Picture this: making money while binge-watching your favorite TV show – sounds like a dream come true, right? Well, that's the beauty of passive income!
Unlike traditional income, where you trade your time for money, passive income lets you earn cash while catching some Z's. Of course, creating passive income requires some effort upfront and sometimes a financial investment, too. But once it's up and running, it can help you pay off debts, save for retirement, or achieve financial freedom.
So, let's dive into this list of 35 top passive income ideas – it's like having the Infinity Stones to create your own financial superhero strategy!
What Is Passive Income?
Passive income is defined as income that doesn't require much effort to earn. It is a form of income that can help you build wealth even when you're not physically working. There are many different ways to earn passive income. For example, if you invest in mutual funds and your investment portfolio increases in value, your earned money is classified as passive income.
Likewise, if you create something digitally – like a video or a song you get money every time someone views it; that's also passive income.
How Does Passive Income Work?
Since you're busy living your life, you want to build a passive income stream that eventually works while you sleep, play, socialize…whatever you want to be doing with your time.
The good news is that you don't need a pile of cash to set yourself up to earn passive income. If you already have an asset you are not fully utilizing, that can serve as your investment.
For example, if you have money sitting in your local bank account, transferring it to a high-yield savings account with a much higher interest rate is an easy way to earn extra money with very little work.
Passive Income vs. Active Income
No matter how you make money, income falls into one of two categories: active or passive. While you may have heard about these, many people still don't understand the differences.
Simply put, passive income is indirectly obtained, such as interest from savings accounts or stock dividends. Additionally, revenue is procured from rental property, limited partnerships, or other businesses where you invest funds without any added effort.
On the other hand, active income is money you substantially work to earn. If you have a business you actively manage, it falls under this type of income. Your paycheck is one example, along with wages, tips, salaries, and commissions.
Truly Passive Income Ideas
These truly passive income ideas require a one-time investment without additional effort in the future. There's no upkeep, fuss, or muss, and these are some of the most straightforward passive income sources to implement.
1. Alternative Assets
Alternative assets, or alternative investments, are often headline news. Because traditional investments like stocks and real estate are often volatile, and savings accounts only offer low-interest rates, people are looking for other options.
Some popular alternative investments include hedge funds, private equity, crowdfunded real estate investments, commodities like wine, geeky collectibles, and luxury watches. LuxeStreet, for example, offers partial shares of high-end watches at a minimum investment of $10,000.
This luxury watch investment pays 12% per year at the rate of 1% each month. The best part is that your investment is backed by luxury watches owned outright by Luxe Street.
- Alternative investments expose you to unique asset classes, different from everyday stocks, bonds, real estate, etc.
- Alternative investing is a fledgling industry with developing regulations. Consequently, these types of investments may be riskier in terms of losing your money than other highly regulated investments.
2. Buy Certificates of Deposit (CDs)
Investing in certificates of deposit (CDs) offers you an easy and low-stress way to generate passive income. A certificate of deposit is simply an asset offered by banks and credit unions that provide you with an interest payment as long as you agree to make a lump-sum deposit that you won't touch for some time.
When looking for CDs, make sure to shop around as (unlike other asset classes) returns can vary significantly from vendor to vendor. An online bank may offer up to three times higher rates than a traditional brick-and-mortar bank.
- Because of their official nature, CDs are highly secure, and you're unlikely to lose any money by investing in them.
- Sometimes, online banks make certain offers that can boost your returns drastically with CDs.
- The interest rates offered on CDs are usually relatively low, meaning it's hard to create usable cash flow without already having a solid chunk of capital.
- In some years, the interest rates don't beat inflation, meaning CDs can sometimes have a negative “real return.”
3. Invest in REITs
If you're too scared to invest in real estate directly, an excellent alternative to consider is a REIT. REITs are Real Estate Investment Trusts, basically, companies that own and manage real estate.
By buying shares of the Real Estate Investment Trust, you are providing your money for them to use to purchase public and private real estate, and you'll be compensated in the form of high dividends.
- REITs are easy to buy on the public market and offer an easy way to get started in the real estate world.
- Some REITs offer consistently high dividends, meaning you'll have lots of room to compound your growth and earn passive income immediately.
