This Passive income ideas article will help you find out the best ways to generate money and build your own business.
What is passive income?
Passive income includes regular earnings from a source other than an employer’s salary or wages. Passive income can come from either; rental property or a business in which one does not actively and constantly participate.
Many people think that passive income is about getting something for nothing but it is the other way round (invest and get something from something you called nothing). “It has a ‘get-rich-quick’ appeal… but in the end, it still involves work. You just give the work upfront.”
But if you’re committed to the strategy of passive income and not to the work upfront, it can be a great way to generate income and you’ll create some extra financial security for yourself along the way.
Passive income can be of a great importance in ways like;
1. To generate extra cash flow, whether you have a great source of income or not.
2. Passive income can help you to be financially stable during good and bad times or if you suddenly become unemployed or maybe if you’re on leave or you voluntarily take some time away from work.
3. With passive income you can have money coming in even as you save up your salary from your primary job. Either way, a passive income gives you extra income security.
4. Passive income can ease your worries of not being able to save enough of your earnings to achieve your retirement goals since you can build wealth through passive income making it your strategy.
Passive income ideas:
- Sell photography online
- Sell designs online
- Rental income
- Create an app
- Rent out useful household items
- Create a course
- Create a blog or You-tube channel
- Write an E-book
- Peer to peer lending
Passive income ideas for building wealth
If you’re thinking about creating a passive income stream, check out these strategies and learn what it takes to be successful with them.
1. Sell photography online
Selling photography online sometimes might not be the most obvious place to set up a passive business, but it could allow you to scale your efforts, especially if you can sell the same photos countless times. To do that, you might work with an organization such as Getty Images, etc.
How it works;
To get started, you’ll have to be approved by the platform (i.e. Getty Images), and then you make sure your photos are licensed before being used by anyone who downloads them. The platform then pays you every time someone uses your photo.
Furthermore, you’ll need photos that are attractive to a specific audience or a photo about a certain scene, and you’ll need to discover where the demand lies. Photos could be;
- Shots of models
- Creative scenarios and more
- They could capture real events that might make the news.
Moreover, selling and licensing photography online through platforms like Getty Images can potentially scale your efforts. You could potentially sell the same image hundreds or thousands of times or more especially if you can provide pictures that will be of high demand frequently.
You could add hundreds of photos to a platform such as Getty Images and not have any of them really generate meaningful sales. Only a few photos may drive all of your revenue, so you have to keep adding photos as you search for that needle in the haystack.
2. Sell designs online
If you have good designing skills, you may be able to turn those skills into a money-maker by selling items with your printed designs on them. Businesses such as CafePress allow you to sell items such as T-shirts, hats, mugs, and more with your own designs.
How it works;
You can start with your own designs and see what the market is interested in, and expand from there. You may be able to capitalize on the surging interest in a current event and design an item that captures the spirit of the times.
Hence, printing partners allow you to ship items without investing directly in the merchandise yourself, avoiding one of the biggest risks of tying up your capital. You might be able to get better pricing if you invest in some of the inventory yourself.
3. Rental income
An effective way to earn passive income is through investing in rental properties. But it often requires more work than people expect.
If you don’t spend time learning how to make it a profitable venture, you could lose your investment, whereas if you the strategies that can yield profit then you can afford a comfortable retirement.
For a good passive income earning from rental properties, you must determine the three things below;
- How much profit you are expecting from the investment
- Total costs and expenses of the property
- The financial risks attached to owning the property
For instance, if your goal is to earn $20,000 a year in rental cash flow and the property has a monthly mortgage of $4,000 and costs another $600 a month for taxes and other expenses, you’d have to charge $6,266 in monthly rent to reach your goal.
Risks attached to the rental property;
There are a few risks attached to rental property and a few questions to consider:
- Is there a market for your property?
- What if you get a tenant who pays late or damages the property?
- What if you’re unable to rent out your property?
Any of these factors could put a big dent in your passive income.
Finally, economic downturns can pose challenges, too. You may suddenly have tenants who can no longer afford to pay their rent, while you may still have a mortgage of your own to pay. Or you may not be able to rent the home out for as much as you could before, as incomes decline. And home prices have been rising quickly of late due in part to low mortgage rates, so your rents may not be able to cover your expenses. You’ll want to weigh these risks and have contingency plans in place to protect yourself.
4. Create an app
Creating an app could be a way to make that leading investment of time and then reap the reward afterward. Your app might be a game or one that helps mobile users perform some hard task or one that can educate its users. Once your app is made public, users download it and then you can generate income.
An app has a huge favorable aspect if you can design something that catches the attention of your audience. You’ll have to consider how best to generate sales from your app. For instance, you might run in-app ads or otherwise have users pay a nominal fee for downloading the app.
If your app gains popularity or you receive feedback, you’ll likely need to add incremental features (i.e.; Update the features of the app) to keep the app relevant and popular.
- The popularity of apps can be short-lived, too, meaning your cash flow could dry up a lot faster than you expect.
