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12 Passive Income Ideas Anyone Can Start

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There are multiple definitions of passive income, which is also referred to as residual income. The IRS has its own definition for tax purposes.

This article defines passive income as consistent income that requires little to no effort to maintain. 

If you’re seeking passive income, your goal should be to get to a point where both the work you do and the money you earn from that work keep generating income over time.

Here’s a personal example: some of the articles on this website were written years ago, but they still produce income today. More so, the more I improve this site overall, the more income those old articles produce. 

It’s a mistake to think that only your money can earn compound interest — your work can also compound.

How Do You Build Passive Income?

Time and money are the two ways to build passive income. Building a website takes time, and depending on how you approach it, very little money. In the other hand, investing in dividend income stocks takes money, but very little time.

When you’re starting out, you need to identify what resources are available to you (i.e., time and/or money) and pick an idea that utilizes those resources.

Ideally, you can also leverage your existing skills and expertise. For example, a web developer can build passive income websites, or a videographer can launch their own YouTube channel.

Best Passive Income Ideas

#1. Build a Passive Income Business

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Any business can be turned into a finely-tuned machine that operates without your active participation. In the classic book Work the System, Sam Carpenter details how he went from working 100+ hours per week to working just two hours per week, running a telephone answering service that produced a mid-six-figure income.

Of course, some businesses are easier to automate than others. In our article on businesses that can run themselves, we list our favorites, which include affiliate marketing, blogging, dropshipping and more.

What these businesses have in common is that:

  • The value delivery is automated through software. To generate income, you need to provide genuine value for your customers. But this value delivery doesn’t have to require your time. Often, value can be delivered through technology, like software or a mobile app.
  • They use network effects to their advantage. A network effect is when a  product or service becomes more valuable as more people use it. For example, if you have a course hosted on a platform like Udemy, people taking your course and leaving a positive review equates to more people finding your course in the future.

Learn more: We did the research and found the 10 best passive income business ideas for any age or skill level to start.

#2. Invest in Stocks

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One thing you’ll learn when you study the stock market is that many stocks pay out around 2.5% of their total value each year in dividends. In 2020, dividends paid to shareholders reached a record high of $503 billion.

Dividends are a portion of a company’s profits that are paid to shareholders in cash. So just by being a shareholder of a company, you get a passive income stream that’s separate from any gains or losses in share price.

If you have enough capital to invest, dividend stocks can be one of the best income generating asset classes. However, it should be just one part of your overall investment strategy.

Dividend stocks tend to lack long-term appreciation — meaning they don’t increase in value as much as other types of stocks — so it’s not always a good strategy for retirement investing. What dividend stocks are good for is producing short-term income. (So they’re great to own during retirement.)

In our beginners’ guide to investing, we discuss why it’s not a good idea to pick individual stocks. The alternative is to buy a basket of them. There are many funds that hold exclusively high-dividend stocks. Choosing an option like this will help reduce your risk exposure over the long term, as well as make it easy to get started.

Learn more: The investment brokerage M1 Finance has a feature called Expert Pies, which are pre-configured portfolios you can invest in. One Expert Pie is a dividend stock portfolio focused on companies with higher-than-average cash payouts. What’s to like about M1 Finance is that you pay no management fee. Learn more in our M1 Finance review.

#3. Invest in Real Estate

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MoneyEasyMedium to high

Real estate is one of the primary ways wealthy people have made money for decades. But due to the risk, time and capital requirements associated with traditional real estate (like rental properties) it has not been a suitable investment for most people.

That’s no longer the case. With real estate crowdfunding, the attractive returns offered are now available to average investors.

If you’ve ever heard of REITs (real estate investment trusts), the concept of crowdfunded real estate is very similar. The main difference is that with real estate crowdfunding, you’re often investing directly in individual properties or projects. 

With a REIT, the corporation picks the assets and you’re investing in the corporation (not the real estate itself). You’re then paid dividend income once all the corporation’s expenses are paid out, including employee salaries and executive bonuses.

Crowdfunding gives you more control over your investment, and for beginners, it cab be an ideal and low-cost way to learn about real estate investing.

Learn more: Start with our guide on how to invest in real estate with little money, which takes an in-depth look at a number of real estate crowdfunding platforms. Fundrise ($10 minimum) is a great pick for beginners. Arrived ($10 minimum) is interesting in that you’re investing directly in single-family homes. If you’re an accredited investor, check out Cadre, which invests your money into institutional-quality assets, including investments in opportunity zones.

#4. Become a Creator

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We’re entering a golden age for creators. Whether that’s writers, videographers, storytellers, influencers or podcasters, there are now more ways than ever to make a living with your creative talents. Furthermore, there are more ways than ever to use those talents to generate passive income.