- Just like regular stocks, how much money you make from a REIT depends on the direction of its stock price. If it tumbles, then so too will your earnings.
4. Earn Passive Income With Peer-to-Peer Lending
Unlike a bank loan, a peer-to-peer loan (p2p) is made directly between you and the borrower. These loans are usually facilitated through third-party intermediaries like Funding Circle, Prosper, and LendingClub.
Because the bank doesn't secure these, you can earn a decent interest rate on your money without having to do much at all.
- You can lend on various platforms and slowly narrow down which works best for you over time.
- The interest rates you can earn on peer-to-peer lending are comparable to the stock market's returns (way higher than the interest rates on CDs).
- There is the risk that the borrower you lend to defaults on loan, and you get nothing.
- Since you need to screen new loan opportunities constantly, the income stream still requires some work to maintain and isn't entirely passive.
5. Invest in Dividend Stocks
Dividends are profits paid out to owners of stocks. Some companies pay dividends regularly, which means that dividends can become a dependable source of income if you amass a significant number of shares over time. A great way to build wealth over time is to slowly start buying dividend stocks and reinvest the dividends, compounding your cash flow.
Investors who love dividend-paying stocks will discuss how their investment generates dividend income and appreciation. In other words, they're getting a regular supply of money (from the dividends), and the underlying stock is increasing in value (as the company grows).
Keep in mind that stocks with high dividends still carry risk. Dividend stocks can drop in value like any other stock. However, they are similar to other equities in that they're usually best to buy and hold for a long time. But if you have some extra cash to invest and understand the risk involved, dividend stocks are something to consider.
Perhaps an index fund full of them would be right for you, and just make sure you understand the risks of index fund bubbles.
- Investing in dividend stocks doesn't require work other than the upfront financial investment, making it an extremely passive asset.
- Dividends don't take away from the principal of the investment, meaning you can use the dividends to reinvest into the same stock (or other stocks), giving you more chances at growth.
- Investing in stocks inherently has risks, and using dividend-bearing ones as a passive income idea is no different. When you buy a dividend stock, there is still the chance that the price tumbles to zero and you lose all your money.
- Building real, usable cash flow with dividend stocks requires an immense amount of time and/or capital, to begin with. Because dividends pay so little, dividend stock investing is a long-term strategy (not a “get rich quick” deal).
6. Open a High-Interest Savings Account
Savings accounts are a reliable way to protect money but not increase it. Sadly, brick-and-mortar banks barely pay any interest. Institutions like Wells Fargo, Chase, Bank of America, and others pay around 0.08% interest. So you could have $100,000 in the bank and earn less than $100 per year in interest. That's nothing!
That's why keeping your savings in a high-yield savings account is clutch. The best high-interest banks are online-only, so you won't need to go into the bank to get started. And some pay as much as 0.70% interest per year. You could also look into money market accounts, treasury bonds, or certificates of deposit for low-risk, stable-return investments.
- You can take your money out of the account whenever possible, ensuring liquidity.
- Highly secure as the bank's resources usually back it.
- Interest rates on savings accounts are usually very low.
- Probably won't cut it if you're trying to earn enough passive income to live off.
7. Long-Term Index Fund Investing
Do you believe that the global economy will continue to grow and progress? And do you have 10+ years to invest money and build eventual passive income streams? If so, index investing might be for you.
An index fund is a mutual fund that owns a wide assortment of assets. Some index funds are focused (e.g., an automotive index fund might own all automotive stocks). Other index funds are broad (e.g., a total market index fund might own every store on the stock market).
Either way, the idea of index funds is to lower risk by diversifying their assets and reducing their costs by enacting simple asset ownership rules. Index funds don't look for the needle in the haystack; they just buy it. Over the long run, index investing has proven to be a very successful method of portfolio growth. And if your portfolio is growing, you can skim off some of the profits as passive income.
- Proven method of long-term monetary growth and successful retirement planning.
- Not a short-term passive income solution.
8. Become an “Angel”
Angel investing is a high-risk, high-reward proposition. It gets its name because it answers the question, “Who would invest in a startup company with no track record, customer base, and surefire path to revenue growth?” Answer: only an angel.
