Make Money Doing Nothing? The Ultimate Guide to Earning Passive Income
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You’ve probably heard the term passive income.
It sounds appealing right? According to the definition of passive, it’d mean you’re earning income without participating or having to do anything at all.
Free money? Sign me up!
Unfortunately, that’s a common misconception. Just like you can’t pluck money from a tree, you can’t expect to earn passive income by being, well, totally passive.
However, it’s a viable way to make money, and offers you security and freedom.
If you’re interested in establishing a flow of passive income, here’s your guide to understanding the term and getting started.
What is Passive Income?
To gain the best understanding of passive income, I chatted with some passive income experts.
Todd Tresidder is a wealth coach and the founder of Financial Mentor. He’s a big proponent of passive income. In fact, he has several passive income streams set up.
Tresidder defines passive income as, most simply, “income that comes in without regard to your time.”
But — and this is a big “but” — it’s not mailbox money; it’s not money that just appears.
He also calls it “lagged income.”
“Often in passive income, you have to commit the time and energy up front,” he says. He describes it as a machine; you need to build the machinery before the machine can work without your assistance. The income is lagged.
Brad Hines is another big fan of passive income. He estimates about 10% to 15% of his income is passive. He first heard the term years ago and was immediately intrigued. However, he admits it’s been a longer and more difficult process than he thought (think: The time required up front).
He compares passive income to its counterpart, active income. That’s the money you’re actively working to make, like at your day job.
“When zero of your money is passive income, that inherently means every minute you’re not working, you’re not making money,” he says.
What’s the Importance of Passive Income?
“Freedom,” Tresidder says when I ask him this question.
“The reason you establish a passive income is because it’s not connected to your time, which gives you the freedom to do other things with your time,” he explains.
Because Tresidder has multiple channels of passive income, he uses his freedom to travel when his kids are on summer break. For example, last year the family took a two-month trip to Europe where they hiked Spain’s 500-mile Camino de Santiago.
“I’ve designed my life to be free and flexible,” he says.
So has Hines.
“The more you’re earning passively, the less you’re becoming a slave to money,” he says. “I can go where I want, when I want.”
Passive income is also important for the financial security it can offer. Although you might take a risk when first establishing it, if it proves to be a steady flow, it offers great security because it’s not connected to your time.
So, for example, if your spouse gets sick or if you can’t work, the idea is you’ll still be earning passive income to pay those never-ending bills.
“No matter who you are — especially if you have debt or student loans or kids or whatever — the more you can get your annual income switched to passive, the better off you are in the future,” Hines says.
How to Make Passive Income
In the meantime, you can start small with these ideas then work your way up like Tresidder and Hines did. Think really big like starting a business or investing in real estate.
Really, the possibilities are endless, so don’t begin to consider this is a finite list – but here are some passive income ideas to get you started.
1. Invest in Real Estate — Without Spending Millions
Want to try real-estate investing without playing landlord? We found a company that helps you do just that.
Oh, and you don’t have to have hundreds of thousands of dollars, either. You can get started with a minimum investment of just $500. A company called Fundrise does all the heavy lifting for you.
Through the Fundrise Starter Portfolio, your money will be split into two portfolios that support private real estate around the United States.
This isn’t an obscure investment, though. You can see exactly which properties are included in your portfolios — like a set of townhomes in Snoqualmie, Washington, or an apartment building in Charlotte, North Carolina.
You can earn money through quarterly dividend payments and potential appreciation in the value of your shares, just like a stock. Cash flow typically comes from interest payments and property income (e.g. rent).
(But remember: Investments come with risk. While Fundrise has paid distributions every quarter since at least Q2 2016, dividend and principal payments are never guaranteed.)
You’ll pay a 0.85% annual asset management fee and a 0.15% annual investment advisory fee.
Interested? Get started with Fundrise here.
2. Make Money Off Your Extra Space
Got a room? A garage apartment? A tent? Establishing passive income in real estate doesn’t have to start with a huge investment.
You can list your space through Airbnb.
But that’s not totally passive, you’re thinking. You can establish a truly passive income by hiring a management company to handle the essentials: booking, cleaning and communicating with guests.
If you just want to handle that yourself, that’s something Hines calls hybrid passive income because you’ll have to do some regular work. However, it’s still considered passive because it’s not like you’re spending the whole weekend with your guests; therefore, time is not attached the your income.
3. Use Cash-Back Apps While Shopping
Just like the cash-back credit cards, remember that you have to actually be shopping and buying this stuff — with zero regards to the rebates.
If that’s the case, this can be considered passive income, according to Hines.
Have you heard of Ebates? It's a cash-back site that lets you earn rewards by shopping online. We love it around here because it's an easy way to save on everything you buy. For example, you'll earn up to 5% cash back on every purchase you make at Amazon.
Plus, you'll get a bonus $10 when you sign up. Here's how to get it:
- Sign up for Ebates here using your email or Facebook account. (It's free.)
- Use the Ebates portal next time you shop online. It’s connected to thousands of stores including eBay, Amazon and Home Depot.
- When you spend your first $25 at any of the connected stores, Ebates will reward you a free $10 on top of the cash-back rewards you earn normally.
4. Sell Your Photos (Nope, You Don’t Have to Be a Professional)
Those thought-out photos you take can get you more than just Instagram “likes.”
