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LEARNING CENTER

To get ahead you have to stay informed.

  1. Learning Center
  2. 10 Real Ways to Generate Passive Income

Checking/Saving

10 Ways to Generate Passive Income

Expected read time: 8 minutes

Published: July 21, 2023

Passive income is money you earn in addition to your primary salary and without much effort. The name “passive income” may sound like easy money, but that’s not always the case at first. Some sources of passive income take a lot of upfront work before reaching their full potential after months or years of work. But the right passive income source could offer a big payout in the long-term. Here are some passive income sources to consider.

What We’ll Cover 

  • Investing
  • Renting Out Your Property
  • Selling Ad Space
  • Affiliate Marketing
  • Selling Handmade Products
  • Writing e-Books
  • Designing Online Courses
  • Voice-over Work
  • Selling Digital Products
  • Dropshipping
10 Ways to Generate Passive Income

1. Investing

Good investments take research. You’ll need to consider their liquidity, the yield they offer, and how risky they are. In some cases, you’ll need to watch out for scammers. But investing is one of the most passive ways to build your wealth over time. Here are some investment types to consider.
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High-Yield Savings Accounts

A savings account is a great way to start investing. You can start with very little money (the minimum at PenFed is $5), there’s no risk you’ll lose your investment, and it’s easy — you can even automate your savings. And as a liquid asset, you can tap into it whenever you need to avoid debt or reach financial goals, all while earning interest. The only downside is yields are lower on savings accounts than most other investments.

Bonds are a type of loan you make to a government or business that they pay back with interest over time.

Bonds and Bond Index Funds

Bonds are a type of loan you make to a government or business that they pay back with interest over time. Bonds are one of the safer investments you can make, but the tradeoff is they usually earn less than other investments and can take much longer to mature. For instance, federal series EE bonds take 20 years to mature and I Bonds take 30 years.

Dividend Stocks

With dividend stocks, you to buy shares of a company and receive payouts at regular periods (usually quarterly). Choosing the right stocks can be challenging, but once your money’s invested, your work is done. Stocks have the potential to earn faster than savings accounts, but they can stress you out more because they can also lose value quickly. Do your research and remember investing is a long game — highs and lows are inevitable.

Do your research and remember investing is a long game — highs and lows are inevitable.

Dividend Index Funds and Exchange Traded Funds (ETFs)

Index funds and exchange traded funds (ETFs) can be even simpler than dividend stocks. Instead of choosing each stock you invest in, you can invest in a collection of stocks. These collections of stocks usually outperform individual stocks and are less risky. However, they also gain value more slowly and often have smaller short-term payouts.

Real Estate Investment Trust (REIT)

You don’t have to buy a whole house or apartment building to get into real estate. If you have $500, you can put it into a real estate investment trust (REIT) and invest in different real estate properties similar to buying a share of a stock. You’ll earn rental income, which will increase as your real estate assets increase. Just make sure you do your homework to avoid scams and properties that are poor investments.

Type of Investment

Yield

Difficulty

Risk

Cost to Start Investing

Liquidity

High-yield Savings Accounts

Low

Low

None

Very low

Highly liquid

Bonds and Bond Index Funds

Low

Low

None

Low

Illiquid

Dividend Stocks

Very low to very high

Medium to high

High

Medium to high

Highly liquid

Dividend Index Funds and Exchange Traded Funds (ETFs)

Low to high

Low

Low

Low to medium

Highly liquid

Real Estate Investment Trust

Low to very high

Medium to high

Medium

Low to high

Highly liquid

Just make sure you do your homework to avoid scams and properties that are poor investments.

2. Renting Out Your Property

Long-term rentals can provide a reliable income stream for years while you build equity in them. Residential properties also tend to increase in value over time, which could mean a nice payout if you decide to sell. Maintenance, cleaning, and turnover can be time-consuming and expensive so you’ll want to create a sustainable and reliable system for those things so you can kick back and collect. 

Whether or not you have a background in sales or interior design, marketing your property is crucial to standing out on rental sites. Look through comparable listings to get an idea of your competition and if necessary, enlist friends or family to help you style, photograph, and describe your rental. Who do you know with an English degree or a killer Instagram?

If you can’t afford to buy a property to rent, you can rent out your house while on vacation or traveling for work.

Your House

If you can’t afford to buy a property to rent, you can rent out your house while on vacation or traveling for work using short-term rental sites like Airbnb. You’re also taking a risk by renting to strangers, but depending on your location, you could make good money for little work.