Of course, angel investing also provides a path to equity ownership in a company that could be huge one day. Could you imagine buying into companies like Shopify or Uber when they only had a handful of employees?
Small angel investments can grow by 1000x! But, of course, that same investment can just as quickly disappear in six months. Angel investing is a feast-or-famine proposition.
- Immense upside. A hands-off way to help entrepreneurs trying to change the world.
- Can prove to be incredibly lucrative.
- As high risk as anything mentioned in this article.
9. Earn Cashback
Did you know that you can earn money from your everyday spending? For example, if you shop with cashback credit cards or cashback rewards cards, you get a rebate applied to your credit card bill. So if you're spending money, you should get some cash back.
- After opening the card, earning cashback is automatic and requires no additional effort.
- If having a cashback card entices you to purchase unnecessary items, you'll erase any credits received. Even worse, if you overspend, you might be unable to pay the bill each month and incur hefty financing charges.
Semi-Passive Income Ideas
If you're motivated to create additional income outside of your day job and have extra time on your hands, these semi-passive ideas can help you generate cash.
10. Own Rental Properties
Robert Kiyosaki's favorite passive income stream, real estate investing, is a popular way to build long-term wealth while also providing you with cash flow. As one of the best forms of passive income, rental income offers you the ability to take advantage of appreciation and cash flow.
If you can find an excellent rental property to buy, it could start paying for your bills on day one and continue to benefit your family for generations to come.
- Because of leverage (taking out a mortgage for the property), the returns on the appreciation of the rental property are amplified.
- Depending on how good of a deal you get, you can buy rental property and earn significant cash flow right from the get-go.
- Due to the leveraged nature of real estate, when an investment goes wrong, it can seriously damage your financial health (potentially even bankrupt you).
- Though real estate seems passive on the surface, much work actually goes into managing rental properties.
11. Rent Your Apartment or House
Utilizing real estate is a great way to turn your property into rental income. Airbnb and similar services have revolutionized where people stay when they travel. And it has opened up serious passive income doors.
Unsure how much money you can make? Simply log on to a site and check out what your market looks like. Granted, you've still got to ask yourself: is this money worth the effort?
Being an Airbnb host isn't truly passive. Sure, you already have the house or apartment. But you still have to act as part landlord, part maid, and maybe even cook your guest some meals. That's work.
Also, you must ensure that you are legally allowed to run an Airbnb from your property. Some cities, neighborhood associations, and homeowner groups forbid it. But if it is legal, and you are excited about meeting new people and making some solid side cash, then Airbnb hosting may be a good option.
- You have lots of control over various factors when you rent with Airbnb.
- If you have a house (or space to rent out), you can earn a decent income immediately.
- It can take some time and energy to get your living space “rent-ready.”
- Though you don't need to suffer the hassle of long-term tenants, that means constantly trying to rent out your space (adding an active element to the investment).
12. Rent Out an Extra Bedroom
Do you have a spare bedroom you're not using? Consider renting it out for extra income. It could mean hundreds of extra dollars in your account each month, but it also means having someone else living in your home. That's not for everyone.
Make sure you both sign a formal rental agreement stating all the rules of the house and the contract, including who pays for utilities and rules about guests, cleaning, and sharing the refrigerator.
- Turn an unused resource in your home into an income source. And hey, maybe make a new friend!
- Another person is living in your house (including your kitchen and bathroom.) Even if they're a saint, having a housemate can be challenging.
13. Rent Extra Land
Perhaps the idea of hosting someone inside your house isn't for you. But how about hosting someone on your property by renting your extra land? There is a tiny home bonanza sweeping the country right now. People are choosing to live in tiny homes and embrace a minimalist lifestyle.
But unfortunately, a lot of those people can't find any place to put their tiny homes. If you have some land, this creates an opportunity to rent out space on your lot. You're making the most of a resource you aren't using and giving someone else a place to live. Win-win.
You'll want to ensure you don't violate any laws or codes in your city or state.
- Compared to other ways you can share your real estate, this is pretty hands-off.
- Adding new buildings to your property can be a significant headache due to local laws and zoning codes. Do your research before pursuing this avenue.