The key to success as a creator is to build an audience that trusts you, and then find ways to monetize that audience. While there are many different ways to do this, one of the most common (and most passive) is through advertising.

For example, someone who creates evergreen YouTube videos can profit from those videos years after they’ve been recorded. In contrast, someone who creates videos only about recent events — such as sports news — has limited long-term earning potential.

In this case, network effects are really in play, as the more subscribers you get to your channel, the more views your videos get; the more views you get, the higher your videos will rank; and higher your videos rank, the more advertising income you’ll earn.

Learn more: Check out our guide on how to start a blog, as well as our articles on how to make money on YouTube, Snapchat, TikTok and Twitch.

#5. Build Single-Use Software and Apps

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Over the last few months, I’ve searched for tools that would allow me to convert a specific file type to something different, convert HTML to text, get a non-sensitive document signed, and generate filler text.

Each time, I’ve arrived on a single-use website that does one thing and one thing only. And while the site is free to use, the site owner earns revenue through advertising that appears on the page.

The first time I heard about this idea was via Pat Flynn’s Smart Passive Income website, where he created a single-use website that allowed anyone to create and customize a clickable map and publish it online.

If you’re not a web developer, you can easily outsource the creation of this type of project. You can also use AI, as we explain in our guide to making money with ChatGPT.

Most people think big when it comes to apps and websites, but a small portfolio of these single-use properties can add up to a very nice source of passive income.

Learn more: Each year, members of the popular computer science and entrepreneurship forum Hacker News share how they’ve earned passive income over the past year. Reading through the posts from 2018, 2019, 2020 and 2021, you’ll find dozens more examples of single-use websites, which can help you generate ideas of your own.

#6. Affiliate Marketing

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Affiliate marketing is one of the most popular ways to get paid for promoting products and services: you earn affiliate income (usually as a commission) for sending potential customers to a merchant or service provider.

Being an affiliate marketer can be a full-time job, but it’s also possible to turn it into a passive income source when done correctly. 

One option is partnering with companies that pay a recurring affiliate commission. Usually, these are for subscription-based services and you’ll keep getting paid until the customer you referred cancels their subscription.

Another way to make affiliate income passive is by automating your marketing. For example, if you started a YouTube channel based on product reviews, while you may only be paid a one-time commission for each conversion, your ability to bring customers in is automated through YouTube’s algorithm.

#7. Rent Your Stuff to Others

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Existing assetsEasyMedium

Earlier in this article, we talked about money and time being the primary resources you can use to earn passive income, but there’s another resource you shouldn’t overlook: the stuff you already own.

The most obvious example here is renting out property or a room you own on Airbnb or VRBO. Airbnb and other community-based online platforms allow you to connect directly with other people looking to rent or borrow assets.

Depending on where you live and what you own, this can be a solid source of steady income that requires a minimal amount of work on your end (especially if you automate the management of the asset in question, such as hiring a property manager).

Examples that exist outside the vacation rental property space include:

Learn more: See our list of the 32 highest paying gig economy apps, which includes write-ups on many of the platforms mentioned above.

#8. Use Passive Income Apps

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TimeEasyVery low

Passive income apps allow you to generate small amounts of passive income throughout the year. Unlike sharing economy apps such as Airbnb and Neighbor, many passive income apps are truly set-it and forget-it propositions. 

Of course, the big difference is the amount of money you can earn: expect around $10 to $30 each year from having these apps installed. That makes this the easiest but lowest-paying passive income idea on this list.

Examples of passive income apps include data collection apps such as the Nielsen Computer and Mobile Panel, which rewards you for having the app installed on your smartphone or desktop. In turn, the company collects anonymous data and resells it to brands for market research purposes. 

Beyond data collection apps, there are many semi-passive income apps, which may take a click of a button or two to earn. A good example of this is Swagbucks, which gives you cash-back when shopping online. All you have to do is open the app and click a link to earn 2-5% on your purchases.

Learn more: Check out this list of the highest-paying passive income apps to see the best opportunities that exist today.

#9. Maximize Credit Card Rewards

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If you’re using a credit card for your purchases, it makes sense to maximize your cash-back.

Cash-back rewards are like free money. Say you spend $50,000 a year on your credit cards: going from an average of 1% to 2% cash-back allows you to earn $500 more in rewards every year.

Considering that some of the top cash-back cards offer up to 5% back in certain categories, this is doable.