Part of Your House

Even if you don’t want to rent your whole house, you can still use your house to make money by renting out part of it. Got a furnished attic, garage apartment, or unused bedroom? It might be just what someone’s looking for, either long-term or for a weekend away.  

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Want to get the most out of your rent-out car for years to come? Check out our guide to seasonal car maintenance.

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Your Car 

Like with renting your home, renting your car out to strangers involves risk. But some people will pay well to borrow your car for a day or two. You can list your car on peer-to-peer carsharing websites to find customers. Just remember that extra driving will require extra maintenance.

3. Selling Ad Space

You can sell advertising space if you have a successful website, blog, or social media following. Often, monetizing your website or blog only takes a few minutes to set up, and the rest is up to advertisers. If you don’t have online advertising space, consider contacting specialized marketing agencies about selling ad space on your car.
Consider contacting specialized marketing agencies about selling ad space on your car.

4. Affiliate Marketing

If you don’t want ads all over your blog or YouTube channel, you can try affiliate marketing instead. With affiliate marketing, you place a link to a product or service on your site. Each time someone clicks the link and makes a purchase, you get a percentage of the sale or a flat fee. 

Affiliate marketing is competitive, and you’ll need to have a good following to generate much income, but there’s very little work involved beyond what you’re already doing.

Affiliate marketing is competitive, and you’ll need to have a good following.

5. Selling Handmade Products

Creative types have more options than ever for selling their work. Companies are set up to make it easy for you to sell your work without the hassle of printing or shipping. However, you’ll need to create a following if you want to maximize your earnings.

Print-on-Demand Store

With print-on-demand, you choose a company to work with and create a digital store on their platform. Upload your original artwork to their website and customers will choose a design and product they want printed with the design (think notebooks, T-shirts, water bottles, and more). Then the print-on-demand company will create and ship the product, taking a cut off the top and giving you the rest.

With print-on-demand, you choose a company to work with and create a digital store on their platform.

Music Licensing

You can license your original music through stock music sites. Your songs could go on to feature in commercials or videos all over the web — and you could be paid each time that happens for years to come.

6. Writing e-Books

Like with selling art or music, self-publishing e-books will require you to do some marketing and generate a following. However, some writers have seen great success with self-publishing. Once your book is written, you can prepare the e-book files online for free. 

Many self-publishing sites don’t charge upfront fees, instead taking a cut of your sales so the cost to entry is low. Competition can be fierce, though. Depending on the type of books you write, your upfront workload could be intense. You may also need to pay someone to edit your writing or commission artwork before you’re ready to publish. 

Creating an online video or audio course could be a way to capitalize on any special expertise or skills you have.

7. Designing Online Courses

Creating an online video or audio course could be a way to capitalize on any special expertise or skills you have. There’s a lot of front-end work that goes into designing, scripting, recording, and editing a course, but once created it could be taken by thousands of people over several years. It might even earn you some cache at work if your course is related to your career field.

8. Voice-over Work

The demand for voice-over work is increasing along with the rise of video and audio content online. More and more companies are using podcasts, YouTube videos, and social media shorts to reach their audiences, and they all require a good set of pipes to get their message across. Many publishing companies also hire voice talent to meet the increasing demand for audio books. You can either buy a few startup tools yourself, or you can find a company to provide audio equipment for you to use in the comfort of your own home.

Many publishing companies also hire voice talent to meet the increasing demand for audio books.

9. Selling Digital Products

Digital products cost little to make and don’t need to be prepared or shipped, giving them a high profit margin. And once created, each item can be sold hundreds or thousands of times. There are also lots of product types you can sell, including:

  • Spreadsheets and budgeting documents
  • Design tools
  • Reference guides
  • Lesson plans and worksheets
  • Templates, patterns, and printables
  • Recipes and meal plans
  • Workout plans
  • Apps and plug-ins

Besides making the product, you’ll need to either find an existing website or create your own where you can sell your products.

10. Dropshipping

Dropshipping makes it easy for you to sell curated products through an online-only store. Simply choose the products you want to sell, select a supplier, and set a price. When a customer chooses a product, your supplier will deliver the product for you. If you have basic web design skills, there’s almost no cost to get started. If not, you may need to hire someone to build your store’s website. You’ll also need to generate some buzz to help people find you store online.
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The Takeaway

Passive income is a great way to boost your savings, supplement your retirement, build personal wealth, or protect your family during hard times. It can even cover fun extras like vacations or your dream car. Now that you know how to get started, what are you going to do with your extra dough?

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