Passive income has become a buzzword, and a concept that many believe is simply “too good to be true.” But the reality is, there are opportunities to generate passive income no matter who you are or how much experience you have—the only catch is that most passive income sources aren’t truly passive.
That said, if you’re willing to put in the initial research and effort, you can capitalize on multiple sources of passive income simultaneously, helping you build wealth and hopefully, retire early.
What Is Passive Income?
Let’s start with a briefer on passive income. Passive income is, hypothetically, income that doesn’t require an ongoing expenditure of effort. Rather than being paid per hour or in the form of a recurring salary, you can sit back and collect passive income without doing anything.
Of course, this is a bit of a misnomer. In most cases, you’ll need to do a lot of upfront work to make your passive income “engine” successful. In other cases, you’ll need to have some capital to start.
Passive income is advantageous because it can be generated while you’re maintaining a traditional career and making a primary source of income. If you no longer want to work, it can also fund your retirement. And because the ongoing time requirements are minimal, you can stack multiple passive income streams on top of each other to multiply your revenue.
Passive Income Sources
These are some of the best sources of passive income you can find:
1. Rental property. One of your best options is to invest in a rental property. Tenants who occupy your property will pay you rent on a regular basis, covering the expenses of maintaining the property, plus a little extra. You’ll need to invest some time into finding the right property, and you’ll also be responsible for conducting repairs and maintenance periodically—but you can always hire a property management company to take care of those responsibilities on your behalf, and make this income source truly passive.
2. A rented room or sublease. In a similar vein, you could try to rent a room of your house, or sublease your apartment. Peer-to-peer vacation rental markets are booming thanks to apps like Airbnb, and you can probably set up your property for a renter within a few hours. It’s a convenient way to supplement your income and/or offset the costs of living in your home.
3. Dividend stocks. Stocks represent shares of ownership in corporations that are publicly traded. Buying a share of stock means you’ll literally own a fraction of the company you chose. To reward investors, many companies issue periodic distributions of profit, or “dividends.” If you invest in stocks known for consistent dividends, you can come to expect a quarterly payout based on the amount of stock you hold, oftentimes 2 to 4 percent of your total held value.
4. Peer lending. Peer lending is a relatively new concept that allows people to make their cash available to others. Just like a traditional loan, people can borrow the money you make available, and pay you back with interest. You’ll get a higher interest rate for higher-risk borrowers.
5. A popular blog. If you have a popular blog, there are many ways you can monetize it. For example, you can host sponsored affiliate links, and reap a portion of the proceeds whenever someone makes a purchase after following the link. You can even advertise directly, if you don’t mind ads on your site. Alternatively, you can sell “premium content” like a book or an online education series. In any case, the real hurdle here is making your blog popular in the first place.
6. A popular YouTube channel. Similarly, you can monetize a popular YouTube channel, earning money through advertising based on the number of viewers you have. Again, the biggest hurdle is getting popular initially.
7. Content royalties. If you produce content regularly, like stock photos, you may be able to earn content royalties whenever someone uses it in a live context. This is also true if you happen to star in a sitcom that runs in syndication—though this is a less accessible option for most people.
8. Advertising on your car. If you have a car, you may be able to sell advertising space on it. The usual catch here is that you have to drive a lot to make it worth it.
If you need help generating the initial capital for some of these methods, consider reevaluating your current budget. Are you spending more than necessary in certain areas? Are you able to downsize your lifestyle by moving to a cheaper area? If not, consider picking up a side gig temporarily; once you have a few thousand dollars to spare, you’ll have a much wider range of passive income options available to you.