I worked a traditional 9 to 5 job for many years and eventually I got burned out. I would work long days, including weekends, and I had little show for it.
Do you know what that feels like?
I knew that I wanted more freedom and the idea of passive income became very appealing.
I had heard of many people quitting and replacing their full-time job with passive income, but I had no idea where to start.
This pursuit led me to start this blog where I now make six figures per year.
If you want to learn legit ways to make passive income then keep reading.
Table of Contents
- How to Generate Passive Income
- 1. Dividend Income
- 2. Invest in Real Estate
- 3. Peer-to-Peer Lending
- 4. Get Out of Debt
- 5. Open a High-Yield Account
- 6. Rent Out a Room
- 7. Write a Book
- 8. Affiliate Marketing
- 9. Lead Generation Website
- 10. Sell Products on Amazon
- 11. Drop Shipping
- 12. Create an Online Course
- 13. Create YouTube Videos
- 14. Start a Business
- 15. Vending Machine Business
- 16. License Your Photos
- 17. Create a Mobile App
- 18. Put Ads on Your Car
- 19. Buy an Online Business
- 20. Buy a Laundromat
- 21. Open a Batting Cage
- 22. Product Design
- 23. Bond or CD Laddering
- 24. Rent Your Stuff
What is Passive Income?
Passive income is where you get paid over and over again for work that you did once.
I now have multiple income streams that are passive, many of which are included below.
How to Generate Passive Income
By choosing the right type of passive income, you can invest your time the way that you want to. It is a way of buying back more time.
There are so many opportunities out there to make residual income in network marketing.
However, this is NOT one of those “things.” These are legit ways for you to make money while you sleep with something that fits your passion, experience, or skill-set.
1. Dividend Income
One of the most popular ways to get true passive income is through investing in the stocks that pay a dividend.
Dividend income is money paid to shareholders of stocks in the form of cash. Dividend-paying stocks are especially enticing for those wanting to make a living with passive income, as they will get payouts each quarter or so. Even Warren Buffett historically is a fan of dividend-paying stocks.
If you are going to go this route, make sure that you educate yourself and pick solid stocks so that you can depend on for dividend income for years to come.
I am personally a fan of investing in index funds which is a fund of many stocks so that not all your eggs are in one basket.
If you don’t have an investment account, check out M1 Finance because they allow you to trade U.S listed stocks and index funds for FREE.
A great way to invest in stocks and ETFs for free. That means no trading fees. They also have an app to track your investments easily on your phone.Learn More
2. Invest in Real Estate
Real estate can be a great way to make money while you sleep.
However, I decided to buy a couple rental properties in my early twenties and I had a much different experience. I had a tenant who was late on his rent consistently, I had a hot water tank flood the first floor, and I even had to evict said tenant.
It was not as glorious as I thought it would be.
Since it costs so much to purchase a home, I decided to check out crowdfunded real estate instead.
Many of the platforms out there require you to be an accredited investor, which means you need to have a net worth of $1,000,000 or make over $300,000 per year (if you are married).
Since that was not the case for me, I decided to look for other, more accessible options.
One company that I came across is called Fundrise. With only $500 you can get started and invest in real estate.
I like it because it yielded a higher return then my initial traditional real estate experience and you no longer have the headaches of actually having to manage the properties (or the people).
Invest in real estate with as little as $500. While most real estate investing platforms are only open to accredited investors, Fundrise makes it accessible to all investors.Learn More
3. Peer-to-Peer Lending
Peer-to-peer lending is when you loan other people money who don’t qualify for traditional financing.
Initially I tried a higher risk option called LendingClub, however, even in the conservative portfolio of loans I only made 4.54%.
If you are looking for a lower risk option with a decent return, check out Worthy. They offer $10 bonds and pay a 5% return. One unique thing about them is that your money is liquid, so you can take it out at any time.
This means if for some reason you need your money back, you are able to access it quickly and easily.
Invest in small business loans that earn 5% annual interest, and you only need to invest $10 at a time.Invest Now
4. Get Out of Debt
The less money you’re paying in interest to creditors, the more money you have in your pocket each month. Getting out of debt quickly can increase your income even more because you’re no longer paying interest to creditors each month.
One way to speed up your debt payoff is to lower your interest rate. If you have high-interest debt that you want to get a lower interest rate on, check out Credible, which offers loan rates as low as 4.99% APR with autopay for refinancing your credit card debt.
Loan rates as low as 4.99% APR with autopay for refinancing your credit card debt.Compare Rates
5. Open a High-Yield Account
Are you looking for a low-risk way to make income passively?