- The biggest risk here is probably that you use your time unprofitably. If you commit little or no money to the project (or money that you would have spent anyway, for example, on hardware), you have little financial downside here.
You’ll also want to make sure that if your app collects any data that it’s in compliance with privacy laws, which differ across the globe that way you can secure a passive income that can last.
5. Rent out useful household items
Start even smaller with household items that people may need but that may be collecting dust in your house like; Power tools, Mechanics tools, Toolbox, and Tents or large coolers.
Look for high-value items that people need for a short period of time and where it does not make sense for someone to own the item. Then map out a way for clients to discover your inventory and a way for them to pay for it.
You can start small here. And then scale up if there’s interest in a particular area. Then ask yourself this question; Do people suddenly want a tent for weekend camping when the weather gets warmer or cooler?.
Figure out the answer to the question which might as well lead you in figuring out where the demand is, and then you could even go buy the item, rather than having it right on hand. In some cases, you might be able to gain the value of money you invested in the item after a few use.
There’s always the possibility that your property is damaged or stolen, but you can reduce the risk with contracts that allow you to replace the item at the client’s expense.
If you start small here, you’re not exposed much to risk, especially if you already have the item and you’re not likely to need it in the near future.
Pay particular attention to liability issues, especially if you’re renting out equipment that has the potential to be dangerous (e.g. Power tools).
6. Create a course
One popular strategy for passive income is creating an audio or video course then kicking back while cash rolls in from the sale of your product. You can distribute and sell your courses through sites such as Coursera, SkillShare, etc.
Or you can go for an alternative way, where you will be offering basic content of your course for free and then charging for more detailed information and more features for those who want to know more (This alternative way is known as “Freemium”). For example, language teachers may use this model. The free content acts as a demonstration of your expertise and may attract those looking to go to the next level.
A course can deliver an excellent income stream because you make money easily after the initial outlay of time.
Creating a course takes a massive amount of effort, and to make good money from it, it has to be great. There’s no room for trash out there.
You must build a strong platform for the course, market it and plan for more courses if you want to be successful.
Once you master the business model, you can generate a good income stream.
7. Create a blog or YouTube channel
Do you have a passion for traveling? Take your passion for a subject and turn it into a blog or a YouTube channel, using ads or sponsors to generate your income.
Find a popular subject you’re quite familiar with and become an expert on it. At first, you’ll have to build out a suite of content and draw an audience, but it can create a steady income stream over time, as you become known for your engaging content.
You can leverage a free (or very low cost) platform, then use your great content to build a group of followers. The more unique your voice is or area of interest, the better for you to become a person to follow. Then you can draw sponsors to your blog or channel.
Some concepts to know;
- You’ll have to build out content at the start and then create ongoing content, which can last for a long time.
- And you’ll need to be really passionate about the product, since that can help you maintain the motivation to continue, especially at the start as your followers are still finding you.
8. Write an E-book
Writing an E-book can be a good opportunity to take advantage of the low cost of publishing and even leverage the worldwide distribution of Amazon to get your book seen by potentially millions who might be your buyers. E-books can be relatively short, perhaps 20-60 pages, and can be relatively cheap to create, since they rely on your own expertise.
You’ll need to be an expert on a specific topic, but use some special skills or abilities that very few offers but many readers need. You can quickly design the book on an online platform and then even test different titles and price points while marketing it.
But just like with creating a course, a lot of value comes when you add more E-books to the mix, drawing in more customers to your content.
An E-book can function not only to deliver good information and value to readers but also as a way to drive traffic to your other offerings, including;
- Audio or video courses
- Other E-books
- Your website or potentially higher value seminars.
Your e-book has to be very strong to build up a group of followers and then it helps if you have some way to market it, too, such as an existing website, promotion on other relevant websites, appearances in the media, or podcasts or something else.
And while an e-book is nice, it will help if you write more and then even build a business around the book or make the book just one part of your business that strengthens the other parts.
Passive income ideas for beginners
- High-yield savings account: A high-yield savings account can be an easy way to get an extra boost on your savings beyond what you’d receive in a typical checking or savings account. It won’t be much, but it’s a simple way to get started with passive income.
- Certificates of deposit (CD): They are another way to generate some passive income, but your money will be tied up more than it would be in a high-yield savings account.
- Real estate investment trusts (REIT): They are also another way to invest in real estate without having to put in all the effort that comes with managing properties. They typically pay out the majority of their income in dividends, making them an attractive option for investors looking for passive income.
How you can minimize your taxes on passive income
A passive income can be a great strategy for generating side income, but you’ll also generate a tax liability for your effort. But you can reduce the tax bite and prepare for your future, too, by setting yourself up as a business and creating a retirement account.
You can minimize your taxes by;
- Registering with the IRS and receiving a tax identification number for your business.
- Then contact a broker who can open a self-employed retirement account.
- Determining which kind of retirement account might work best for your needs.