14. Renting Your Car
Companies like Turo and GetAround make it easier than ever to rent out your car when you aren't using it. Of course, renting out your car will mean additional wear and tear on your vehicle, so your repair bills might increase.
But users have said it's well worth it for the checks coming in the mail. This could be the perfect way to generate some passive income if you have a second car sitting around or no longer use your vehicle daily. Be sure to check with your insurance company to determine coverage.
- A car is one of the worst investments you can make. But renting it out makes that investment better.
- More miles = more repairs. And what if the car renter spills their burrito all over your nice clean seats?
15. Advertise on Your Car
Advertising on your car is one of the easiest passive income ideas to make some extra money. You can sign up with companies like Wrapify or Carvertise which will then match you with brands looking for people to advertise their products or services.
Once you're matched with a brand, you'll be given specific instructions on how to apply the wrap to your car. Once the wrap is applied, you'll earn money for every mile you drive. The amount of money you make will depend on the brand you represent and the campaign length.
16. Get Paid for Referrals
Companies like Rakuten (formerly eBates) have existing referral programs that pay out cash for every friend you register. This is a low-effort way to make money if you have many friends or social media followers. You must set up an account on Rakuten's website or download the free mobile app.
Next, navigate to your account settings and click on “refer” to get a link to send your friends. To find other programs like this, it's super simple. Nearly any company that delivers food or other products has similar programs.
- Many people want to save money when possible.
- You don't want to be known as the “let me sign you up with my referral code” guy. There's a fine line between passive income and alienating the people in your life.
17. Make Money Playing Video Games
Did you know you can earn money playing games? If you're already playing games in your free time, you can earn some extra cash while having fun. For example, Mistplay is an excellent app that lets you make money playing video games.
- You'll be making money for something you're already doing.
- Fits nicely into the margins of your day: waiting in the school pickup line, sitting at soccer practice, or on your lunch break.
- You might be tempted to spend more hours playing video games than usual.
18. Try Affiliate Marketing
Affiliate marketing pays you fees for referring new customers to brands. For example, suppose you own a website that compares prices (e.g., Kayak.com). In that case, you can show price comparisons to your customer and then earn commissions for referring those customers to eventual purchases.
In addition, if you have a large social media following, you could earn a percentage of the purchases made by your followers. This type of investment can be passive if it's already generating revenue with very little hands-on involvement.
- Once the ball is rolling, you can quickly make a lot of money.
- Creating a website or gaining a large social media following can be challenging.
19. Start a Blog
Do you have a passion for a subject? Perhaps you have a specific niche that you're an expert in? If so, starting a blog could be a great way to build an online asset while providing you with cash flow.
In the beginning, you'll need to devote lots of time and energy to it to build up a sizable audience, but once you have many readers, you can monetize and start earning all those costs back.
- A blog is low cost and affords you many work-from-home opportunities that a 9-5 job otherwise doesn't.
- The growth of online entities is usually exponential, so you can expect to see an explosion of growth if you're successful.
- A blog takes lots of time and effort to succeed. In the first few years, expect not to make any money (or even be out of pocket a couple of hundred dollars) before you start generating some cash flow.
20. Start a YouTube Channel
Do you have a message to share with the world? Something unique to teach people? A bent for videography? A personality that people want to watch? You can earn a significant passive income from advertising revenue if you gather a following on YouTube.
- It's free to set up and a proven way to make real money.
- You must have 1,000 subscribers and 4,000 hours of watch time on your channel to qualify for monetization.
- You'll have to build a following and be willing to develop videos without immediate results.
21. Create a Print-on-Demand Online Store
Do you have a graphic design touch? Create some iconic designs and sell them in an online store. Then, your customers can download the designs they enjoy and print them independently.
Alternatively, you could outsource the printing to a third party. E.g., a customer orders one of your t-shirts, and a third-party print shop makes the t-shirt and sends it to the customer. You've got to do some work upfront, making the art and researching what kinds of designs customers buy today.
But if you're up for it, you can create a steady passive income stream from print-on-demand graphic designs.
- A creative outlet that can lead to stable passive income. Possible to outsource nearly all of the sustaining work.
- It's possible to create a whole portfolio of graphic design that nobody wants, and you've got to make something desirable.