Then look at opening a high-yield account with an online bank.
For instance, CIT Bank pays more than 10 times traditional banks and offers competitive rates.
They have a $100 minimum to open and there are no monthly service fees.
They are also giving a bonus up to $300 for opening an account. Click here for more details.
While this won’t make you filthy rich, it will be a safer way to make consistent income and not lose your money since they are FDIC protected.
Pays more than 10 times traditional banks and offer competitive rates.Get A Bonus
6. Rent Out a Room
Do you have an extra room that you rarely use? Why not rent it out to someone looking for a short-term rental on Airbnb. Millions of people use Airbnb to find a place to stay instead of staying at a hotel, sometimes even for months at a time.
You can hire a maid service to clean and prep the room after a guest leaves. If you hire a property management company, then this will eliminate work on your end and make it truly passive income.
My friends Steve and Annette Economides make over $1000 per month renting out their spare bedrooms.
7. Write a Book
Once the initial work of creating the book is done, selling books produce residual income.
I actually wrote a book called You Can Retire Early where I get a 10% royalty for every book that gets sold.
Once your book is available on a site like Amazon, you could receive a check each month for doing absolutely nothing. Note that spending some time developing an effective marketing plan is vital. Obviously, the more time you spend marketing your books, the more money you’ll make.
8. Affiliate Marketing
If you have a website already then this is a no-brainer. Some people are making over $50,000 per month like Michelle Schroeder-Gardner who teaches others how to make money online with her course Making Sense of Affiliate Marketing.
If you don’t have a website, you can start one for less than $3/month. That’s the price for getting a website host – a company that stores your website on servers so it can be viewed on the Internet. Click here to get special pricing of $2.95/month with Bluehost.
Affiliate marketing can be a great way to make money from home. All you need is a computer and a website.
Going the affiliate route is awesome because when people click on the affiliate links on your site, you receive a commission at no additional cost to them.
All they have to do is purchase a product or service and you get the credit for it.
9. Lead Generation Website
Another way to make passive income is to create a lead generation website. Lead generation websites exist to give referrals to local businesses.
So, let’s say you created a lead generation website that focuses on real estate. You’d use the site to educate people about home ownership. Or, you’d educate them about real estate investing.
Within the site you’d have links where people could contact you to learn more. When someone contacts you, you refer them to a real estate professional in their area.
The real estate professional would pay you for the lead. It’s a warm lead and not a cold lead, so professionals would be more willing to pay.
You could also make money by having advertisers on your site. Note that you would have to understand SEO (Search Engine Optimization) rules in order to make the site successful. Getting your site at the top of search engine pages would be vital to success.
10. Sell Products on Amazon
Do you shop on Amazon? Most of the world does too.
Did you know that you can sell your own products on Amazon and have them even ship the products for you? I actually have a friend who has done really well with this as he makes six figures per year selling his own products online.
11. Drop Shipping
With the explosion of eCommerce, drop shipping has become very popular. Here’s how it works: you create an online store that offers products from certain manufacturers.
A person visits your site and orders a product, and then your system sends the order to the specific manufacturer. The manufacturer then completes the order by shipping it directly to the customer.
One of the cool things about this type of business is that you do NOT need to order inventory. The customer pays for the product; you collect the profits, and the manufacturer stores and ships the products to the customer. It’s as simple as that.
If you’re interested in starting a drop shipping business, consider using a platform like Shopify to build your online store.
They even have a 14-day free trial that you sign up for here.
12. Create an Online Course
Online courses can be a great source of passive income. Here’s how they work: you create a value-packed online course that helps solve a problem or fills a need.
The course can include videos, e-books, and emails with pertinent information. Customers sign up to purchase the course, and your system automatically emails them everything they need to access the materials.
You get money for the price of the course that you created. A platform such as Teachable can do all the heavy lifting for you when creating your course.
13. Create YouTube Videos
Everyday regular people like you and me are making money on YouTube. Each time someone watches one of your videos, ads can appear, and you can make money from those ads. The key to earning money on YouTube is building a large enough subscriber and viewer base.
It can take a lot of time up front, but once your videos are live there is potential for you to make passive income from each video indefinitely.
Granted you probably will not make a living off of just a few videos. Be prepared to make over 100 videos if you really want this to take off.
14. Start a Business
Owning a business can be a good passive income source. The key is in having the right people running the business for you. Whether it be through the purchase of an existing business or opening a new business, your great business idea can be a viable source of passive income.
