Passive income is defined as money being earned on a regular basis with little or no active effort or input from the person receiving it.
Active income on the other hand usually involves performing a service and sometimes involves having to travel to complete the work.
Because passive income once it is set up requires no work as such, it is highly scalable and can be very lucrative, unlike active work that requires labour and a physical presence that is limited by hours, days and weeks, etc.
So, on the face of it, building a passive income seems to be the perfect way to make money and enjoy your free time. However, it should be noted that to acquire a passive income stream in the first instance, can involve a lot of work or expense to create.
There are many ways to create a passive income, below we list just 10 examples.
10 Passive Income Ideas:
1. Rent out a room or a property
If you have a spare room in your home, you could rent that out either privately or using a service like Airbnb.
If you are fortunate enough to own another property, then you could look at renting that out on a long term basis. This could be to a single tenant, as an HMO (house in multiple occupation), or as student accommodation.
If you do not own another property, but like the idea of being a landlord to make money, then you could look at the buy to let investment option. The idea being, the rental income will be sufficient enough to cover any maintenance, loans, or mortgages on the property and leave some revenue over as an income. The value of the property should also increase over the course of time, giving you another passive income stream.
2. Rent out a vehicle
Many people are unaware of the fact that they can rent out their cars or other types of vehicles. This is particularly lucrative with regards to motorhomes, camper vans and other recreational vehicles (RVs). Look for companies that will manage this for you or websites that allow you to advertise your vehicle independently. Always ensure you have the correct insurance cover in place first before you rent out your vehicle.
3. Write a book or an eBook
If you have the skills to do it, writing books and guides and publishing them can guarantee an ongoing passive income. If you are not good with words, you can hire someone to do it for you.
4. Refinance your mortgage or debts
Interest rates are extremely low at the moment. Now could be a good time to refinance your mortgage and any debts with a lower interest rate. So, even if this isn’t classed as a type of passive income, it serves the same purpose. There will be less money going out from your bank account and you can invest the difference into something that will make you another income.
5. Cover debt
One investment that you can make with the money you saved on your mortgage payments is to pay off debt. No matter how little debt you have or how good your credit score is, it has the same effect on your finances, it removes money from your bank account. Paying off credit cards and loans sooner will save you months or years of interest that can be put to better uses.
6. Invest in a company
This is the type of passive income for which you will have to risk putting some money into initially. There are many startups that require investors, often termed Peer-to-peer lending (P2P), crowd-funding or angel investor, these sometimes small initial investments can pay off big time if the initial start-up company goes on to be very successful (Facebook for example).
As mentioned above, you can start by investing in small businesses with low amounts of money. This will keep you safe from massive loss and if you research the market properly, it will bring you a constant passive income.
7. Invest into dividend paying stocks
Investing in dividend paying stocks can be seen as a fairly passive way to receive an income. Before investing in the market, you will need to conduct a great deal of research to establish which stocks and funds you want to put your money into. Get it right and the returns can be very substantial, get it wrong however and you stand to lose everything.
8. Open up a business
This may sound like a lot of work and not very passive at all, but you can open a business and pay other people to run it for you. This is how most successful entrepreneurs work, they own multiple companies and businesses, but don’t take part in any of the day to day running of them.
It does take a bit of work at first because you will need to find the right people to run it. After you have everything figured out, you will be able to enjoy the passive income and the fact that you just created jobs for others.
9. Create a website
The internet is crowded with a lot of information and you might feel like no one will read your website. However, there are many ways to make money online. Creating a niche website, especially one on a subject that you know a lot about or are passionate about, can be a very enjoyable way to create a passive income.
There will be quite a bit of work involved and some costs initially. You will need a website building and a hosting account, then you need content creating and adding for the website to rank on Google and other search engines. All of this can be outsourced though, this will obviously increase your initial start-up costs, however, a well designed good looking and fast loading website with good quality content on it will pay for itself in the long term.
There are many ways to monetise a website or blog. You can use your website to promote products via affiliate marketing links and to sell banner advertising space, either directly or through a program like Google Adsense. These are just two ways you can create an income online.
10. Create a YouTube Channel
Making videos and posting them on YouTube, can be monetised much like a website. You can place ads and banners on your videos and place affiliate links in the video description that will make you an income. If you build a large following on Youtube (and many do) the income obtainable can be very substantial. Like with a website, once you have created the content and posted it online, that content will stay there pretty much forever and a day, creating a long term passive income for you.
Becoming financially secure may involve having more than one source of passive income. You can use a few of the ideas above to build several passive income streams and ensure you have a constant cash flow.
However, it should be noted that you will need to invest one of two things or even both initially to get that passive income started: Time or Money.
Sometimes, the best option is to invest both. For example, you can start by creating a business, website, or YouTube channel and then, when managing it takes too much time, you can pay someone else to do it for you.