Passive income is one of the most exciting ways to earn income online. Yet, there are a lot of misconceptions about what is involved in setting up sources of passive income. We’ll explore this type of income from the basics and then consider some common examples of passive income ideas to clear the confusion. You will also find plenty of practical passive income examples, with dollar examples available.
Passive Income 101
Defining passive income means earning income from an asset or business from which the person is not actively involved. The vast majority of people earn most or all of their income in the form of active income. For example, a wage or salary earned from employment is passive income. A well-paid lawyer or doctor who earns fees from the services they perform.
Active income has advantages and disadvantages compared to passive income. Speed is a crucial advantage to active income. Many people can find a job quickly and start earning wages if they have valuable skills. In addition, active income from employment or freelancing is relatively simple. You perform a service and receive compensation. The disadvantage to passive income is that it requires your effort. For example, a consultant or freelancer who takes a two-week vacation may see their income fall significantly. Likewise, self-employed people may not earn income if they become ill.
Passive income, in contrast, offers several exciting benefits. Once a passive income source is set up, you can go on vacation and still earn income from the business or asset you have created. In addition, it is possible to grow a passive income source to a large size – earning millions of dollars from a passive income source is possible. However, there is no free lunch in life. To earn a passive income, you must first create a business or asset with value.
Historically, the most common examples of passive income were financial investments or real estate. While earning an income from investments and real estate still work, they usually require a substantial upfront cash investment to get started. If you have little money, these forms of traditional passive income may feel out of reach.
The good news is that the digital economy has made it possible to create new forms of passive income that rely more on creativity and work effort than cash. That means that you can apply yourself to a digital business opportunity for a few months or years and eventually earn a passive income. You can continue growing a passive income source to produce even more income or sell the asset for immediate cash.
Passive Income Case Study: Earning Passive Income From Hobbies
Imagine you could earn a passive income on the Internet from your hobbies. That’s exactly what entrepreneur Sean Ogle in Oregon has achieved. He has started two online businesses that earn passive income. Several years ago, he started the Breaking Eighty website dedicated to golf. Ogle focused his website on golf at the world’s best golf clubs. He has earned income in affiliate commissions from products he recommends and advertising. More recently, Ogle has created another passive income source – Slightly Pretentious – based on his interest in cocktails. This newer cocktail-themed website has generated some income.
These examples show that it is possible to earn income from topics and activities you already enjoy. As you explore the passive income ideas below, remember that it is possible to create an online source of passive income around your interests. Golf is an excellent example because it is a multi-billion dollar industry, many people are passionate about the sport, and there are active advertisers.
Passive Income Ideas: 10 Ideas To Inspire You
Before we explore these passive income ideas in depth, there are two points to consider. First, don’t feel the need to pursue all of these ideas simultaneously – pick one idea and apply yourself to that idea. Second, starting with one idea does not mean you can never pursue any other ideas. For example, a blogger can publish an ebook or course. With those two points, let’s take a closer look at some of the most popular passive income ideas.
1. Creating an online course
Selling an online course is a proven way to earn passive income. In brief, you create the course once, and then you can sell it for months or even years to come. That said, an online course is not necessarily 100% passive. For example, you might offer weekly or monthly office hours to students to ask questions.
There are two general ways to sell an online course depending on your skills and goals. First, you can upload your course to a digital course platform like Udemy, Skillshare, or CreativeLive. In this case, the digital course service may help market your course and give you tips on presenting the course to students. The downside is that the digital course platform will charge you fees and have requirements to follow.
The second way to sell an online course is to sell it directly through your website. For example, Ben Currier sells a course on Microsoft Excel called “Excel Exposure” through his website. At this writing, he sells the course for $197. By selling this course directly from his website instead of using a platform like Udemy, Currier can charge higher prices and earn more from each sale.
Selling an online course is a good option for experts who enjoy explaining their knowledge in simple terms. Like many other passive income ideas, online courses require ongoing marketing. If you already have a significant online presence, it may not require much effort to market your course. In addition, if you sell your course through a digital learning platform, those platforms may help you sell the course.
2. Writing and selling an ebook
In the world of passive income ideas, writing and selling an ebook is probably the strategy with the longest track record of success. It is possible to write an ebook this year and continue selling it for years. There are online tools that automatically deliver the ebook to the buyer. Therefore, there is potentially no customer service required of any kind associated with this passive income idea.
