Passive income is a regular cash flow that requires little or no daily effort to maintain. Passive income is considered unearned income by the IRS because it doesn’t come from active employment. Examples include investment income or rental property income.
This is the opposite of active or earned income, which is generally defined as income received from working at a job or as a contractor. That’s not to say passive income is easy money — in fact, the opposite can be true. Most ways to generate passive income require an upfront investment of either money, time or both; the income part comes later (in some cases, much later). But once you’ve made that initial investment, passive income can pay off for years to come.
You can earn passive income through investing in certain financial assets or by starting businesses that, after an initial investment, start to generate income without regular work. The taxes you’ll pay on passive income may vary depending on the source of the money, so make sure you keep careful records of your earnings.
Make financial investments
Financial investments include a range of options, such as investing in the stock market, mutual funds, bonds, and peer lending, and they require minor follow-up work as they accrue interest. Work with a financial advisor to figure out the best investment options for you.
Own a rental property
Rental income can be a steady way to earn extra money, but, whether you house long-term tenants or short-term renters, this passive income source comes with all the required maintenance of regular home ownership.
Earning regular rental income means you’ll need to purchase, prepare and manage a property. Whether you’re renting it out for short- or long-term purposes, once established, can provide you with a predictable income source.
If you’re interested in real estate investing but don’t want to manage a property yourself, a platform like Realty Mogul may be worth considering. Realty Mogul is a real estate investment platform that allows individuals to invest in commercial real estate properties with as little as $5,000.
Through the platform, investors can access a range of real estate investments, including rental properties, commercial buildings, and development projects. By investing in a diversified portfolio of properties through a platform like Realty Mogul, you can potentially earn rental income without the hassle of managing a property yourself.
Store people’s stuff
People have a lot of stuff—and they’re always looking for cheap ways to store it. If you have some space in the basement or the garage, what could be easier than having people pay you to store their stuff? You’ll just need to make sure their items are safe and secure.
Check out websites like Neighbor, iStoreit or Store At My House to get started. These are services that can put your indoor or outdoor space to work. Will people pay a ton to have you store their off-season wardrobe? Maybe not—but it can add up over time.
And if you have a barn, garage or even just carport space to store vehicles, boats, campers and other high-dollar toys, people will pay more to keep them safe and weatherproof. Set it (safely) and forget it—talk about passive income!
Rent out useful items
Do you have any items you don’t use all the time that others would like to borrow? Things like a trailer, trampoline, kayak, or even your own yard or backyard pool could earn you passive income as rental items.
If you have more sports gear than you could ever use all in one week—things like bikes, surf boards or a pair of skis lying around—you can rent it out on a site like Spinlister.
You can also explore popular rental websites like Fat Llama (yes, that’s really the name). All you have to do is upload pictures of your items, set a price, and tell the world they’re ready for rent.
If you’re not quite ready to tell the world, consider starting with just your neighborhood. Got a chainsaw, pressure washer or lawn aerator? Larger tools can rent anywhere from $30–70 (or more) for just a half day at retail stores, so there’s a lot of potential cha-ching there.
Hop on your community’s social media sites and start posting, or distribute flyers the old-fashioned way. Hit it during the right season, and your flyers could get a premium spot on your neighbors’ refrigerator doors—and that leads to phone calls. Just remember to set up some rules so you don’t end up with ruined tools you have to replace from your own pocket.
Start a YouTube channel to earn passive income
YouTube creators can make a lot of money, and getting started doesn’t necessarily require much expertise. You can create how-to or explainer videos on virtually any subject, or go more personal and put yourself in the videos. Consider different formats that are successful on the platform, like interviewing subject matter experts, providing tips and tricks, or even just showing yourself playing various video, mobile or board games.
Like blogging, the important thing is to find a niche and build a following. You can then integrate Google Ads, become a YouTube Partner, and even make money off memberships, live chats and subscriptions.