Hines uploads his iPhone photos to stock photography sites. He says many of them are trying to get away from the “perfect” photo and are looking for more realistic images. After a quick upload, he’ll get email notifications when someone purchases his work.
You likely won’t become a millionaire; sites like Foap pay about $5 per purchase. However, if you have a nicer camera, you can step up your game like Eliza Snow, who quit her corporate job to sell photos full time.
5. Create a Website
…like everyone else you know, right?
Hines says starting a profitable website can be difficult because the competition is fierce; you’ll have better luck breaking into a niche market.
The upside is that it costs little money to start one — and there’s little risk. Your startup expenses might only include purchasing a hosting package. For a new blog, this is affordable through channels such as Bluehost, which offer packages starting at $2.95 a month when you sign up here.
To earn money through your site, learn about affiliate sales. For example, Hines has a site called Nerd Playthings. He lists about 45 toys and gadgets — only a few of which he made, but mostly all linking back to Amazon via Amazon Affiliates. If a consumer clicks on a link and buys the product, he’ll bag some money.
To learn more about this, we have a whole guide on how to make money blogging.
6. Buy a Gumball Machine
Scratching your head yet? Hines actually used to make money from those gumball machines you see in restaurants; he’d get 80% of the profit.
You can also look into the same idea with vending machines. There will be some management you have to do, but, again, it’s one of those hybrid passive income sources.
Plus, it’d be kind of cool to say, “Fun fact: I own a gumball machine.”
7. Design Greeting Cards
We wrote about companies that’ll pay you to write greeting cards — some up to $300.
We also included a bonus site at the end, one where you can design your own greeting card through a site like Card Gnome. It’s basically an Etsy for greeting cards. All you have to do is design the card and put it up for sell.
Each time someone buys your card, you’ll get 5% of the purchase. Once you hit $10, you’ll be able to cash out.
One and done.
8. Create an E-Course
One of Hines’ biggest pieces of advice was to “take whatever you’re doing as a day job, and teach what you know by creating an information product and get money from that.”
For example, this math teacher created an online course on programming, and he made $1 million in under a year.
9. Sell Random Stuff on Sites Like Zazzle
By random, we mean… pretty random
Hines sent me a link to a coffee mug he designed and has for sale on Zazzle. It has a large picture of a Siamese cat’s face. He put it up for sale about a year ago and still receives royalties from it.
If you have art, designs or photos, you can publish them on any kind of product you can think of: invitations, T-shirts, mugs, pillows, phone cases… Then set your own royalty rate (that’s the percentage you’ll rake in from 5% to 99% ), and you’re done.
You won’t have an inventory to handle (no production, no shipping).
10. Get Cash-Back with Credit Cards
You’re already shopping, right? A passive way to earn income is to sign up for credit cards that offer cash, or points, back.
We created a list of cash-back cards that offer sign-up bonuses — and are free of fees.
It’s important to remember is that for this to truly be passive, you’re not spending money for the sake of earning points or cash back; you’re spending it like you normally do.
11. Teachers (or Not): Sell Lesson Plans
This idea is especially useful for teachers who are already frantically cranking out lesson plans. If you find one you’re really digging, put it up for sale on a platform like Teachers Pay Teachers. This helps other teachers across the world as well as gives you some income.
Hines isn’t a teacher, but he wrote up a lesson plan about nutrition a few years back. Because the content is evergreen, teachers are still buying it today. To date, he says he’s made about $1,000.
12. Stick an Ad on Your Car
Do you already drive a lot? If so, consider slapping an ad on the side of your car.
Our contributor Steve Gillman explored the method of income. For example, you could earn $100 a month from a platform like Carvertise with no upfront costs.
You’ll likely have to answer questions about your driving habits, and you’ll have a better chance of getting selected if you live in a bigger city and drive a lot.
If you drive for Uber or other ride-sharing services, this might be perfect for you.
13. Make YouTube Videos
Think you have something that might go viral? Or have expertise in something folks might be interested to learn? Make a YouTube video, and establish a passive income.
Contributor Steven Gillman has done just that. He’s monetized his YouTube videos with Google AdSense. For example, he shot ten videos about ultralight backpacking. No, they didn’t become huge hits, but he has made more than $1,000 over the years.
He outlines how you can start a YouTube channel.
14. Publish an E-book
If you have a way with words, or an intriguing life experience, you could write a book. But there’s no need to send it off to all the major publishing houses in New York City.
You can publish e-books through Amazon’s Kindle Direct Publishing platform. Again, our contributor Steven Gillman did this (because what has he not done?!).
He wrote a book in a week. Note: E-books don’t have be hundreds of pages long. They can be as short as 6,000 words.
After publishing it on Amazon, he started making $350 a month. He outlines exactly how he did it and the best tips and tricks for you.
15. Rent Out Your Car — or Other Stuff You Don’t Use Regularly
Just like renting out your space, this will require some maintenance and upkeep unless you go through a broker, but it can yield some solid passive income.
As mentioned, there are tons of ways to establish a passive income; these are just a few. Just be sure the offer is legitimate. Do your research, and remember that if it’s too good to be true… it probably is.
Carson Kohler (@CarsonKohler) is a junior writer at The Penny Hoarder.