You've probably heard of dropshipping before but may not know precisely what it is or how it works. Dropshipping is a business model in which e-commerce entrepreneurs sell products without carrying any inventory.
When a store owner receives an order from a customer, they contact the supplier, who will ship the products directly to the customer's doorstep. Dropshippers never have to worry about storing or shipping products themselves.
In addition to being a hands-off way to run an e-commerce business, dropshipping also offers the potential for huge profits. Because there are no inventory costs, drop shippers can offer their customers competitive prices and make a healthy profit margin.
23. Create an App
Are you a programmer? If you have a decent understanding of math and logic, you can quickly teach yourself various app coding languages and start creating your own smartphone apps.
Do you remember Flappy Bird? In 2013, this simple single-player smartphone game took the world by storm, garnering millions of downloads. In addition, the app developer claimed to be making $50,000 a day from in-app advertising.
Flappy Bird struck gold, but if you took a month to create an app and then made $20 per day for the next five years, that'd be close to $30,000 in passive income.
- Everybody has a smartphone, so your potential audience is enormous.
- The app stores are flooded, so whatever you make has to be excellent and desirable.
24. Start an E-commerce Store
Nowadays, you can sell anything as long as you have the internet and a determination to succeed. Find your area of expertise and connect with suppliers to sell your products.
The best part? You never need to see the products or ship them yourself. You can hire a drop shipping company to handle all the logistics for you (and make your venture even more passive).
- There is an extremely low barrier of entry for selling things online. Many producers take an existing product, jazz it up, and resell it for a profit. You don't need to become a social media influencer to sell stuff online profitably.
- There are tons of suppliers out there to fulfill your needs. If you have an idea, you don't need to worry about not having the resources to see it through.
- With so many vendors on the internet, it can sometimes be hard to differentiate yourself. You must ensure your product brings actual value to your customers if you want a consistent income.
Passive Side Hustles
These passive side hustles require a steady but low effort to execute. If you need money now, these options are easy to get off the ground. While they aren't entirely passive, they still can provide an additional income without requiring you to work all weekend.
25. Flip Products on eBay
You may know a particular product better than anyone else. It could be game consoles or cell phones, and for others, it's makeup, shoes, or handbags. The point is: you might be an expert and not even realize it. You could earn a significant side income by learning to buy and sell that product for a profit on eBay.
The learning curve may be steep at first. However, once you get the hang of selling on eBay, you can regularly churn out additional income. This is frequently called “flipping.”
- There's a lot of pure profit to be made as long as you know what you're doing.
- Dealing with anonymous parties can be challenging, and eBay typically sides with the buyer over the seller. So, if you're selling for profit, you can quickly get burned.
26. Use Your Washing Machine
If you have a washing machine and dryer, you can make money. Sound crazy? Several companies bill themselves as Uber for Laundry, which is pretty simple. You sign up, pick up clothes from people near you, and wash them.
Once you deliver their laundry, you'll get paid. It's that simple.
- Turn an unused resource in your home into an income source. You don't need incredible skills to wash people's clothes.
- Everyone has a different definition of “dirty laundry.” Do you want to test yours?
27. Become a Tutor
The more the world changes, the more people need new skills. If you have a specific skill set in language, math, computer science, or any other areas, you may be able to find clients to pay you to teach them. With all the new technology available, you can even tutor kids in China and make money in your Texas apartment.
Check out companies like VIPKid for online tutoring jobs. You can make much more than minimum wage by working around your regular schedule before or after work, during the summer break, or on weekends.
- You have a lifetime of knowledge. Someone out there is probably looking to learn what you already know.
- Teaching can be challenging, and your students will expect results. How will you react when you've explained something ten times, and they say, “I still don't get it”?
28. Become a Collectibles Expert
What do stamps, Beanie Babies, and Pokémon cards have in common? First, they are all niche collectibles with small but thriving markets. Second, you can do a few hours of homework on a particular collectible and immediately become more knowledgeable than 99% of the population.
And that knowledge is power. People are selling their old “junk” daily for pennies on the dollar. If you develop the skills to recognize treasure from trash, you can turn their pennies into your dollars.