There are broadly two kinds of ebooks you can write and sell in the ebook world. First, you can write and sell fiction ebooks. If you enjoy writing novels and short stories, this may be the best way to go. Generally speaking, fiction books are the most popular type of book on the market. The most popular fiction genres include romance, mystery, science fiction and fantasy, thrillers, and horror. If you are interested in those genres, writing and selling fiction ebooks may be a good fit for you.
Alternatively, there is also a large market for nonfiction ebooks. With a nonfiction ebook, the reader is usually looking to solve a specific problem or achieve a goal. For example, many ebooks help people lose weight and become better at sports. Also, countless ebooks teach professional and business skills. For example, some of the best-selling nonfiction ebooks on Amazon right now include “The Complete Book of Home Organization” and “Let’s Make Dumplings.”
There are two challenges to earning a passive income from selling ebooks. First, you need to put in the work of writing, editing, and creating an appealing ebook that appeals to potential buyers. Fortunately, some resources can help you – for example; you might participate in National Novel Writing Month in November to write your first novel. Second, ebooks usually do not sell themselves. Therefore, you need to put in the effort to attract readers, build marketing campaigns and get your ebook in front of potential buyers.
For more guidance on how to write and sell ebooks, see our post: How To Sell Your Ebooks Online As A Beginner.
Tip: You can often earn higher profits per book sold if you sell your ebooks directly to readers from your website. Amazon, the most popular ebook platform, takes up to 70%% of royalty revenue as their fee when a reader buys an ebook. You can sell ebooks directly to readers using CheckYa and earn higher fees.
3. Peer-to-peer- lending as a passive income
Imagine if you could become a banker and lend money to people and organizations you value? That’s the promise of peer-to-peer lending. This passive income idea is different from others in two key ways. It does not require months or years of effort in building up an audience or in-depth understanding of a topic to create a course or write an ebook.
Instead, you simply need some spare money to invest in peer-to-peer lending. For example, you can get started with Kiva with a starting investment of $25 and support an entrepreneur’s business growth. In comparison, Prosper offers relatively higher-risk loans with an interest rate averaging 5.5%.
Earning passive income through peer-to-peer lending is possible. There are several limitations to keep in mind. You may lose all of your money if the borrower does not repay the loan. Also, low-risk borrowers usually have many options to obtain credit. That means that borrowers who use peer-to-peer lending services may be at relatively higher risk. Finally, keep your expectations reasonable. For example, a $1000 loan with 5% interest means you would earn $50. The same $1,000 might be better invested in a different passive income idea depending on your interests.
4. Monetising social media channels with sponsored posts
Have you seen influencers on Instagram, YouTube, and other social media platforms? These creative individuals earn additional income by offering sponsored posts in many cases. In essence, the influencer is paid to create an ad for a company that wants to get in front of the influencer’s audience.
Earning income with sponsored posts combines active income and passive income. The passive income element can take a few forms. You might promote a product on an affiliate marketing basis. In this case, you get paid when people click on your link and purchase. The more people who click and buy, the more you earn! Even better, people may come across your post months into the future, and you can still earn commissions. Also, your potential earnings tend to increase as you build up a larger following.
That said, there is an active income element to this passive income idea. For example, you will still have to create the sponsored post and work with the advertiser. The advertiser may have complex requirements which you will need to fulfill. In addition, you might have to spend time tracking down sponsored post opportunities.
The income potential of sponsored posts dramatically increases as you develop a larger audience. According to Influencer Marketing Hub, mega influencers (i.e., with 1 million followers or more) can earn $10,000 per sponsored post on Instagram.
5. Blogging and YouTube channel
Earning passive income from blogging or a YouTube channel are well-established ways to generate passive income. For simplicity, let’s focus on two of the most common ways to generate income: display advertising and affiliate marketing. Display advertising means showing ads on your videos or your blog. Affiliate marketing means earning a commission from recommending products.
For a blog to generate meaningful passive income, you need a substantial audience. For example, to earn $1,000 a month in revenue from display advertising, you might need as much as 85,000 page views per month with a platform like Ezoic. It is important to note that the amount of money you can earn from display advertising varies based on the topic of your blog and the time of year. For example, a baking blog – Owl Baking – earned $175 in its first month with 23,494 pageviews (i.e., about $7.50 per 1000 page views).
YouTube channels can earn money in several ways. The simplest way is to generate income directly from YouTube. According to Influencer Marketing Hub, over 2,000 channels with more than 1 million subscribers. Channels with over 1 million subscribers may earn over $30,000 per week from AdSense alone. With a smaller audience that generates fewer video views, your passive income would be less.
