers without having to physically handle the inventory. It was one of the most popular ways for people to earn money online since early 2019.
Since then, people claim that dropshipping is dead, however after the events of 2020, it seems to have only accelerated.
All you need to do is create an online store, list some products from your supplier that you want to sell and promote your store. When someone buys online from your store, you would then manually order that item yourself from your supplier but have the delivery address sent to your customer with their name.
From your own point of view, you only deal with the storefront and marketing (as well as customer support for refunds and enquiries).
If you get it to the point where your store takes off, then the amount of passive income you make can be extremely high. There are many case studies on YouTube where people make over millions of dollars running an online store by themselves.
Bear in mind that there is stiff competition right now in dropshipping (hence why people think it’s dead). You will need to have some kind of USP or special benefit to attract buyers to your site.
Another great passive income idea is selling t-shirts. You can either design and sell them yourself or find a designer who will work with you. It’s one of the best homebased business ideas.
You can use various websites such as CafePress, RedBubble, Amazon Merch, Facebook and Twitter to sell your designs.
In general, these companies will usually handle the making of the product, selling and packaging it, as well as shipping it directly to the customer on your behalf.
Your main responsibility is to come up with interesting designs that people want to buy and to market them well. In fact, marketing is probably the most challenging as you are dealing with a lot of competition. Even if you don’t have much competition, you will eventually have competition if you experience success with your own sales. Those are the biggest challenges when it comes to selling t-shirts online.
If you’ve setup an automated sales funnel and some marketing campaigns, you are likely to experience regular sales passively and enjoy your earnings.
Start a vending machine business
If you’re looking for a way to earn some extra money, consider starting a vending machine business. It’s not something that a lot of people do and is one of the effective ways to get residual income. It’s easy to get started and doesn’t require any special skills. All you need are the machines themselves (which can be bought online or from your local vending company), an area in which to place them, and enough stock—usually sold by bulk distributors—to fill each one at least once per week.
Vending machines come in all shapes and sizes, so there’s something available that will fit into just about any location without being too intrusive.
Most businesses have enough room somewhere on their property for a few small soda or candy machines that could generate some additional income when not needed for regular work use; larger spaces might benefit from having several locations dotted around where employees spend time during lunch hours or breaks between tasks.
It’s a mostly hands-off passive income idea which you can continue to make you money long term.
So there you have a list of easy passive income ideas that actually work. Try to start with one of the cheap passive income ideas and gradually add more. Having multiple income streams is one of the powerful secrets to building huge wealth.
If you want to start earning passive income fast, then you’re going to need to use the resources that you already have. As discussed in this article, these could be schemes such as real estate rental income, renting out a room or your driveway, advertising on your vehicle, affiliate marketing, dropshipping or other homebased business ideas.
There are numerous options available, and they all come with their own benefits, but it’s important that these methods match up with your skillsets and interests in order for them to be successful.
It’s also important that you pick something that you like and stick with it for a few months even if it feels like there is no progress being made initially.