As an entrepreneur or self-creator, earning passive income is the ultimate dream. While getting to that point requires hard work, putting in the time and effort now will give you freedom, flexibility, and cash in the long-term.
Just as with any side hustle, the first step of earning passive income is to create a website and put yourself online. After that, you’ll be able to try different strategies to keep the cash rolling in–whether it’s putting affiliate content on your site or starting an online dropshipping business.
Below, we’ll dive into what exactly constitutes passive income–and the top ideas for generating passive income yourself.
What is passive income?
Passive income is a type of income that requires minimal work. Essentially, it means making money without putting in much time or effort (for more details, see our guide on businesses that run themselves). How is this even possible? Think about it–you can earn money as an investor even while you’re sitting on a beach in Hawaii. Other types of passive income–like renting out a property or making money on YouTube–operate on a similar principle. Once your income sources are set up, you can (mostly) sit back, relax, and watch the cash flow in, in the same that you might with a side hustle. The key is to come up with strategic, low-effort business ideas that work with your skills and lifestyle.
Best passive income ideas
Let’s take a look at some of the most profitable passive income ideas, many of which you can do online and from your home:
01. Start a dropshipping business
Dropshipping is a type of retail business in which the merchant functions as a middle man between a supplier and a customer. Wayfair, for example, doesn’t have a physical store or warehouse. Instead, it partners with suppliers who manufacture and ship the products directly to customers. When a customer orders a product from Wayfair, the order is forwarded to the supplier, who handles the fulfillment process. This allows Wayfair to offer a wide selection of products without having to invest in inventory or manage a supply chain.
While starting a business typically requires upfront investment, dropshipping has very little cash risk. You don’t need to invest in a physical space, and you only pay your supplier when a customer makes a purchase. Most dropshippers earn a profit of 20 to 30% of the final sale price, including the costs of the product and the price of the supplier.
02. Sell digital products
Another business you can start with little money is a digital product store because you don’t need to pay for the costs of physical items, storage or shipping. Selling digital products is a great source of passive income because you only need to create a digital good once, and it will be in infinite supply for years to come. Think downloadable guides, eBooks, templates, printables and digital kits. UX designers, for instance, can create and sell wireframes, flowcharts and personas for professionals to download and use.
03. Invest in the stock market
Revenue generated from stock market investments is probably the most well-known source of passive income. While sometimes risky and daunting, it’s an effective way to build lasting wealth without much effort.
Keep in mind that stocks and the stock market itself are constantly in-flux, so this passive income idea is a way to generate income over the long-term. Instead of approaching this with the goal of getting rich quickly, you’ll want to slowly grow your investments over the course of your lifetime.
Note that we’re not here to give you investing advice–you’ll need to do your homework and consult with your own financial advisor about the types of stocks that best fit your needs.
04. Become an affiliate marketer
Affiliate marketing involves sharing or posting links to products, then earning a commission whenever someone clicks and makes a purchase. Joining affiliate programs such as Amazon Associates, CJ Affiliate or ShareASale is an easy way for anyone to get started.
Just how much money can you expect to make? Around 81% of affiliate marketers make over $20,000 annually. That said, some people make a living off affiliate marketing. Adrian Brambila cites affiliate marketing as one of his main sources of income. In 2020, he generated $750,000 from affiliate marketing alone by sharing affiliate links on his blog, social media accounts and newsletter.
Of course, the more followers, shares, and views you have on your website and social media accounts, the more people will purchase from your links. With that in mind, you’ll need to start by using these platforms to build your authority in a particular niche. Once you’ve established your expertise, share product recommendations with an affiliate link to encourage people to buy.
While getting followers and subscribers does require time and effort, you’ll be able to earn passive income from your links once you have an established fan base.
05. Buy rental properties
Buying and renting out real estate is one of the most effective ways of earning passive income. In fact, some people make their entire income on their rental properties. Take 32-year-old Michael Albaum, who makes $431,000 per year from his 61 rental properties. His strategy is to buy homes in markets where the rent is higher than monthly mortgage payments and to only buy properties that a management company can run without his involvement. To make sure he doesn’t have to work hard, he buys property only when it’s clear it will be fairly easy to outsource to run through a management company.