6. Selling design online as a passive income
Generating passive income from design is a more specialized way of generating passive income. The fundamental principle is similar to creating a course or an ebook. The first step is to create a valuable asset – a design in this case – that people want to buy. The second step is to make it easy for customers to buy the design. You could use a platform like CreativeMarket, DesignCuts, or sell it directly to customers using CheckYa.
There are various types of designs you can sell online. For example, you can sell custom fonts, logos, 3D assets, and more. As with the other passive income ideas, you may still have to work at marketing your work to potential customers on an ongoing basis. For example, suppose you already have a blog or YouTube channel dedicated to graphic design. In that case, you might decide to create and sell graphic design products to the audiences you have developed.
7. Selling photography online
Earning passive income by selling photography online is simple. The most popular and straightforward option is to upload your photos for purchase on stock photo websites like iStock and Shutterstock. In this case, you are leveraging a large marketplace that already has an audience. As a result, you may be able to earn sales with little or no effort from these platforms.
According to Fstoppers, a photography blog reports earning $42 from EyeEm in a short period. Earning passive income is an excellent strategy for experienced photographers. Traditionally, one of the significant challenges with earning passive income is that you have to create a valuable asset or audience before earning much income. As a photographer, there is a good chance you already have a significant number of photos.
8. Rental income as a passive income
Earning passive income from real estate is a well-established passive income idea. In essence, you obtain a rental property and then earn income from tenants. For example, you could purchase a three-bedroom house in a city with multiple colleges and universities and rent out all three bedrooms to students. Depending on your goals, you might earn a small amount by renting out a room in your home or purchasing rental properties.
The rise of websites like Airbnb, HomeToGo.com, and Vrbo has made it easier to get started in earning rental income from your home. According to NerdWallet, the average Airbnb user earns $924 per month from the website. The amount you can earn on these platforms varies depending on several factors, including your location. If you are located in a popular tourist destination like London, New York, or Miami, it may be easier to earn vacation rental income.
There are two drawbacks to earning rental income. First, rental income usually involves ongoing expenses like cleaning, maintenance, and possibly property management. Second, earning rental income usually requires owning a property like a house or other building. Fortunately, you can get started in real estate with a smaller amount of money. For additional details and examples of getting started in this area, take a look at BiggerPockets.
If you don’t currently own property or have enough money to invest in real estate, try one of the other passive income ideas outlined here. Alternatively, you can earn income as a consultant. Learn more by checking out our post on five ways to start your online consulting business.
9. Create an app
Developing and selling a mobile app is a great passive income idea for people with technical skills or the desire to learn. For example, about 290 million people with smartphones in the US alone – all of those users could end up using your app!
Creating an app is a powerful way to earn income as a passive income idea. After making an effort to develop an app, customers can buy an app repeatedly. For example, the game Stardew Valley has sold over 10 million copies. Generally speaking, the critical app opportunities are for mobile devices (i.e., Apple apps and Android apps).
Worried that you cannot earn a passive income if you have limited technical skills? Some tools and services are making it easier to create apps. No-code app builders like Bubble and Appy Pie make it easier to create apps with minimal technical skill.
The downside to creating an app is that digital products require ongoing support and updates. For example, customers may ask for new features and content in the app. A developer who ignores customer requests may find it challenging to earn sales. An app may need updates periodically to maintain security.
10. Membership sites
Imagine you could create your own “Netflix” to earn passive income. With Netflix and other streaming services, the company creates or licenses content, and customers pay for access to that resource on an ongoing basis.
While individuals may not have the resources to create TV shows and videos, there is a way to earn ongoing income. Specifically, you can create a membership website where customers can access ongoing content.
For example, Orchids Made Easy, which provides tips to help people grow orchids, earns over $100,000 per year, according to SmartBlogger. In addition, there are many membership sites dedicated to professional skills like Breakthrough Marketing Secrets which provides business training to copywriters and marketers.
Membership sites are similar to apps and courses in some respects. Imagine if you signed up for a service like Netflix and there was never any new content added. You might cancel your account after a while. To prevent customers from leaving the membership site, you will probably need to add new content or update older content periodically.
What Every Passive Income Idea Needs To Work
After selecting a passive income idea, it may take some time to create assets and build an audience. However, it is critically important to make sure you can get paid. In some cases, you will get paid automatically by signing up for a large platform like Amazon or Udemy. However, there is no reason to limit your business growth to third parties. Instead, use CheckYa to add flexibility to your business. For example, you could use CheckYa to send an invoice to an advertiser who requests a sponsored post. Or sell your digital goods via CheckYa. You can even sell your courses via CheckYa.