The world of collectibles is incredibly diverse, ranging from old arrowheads to Christmas ornaments to classic books. But where there's a paying customer, there's an opportunity to earn semi-passive income.
- Niche markets where large differences in knowledge can lead to significant profit margins.
- An incredibly diverse range of products and a real risk of getting fooled by counterfeits (a.k.a. losing money).
29. Give Lessons
Are you a highly-trained athlete or artist? Do you have demonstrable skills, competitive experience, or professional licensure? Then, you could make a significant side hustle income by giving lessons.
The biggest customers? Parents and their kids. There's a huge demand from parents who want their children to have good golf swings, pleasant singing voices, and the ability to speak in public.
And you don't need to be a professional opera singer or a world-traveling tennis player; all you need is enough skill so that the parents and their children respect your expertise. Many former DIII athletes and local art teachers make $50-$100 per hour by giving lessons in their expertise fields.
- Lots of potential clients, high demand for your skills.
- While the effort to acquire your skills is a passive sunk cost, the effort to give the lessons is quite active.
Residual Income Ideas
One type of residual income is a payment to an actor or writer for each rerun after an initial TV season. Don't worry. You don't have to be a celebrity to take advantage of this income stream.
30. Collect Royalties
Let's say you wrote a book. It could be an eBook (e.g., via Amazon's Kindle direct publishing) or a traditional book published in print. If you self-publish, almost all the money from sales of that book goes straight to you–even years later. If you use a publisher, they pay you an upfront fee for the work.
Once they recover that fee from sales, any additional income you receive (net of the publisher's cut) is residual income. You did the work once, yet all sales proceeds will provide you with residual income.
- A steady income stream from now until you die.
- You've got to write an excellent book (or make a good movie, show, etc.). It takes skill and hard work.
31. Product Sales
Not the writing type? That's fine. Let's say you're a widget salesperson. You sell the widget for a set price. Part of the sale is for ongoing service.
The purchaser pays a monthly (or other) ongoing fee for your company to service the widget. The company receives the money, the service department handles the continuing service, and you get a piece of the ongoing fee from the service contract – that's residual income.
Salespeople get an upfront commission for the initial product sale in the insurance world. For example, the deal might be life insurance, property, casualty, or health coverage. After the original commission gets paid, the salesperson receives an ongoing residual income from the initial sale as long as the customer pays the premiums.
Service usually comes from the client services team, not the selling agent.
- There's a very high ceiling. Sales commissions and residual income frequently have no upper limits.
- Being in sales is tough, and your failures are apparent and right in your face.
32. Sell Stock Photos
Do you have a knack for photography? Are people always impressed by the pictures that you take? If so, you could potentially make a killing selling stock photos.
You can either go through organizations like Shutterstock, Alamy, and Getty Images or decide to sell your photos online (through your social media or your blog). You get to keep all the profits when you sell your photos. With more prominent organizations, you get some money every time someone purchases your photo, and the organization gets a cut, too.
You can take photos of almost anything: newsworthy events, landscape photos, or even your feet.
- If you're good at marketing, you could scale your work over time and earn exponentially more as you grow. You can even take the same photograph and sell it thousands of times.
- If photography is your passion, you can have fun while building your portfolio and your passive income over time.
- Photography is a highly hit-or-miss industry. In other words, you can produce hundreds of photos and have only one or two generate meaningful sales. Maintaining motivation with this kind of business model can sometimes be challenging.
33. Create and Sell an Online Course
Do you have a specific skill that's highly sought after? Are you comfortable sharing this skill with the world? If so, you might consider creating a course and using it to make money online.
You can do this through sites like Coursera, Udemy, Skillshare, or your blog/podcast. Another alternative is to run a freemium model, making specific lessons/content accessible but then charging for more advanced topics.
- With an online course, you put in all the work upfront, then (ideally) sit back and reap the rewards of your labor.
- The best side hustles are borne out of passion. Creating courses for them can feel gratifying and fun if you're genuinely interested in specific topics.
- There's a lot of competition out there for online courses. Your course must be excellent for you to have a shot at generating usable passive income from it.