My favorite two-card combination for earning cash-back is:

  • Chase Freedom Unlimited: earn 1.5% cash-back on every purchase.
  • Chase Freedom: earn 5% cash-back in rotating quarterly categories (and 1% on everything else).

I use the Chase Freedom when I’m spending within a bonus category and the Chase Freedom Unlimited for any purchases outside of a bonus category. On average, it’s not hard to earn well above 2% cash-back with this simple strategy.

Advanced Cash-Back Tip: If you have a premium Chase credit card, like the Chase Sapphire Reserve, you can transfer points you earn with the Freedom and Freedom Unlimited to your premium card. The benefit here is that your points are worth more after you transfer them.

For example, when booking travel through Chase with a Chase Sapphire Reserve card, you get 50% more value. As such, when you spend within a bonus category using your Chase Freedom card, you’re actually earning 7.5% cash-back when you redeem the points for travel. This strategy is called the Chase Trifecta.

Learn more: See the best cash-back cards offered right now.

#10. License Your Ideas

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If you have an idea that could enhance a product or service, you can get paid to license that idea.

I see this a lot on Shark Tank, where Kevin O’Leary loves to buy a large stake in a company and then enter a licensing agreement with the entrepreneur. O’Leary sells it hard for the fact that the entrepreneur can sit back and collect royalties for every unit that sells.

One big Shark Tank winner in O’Leary’s portfolio is Groovebook, a photo-printing app/subscription service that was created by Brian and Julie Whiteman. In the Tank, O’Leary and Mark Cuban invested $150,000 total for 80% of licensing rights. The company later sold to Shutterfly for $14.5 million.

The deal was only 18 months old at the time of the sale, O’Leary says. “The co-founders became millionaires. That’s a great outcome.”

Learn more: There’s a great book on the topic titled One Simple Idea: Turn Your Dreams into a Licensing Goldmine While Letting Others Do the Work. If you ever dreamed of being an inventor, grab the book from Amazon or your local library.

#11. Sell Digital E-Books, Files and More

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There are a number of opportunities for creating digital assets (e-books, videos, photos, graphics, etc.) and selling them online. What’s nice about this concept is that if you get on the right selling platform, the marketing can take care of itself by utilizing the network effect.

For example, if you self-publish an e-book on Amazon Kindle that gets good reviews, those reviews will generate more and more sales.

Other passive income opportunities worth looking into are:

  • Graphics: Etsy, the largest creator marketplace online (with over $3 billion in annual sales), allows users to sell digital downloads. Invitations, patterns, scrapbooking designs, printable artwork, and coloring pages are some of the more popular niches.
  • Stock photography: You can list your photos on sites like Shutterstock that content creators use when searching for images for commercial purposes.
  • T-shirts: One great shirt design can sell hundreds and hundreds of units without any marketing at all.

Learn more: Check out our guides to making money on Etsy and how to get paid to take pictures.

#12. Buy a Small Business or Website

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Our top idea on this list is building a business while operating it with finely-tuned systems and procedures so that it runs without your active involvement.

Building a business from scratch takes time. To fast-track this idea, one option is to buy an existing small business.

From a small website to a well-run local franchise, businesses go up for sale all the time. Buying a well-run business at a fair price — one which ideally allows you to utilize your existing skills to increase its value — can be one of the fastest ways to generate a job-replacing passive income stream.

Learn more: is the internet’s largest database of businesses for sale. has the web’s largest inventory of websites for sale. 

Final Thoughts on Passive Income Ideas

In the widely quoted study published by the IRS, “Over the Top: How Tax Returns Show that the Very Rich Are Different From You and Me,” it was found that millionaires average seven different income sources.

The top seven sources were:

  1. Capital gains
  2. Earned income
  3. Interest income
  4. Investment income
  5. Profits (from a business then own)
  6. Rental income
  7. Royalty income

Having multiple streams of income — with those being a mix of active income and passive income streams — is one of the keys to building real wealth. Not only does it provide more opportunities, it’s also a far less risky strategy than having just one active income stream.

Wherever you are in your financial journey, each of these ideas can help you create real passive income — whether that’s a few hundred dollars a year or income that can eventually replace your job.

R.J. Weiss
R.J. Weiss, founder of The Ways To Wealth, has been a CERTIFIED FINANCIAL PLANNER™ since 2010. Holding a B.A. in finance and having completed the CFP® certification curriculum at The American College, R.J. combines formal education with a deep commitment to providing unbiased financial insights. Recognized as a trusted authority in the financial realm, his expertise is highlighted in major publications like Business Insider, New York Times, and Forbes.

    1 Comment

    1. Great article, everything I need to know is here to start a business. I don’t need to search for other websites. Thank you!

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