06. Rent out space
Even if you don’t have the money to invest in rental properties, you can rent out a portion of your own home–whether that’s a spare bedroom, your driveway or a backyard shed. This is a low-effort, home-based business idea that’s great for people with room to spare.
There are plenty of online platforms to connect you with customers. Spacer, for instance, lets you rent out your parking space, while Neighbor lets you rent out your driveway, garage, basement or shed. The advantage of renting space through these platforms is that you don’t need to do much marketing.
07. Become a social media influencer
Another source of passive income is social media. On platforms like Instagram and YouTube, people make money just by gaining a following and becoming influencers. Like most other strategies for building passive income, this requires some work upfront. Once you have an established group of followers, you can keep the cash flowing fairly consistently.
Influencers can earn money in the following ways:
Advertising
Premium subscriptions
Sponsored content
Brand partnerships
Affiliate marketing
Dropshipping
According to Lindsay Thomson, Head of social media for Wix,
"In the coming years we will see the growth of more social influencers. It's never been easier to create and share original content and for that content to reach a wide audience."
08. Sell online courses
Do you love teaching or have specialized knowledge to share with the world? Selling online courses is another source of passive income once you have an established customer base. You can also sell subscriptions for your digital content and courses. You can sell your online courses through your website or learning marketplaces like Udemy or Masterclass.
09. Run a print-on-demand store
Print-on-demand is another online business idea that you can start from home and that requires little investment. All you need to do is make a design, put it on a product like a T-shirt or mug, and start selling.
If you don’t already have design know-how, take a look at creative online marketplaces like Etsy. This will give you insight into the kinds of products and designs that are trendy and profitable.
Once you have a design idea, partner with a print-on-demand company to manage your inventory and sell through your eCommerce website. As you create your own site, take a look at these websites that sell handmade goods or eCommerce business ideas for inspiration.
10. Sell stock photos
If you have a knack for photography, you can sell your photos as stock images under a royalty-free license. This is an effective source of passive income because you aren’t just selling a photo once; instead, you’re able to license it over and over again for a fee.
You’ll also find that there’s very little actual work when you join a stock photo agency. These are companies that offer large catalogs of images and cut a commission from the sale price. This means you won’t need to put time and effort into marketing your photos, growing your brand, or setting up a store.
Some of the most popular places to sell photos include the Shutterstock contributor program, the Adobe Stock contributor program, and Getty Images.
11. Become a pet or house sitter
If you love dogs and cats, you can earn extra cash on the side as a pet sitter. While this will sometimes require active tasks like feeding or walking the dog, most of it—like watching TV while petting the cat or just being around when the dog needs you—is fairly passive. To connect with pet owners who need your help, try platforms such as Rover or Fetch.
Not a pet person? Try looking for jobs as a house sitter. Typically, this involves watering the plants, taking in the mai or just keeping everything safe and secure. For house sitting jobs, try MindMyHouse and Housesitter.com. To avoid commissions and fees, you can also offer your own services on Facebook or Nextdoor, or create your own website with a built-in appointment scheduler.
If you’re already working from home, both pet sitting and house sitting are side gigs you can do at the same time to supplement your existing income (see our guide for even more side business ideas.)
12. Create and monetize a blog
Starting a blog requires time and effort at first, but it can evolve to become a lucrative stream of passive income. Lots of people either earn full-time income as bloggers, or use the extra revenue to supplement their career.
Elna Cain, for example, is a successful freelance writer who uses her blog to sell coaching resources to aspiring writers. Jeanine Donofrio, creator of the blog Love and Lemons, is a full-time food blogger and recipe creator who uses her blog to build her personal brand, share her recipes and sell her merchandise.
How can you start something similar? There are a couple ways to earn passive income through your blog:
Use your blog to build a lovable brand and sell your own products
Link to affiliate products within your blog posts and earn a commission on every sale
Offer premium resources like eBooks, templates, guides and courses available for purchase
Partner with a brand and create sponsored posts
Run ads on your blog through Google AdSense
Passive income FAQ
What are the easiest passive income ideas to start?
Passive income refers to income generated with minimal ongoing effort or involvement once the initial setup is complete, so in theory any passive income business idea should be easy to setup. However because no business idea is entirely hands-off, here are some relatively easier passive income ideas to start - creating and selling digital products, renting out properties for investment purposes, and affiliate marketing.