34. MLM Marketing
MLM is a multi-level marketing program with residual income aspects for those unfamiliar. In MLM programs, participants are encouraged to sell a company's products. Of course, the participants get paid for that.
But big money typically comes from recruiting others to sell those products under your account. Every person you recruit pays a percentage of their sales to you, as does every person they recruit. So you encourage those folks to recruit others, etc.
The idea is to build a sales empire – sometimes shaped like a pyramid where many people are at the bottom and fewer people at the top. People at the top of this food chain earn residual income via the people underneath them in their “line.”
This is because the folks at the top aren't selling themselves yet, making income from those underneath them.
- Turn your entrepreneurial spirit into passive income.
- MLMs are very controversial.
- Don't get trapped by purchasing many products upfront, and don't alienate your friends and family.
Passive Small Business Ideas
Small business owners will tell you that being an entrepreneur is hard work, and there's always something to do. Very few business owners would classify their income as passive, and it's the opposite of passive because you are actively involved!
But some small businesses can, essentially, operate on their own, with enough systems set in place.
35. Car Wash
Most modern car washes fall into two camps: they are either self-serve or fully automated. The car owner either gets out and washes the car or drives up to a conveyor belt that sucks them through a tunnel of bubbles.
There are likely very few employees and a small amount of upkeep in either case. All you have to do is ensure the soap is fully stocked and the water is running. Sounds like the perfect job for a teenage part-time worker.
- Car washes provide a steady income with little effort from the owner.
- Good help is hard to find, and you'll be relying on employees to run your business.
36. Storage Rentals
People love stuff. And the more stuff they collect, the more likely they will pay a third party to store it. And that third party could be you! A storage rental facility requires some significant overhead upfront and little maintenance, especially if it's not air-conditioned.
- Fewer maintenance issues than an apartment or home rental.
- Like any small business, you'll need to oversee it and the employees.
Lastly, the laundromat is another excellent “hands-off” small business that could earn you passive income. Perhaps you're underwhelmed since you'll only be collecting profits of $2.25 at a time.
But it's one of the few businesses where the customers do all the work themselves! Dozens, if not hundreds, of customers, might use your laundromat on a typical day.
- Very high potential for long-term passive income, with a small amount of active work as a business owner.
- You'll need to rent a physical space and spend capital to buy and maintain the necessary machines.
38. Become a Franchisee
What if you could open a business with worldwide recognition from Day one? That's what you can do by becoming a franchisee. The most common example of this occurs with popular fast-food chains like McDonald's or Burger King.
Most individual fast-food restaurants are not owned and operated by the leading corporation but are owned and operated by a local small business owner, a.k.a. the franchisee. This person might pay rent or licensing fees to the main corporation, but they keep most of the restaurant's profits.
If you want to turn this idea passive, hire good employees to manage the franchise for you. They deal with the day-to-day operations; they deal with the headaches. You collect the profits.
- An established business model with a very high ceiling (e.g., multiple locations at high profit margins).
- Requires high initial cost and can quickly become non-passive if you have difficulty “letting go” of your involvement.
39. Buy ATMs
Where do those fees go when you use an ATM? Answer: straight to the ATM owner's pockets. And those pockets could be yours. If you find a good location for an ATM, you can make significant amounts of passive income.
The key is finding an under-utilized area with a high density of people needing cash. Much like the laundromat or car wash, it might feel like earning 2 dollar ATM fees is a slow path to wealth. But it's incredibly hands-off, and the customers do all the “work” themselves.
- Very hands-off. Good business model as long as people need money (and they always do).
- Requires a great location. And your business involves an unguarded box full of cash, and that's risky.
40. Vending Machines
Did you know that individuals can own vending machines? There are machines available on the resale market and small vending businesses for those looking to retire. So, if you have an idea for a high-traffic area needing convenient food and drink options, you can start your own business.
- Requires minimal time each week for restocking.
- Location is vital, and you might try a few duds before you find the perfect spot.
The Bottom Line
Remember, generating passive income requires creativity and initial work to set things up. You've got to consider the value of time.
But if you can take time to learn something you think you'd be good at, you can start making money outside a traditional day job. So take an intriguing idea, do your homework, and try it. You'll be on your way to building an income stream for yourself in no time.