From passive income sources to side hustles, skyrocketing living costs have left many of us looking for ways to boost our checking account balances. In that sense, passive income — making money without actively working for every cent — sounds like a dream come true.
The reality is a little different. Without going all Shakespeare on you, nothing will come of nothing. To create passive income streams, you’ll need a combination of time, knowledge, and money. The right passive income stream depends on your budget, skills, and available hours.
Here’s one way to break down some common passive income ideas:
Best if you have cash to invest: Buy ETFs or REITs
If you’re able to put your money to work for you, investing can be one of the least time-intensive sources of passive income. There is some time involvement: You’ll need to open a brokerage account and research different assets and investment strategies. But after that, a lot of buy-and-hold investing strategies don’t take a ton of ongoing management.
For example:
- Exchange-traded funds (ETFs): An ETF is a basket of securities that follow a specific theme. You might buy an ETF that tracks the S&P 500 and gives you exposure to the largest 500 companies in the U.S. or one that’s made up of companies that often pay dividends to investors.
- Real estate investment trusts (REITs): REITs are companies that own and manage a mix of properties. They usually specialize in a specific sector such as office space or warehouses. REITs have to pay out 90% of their taxable income as dividends.
Dividends are an important concept when it comes to passive income. Some companies pay a percentage of their earnings as dividends to shareholders. That means you get regular payouts in addition to any portfolio gains if the asset appreciates in value.
Best if you have teachable skills: Make an online course
There’s a lot of appetite for online learning, so if you have skills to teach, creating an online course could be a great earner. I have a friend who is both a coffee aficionado and a former teacher. She made a successful video course on how to taste coffee.
Think about where your expertise lies and research potential customers who might pay to learn from you. Ideally, it’s something you get excited about because that will come through on the video. And it should be something you have experience in. If you don’t know how to play the guitar, no amount of passion is going to make you a great online guitar instructor.
OnlineCourseHost.com estimates it will take between three days and two months to make a video course. Once the course is made, you’ll need to spend time marketing it and managing your customers. Online platforms like Udemy, LearnDash, and Skillshare can make the process easier. Still, be prepared to put in a lot of work upfront to build this passive income stream.
Best if you own property: Rent out space
I rent out an apartment, and I can tell you it takes a lot of work. That said, there are less time-intensive ways to be a landlord or make your space work for you. For example, a good property manager can help keep your rental income truly passive. They will help you find tenants, keep your property occupied, and stay on top of any maintenance and day-to-day management.
Fees vary, but many property sites estimate an 8% to 12% fee. That’s going to eat into your profits, so weigh that against the value you put on your time. Plus, a professional could help you maintain a higher occupancy rate and avoid legal issues.
Best if you’ve always wanted to get published: Write an ebook
Like creating an online course, writing an ebook can take time and knowledge. And there’s no guarantee it will pay off — it’s a very competitive market. (I know; I self-published a book, and it generates less than $20 a year in passive income.)
However, if you enjoy writing and are willing to keep at it, some authors do make money this way. Before you start, research which topics are likely to be profitable and what the competition is like. Look for some crossover with themes or genres you want to write. And be prepared to invest in marketing, cover design, and editing help.
Best if you have limited upfront cash: Use what you have
If you don’t have a lot of time, expertise, or money, don’t despair. Take a step back and think about what you do best or what you own that you could put to work.
For instance, if you’ve got an eye for design, you might be able to sell your work on Etsy. Print-on-demand centers will fulfill your orders with minimal work from your side. If you have garage space or a parking spot, perhaps you could rent it out. Or sell ad space in your car’s back window. Be creative. Worst comes to worst, you can write an ebook about your experiences.
Bottom line
It is possible to build up decent passive income sources, even if you don’t have lots of money to invest. Just be realistic about the time involved. Your so-called passive income source should not mean you’re showing up for work with bags under your eyes and drifting off during meetings.
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