Do you want some creative small businesses that you can start for under 100 bucks? Then check out the $100 Startup by Chris Guillebeau. These are all verified businesses that grew to over six figures per year. And they all started with very little money up front.
15. Vending Machine Business
A successful vending machine business can be a great way to make passive income. The key is to find the right places to install your vending machines. Check with smaller brick and mortar businesses. Contact those that have over 100 workers in the building on a daily basis, and see if they need vending machines.
Another key to vending machine success? Ask those workers what items they prefer to have in the vending machine and then stock accordingly. Once again, if you want to reduce the amount of time that you are involved, consider hiring someone to stock the machines for you.
16. License Your Photos
Have you ever wondered how you could make money taking pictures? Do you have an eye when it comes to taking good photographs?
If so, check out a site like Shutterstock. You send your photos to Shutterstock and if they are approved, each time one of Shutterstock’s clients downloads one of your photos you’ll get a paid a royalty.
17. Create a Mobile App
If you are a bit techie and can come up with some unique ideas for mobile apps, or improve upon an existing app that will help people make their lives better, you may land yourself a great source of passive income.
Every app on your phone is making money for somebody, somewhere. For instance, Joel Comm made over $1Million from his iFart app.
We won’t even talk about the ridiculous money that Angry Birds brought in.
While these are the exceptions, there are plenty of people making thousands of dollars per month with their mobile apps.
18. Put Ads on Your Car
How would you like to make money just for driving your car and not have to pick up any passengers? By allowing companies to place advertisements on your car windows, you can earn a few hundred dollars each month simply by driving your car around town.
Check out Wrapify to see how you might be able to make passive income by wrapping your car with an advertisement.
19. Buy an Online Business
The beauty of an online business is that most will allow you to work from anywhere. Starting one from scratch can take a lot of time and resources. Why not consider buying an already established online business? Websites such as Biz Buy Sell have hundreds of online business listings that are for sale in varying price ranges.
Check to see if there is an online business for sale that is in line with your passions or hobbies. Again, in order for this idea to produce passive income, you’ll need to hire someone to run the business.
20. Buy a Laundromat
Here’s another turnkey passive income business idea. Many cities have established laundromats that are available for sale.
Here is how it would work:
- Buy the already existing business
- Make sure that you have someone to manage the day-to-day operations,
- Then “soak up” the profits.
The reason why you would want to buy an existing laundromat is that the startup costs are pretty high. Commercial washers and dryers are not cheap. It makes a lot more financial sense to buy an already established laundromat than to start from scratch.
21. Open a Batting Cage
I am shocked by the lack of batting cage facilities. Baseball is one of the most popular sports for kids in America. Yet batting cages are hard to come by depending on where you live.
Something to be aware of, though, is that these can require a lot of money up front. You will have to have a big facility, equipment, and someone to run the cage.
So make sure to do your due diligence before you invest too much money in this endeavor. Buying an existing batting cage business may be a more financially sound choice.
22. Product Design
Another way you can make passive income is by designing t-shirts and other products – even with no prior design skills. Sites such as Redbubble allow you to upload your witty design ideas and then create t-shirts, coffee mugs, laptop covers, etc.
Shoppers then visit the site and check out your products. When they purchase one of your designs, Redbubble will pay you a portion of the profits. They handle all of the production and shipping of products.
23. Bond or CD Laddering
Bond and CD laddering involves owning several different bonds and/or Certificates of Deposit. Each one matures at different times during the year. Then you take the profits from those investments as cash income during the year.
Although many CDs and bonds might not earn as much of a return as a Peer-to-Peer lending investment, bonds and CDs also generally come with little to no risk. This helps ensure a solid income source on a regular basis.
Related: 12 Best CD Rates in 2020
24. Rent Your Stuff
Thousands of people every day are looking to rent any variety of items. Craigslist can be a great place to advertise your items for rent.
Products that you could rent out:
- Extension ladders
- Party tents
- Tables and chairs
- Utility trailers
- Log splitters
You can even rent out your car when you are not using it with a company like Turo.
Just make sure that you have a proper rental agreement signed by both parties. Also, get paid in cash beforehand, and get a current photo ID and secondary proof of address from renters.
This will help you to protect the property you’re renting out. For extra peace of mind, consider requesting a security deposit as well.
As you can see there are a ton of ways that you can make passive income. Hopefully, this list has helped you narrow down which source of income is best for you.
So if you’re tired of the traditional way of making money, implement a few of the passive income strategies above so you can start working less and making more money while you sleep today.