If you want to grow your wealth, passive income streams can help. There are many options to earn residual income.
Most passive income opportunities take some cash and effort to get started. They may also require maintenance along the way.
Regardless of the initial effort needed to be successful, having multiple streams of income is a terrific way to expedite your financial goals.
List of Best Passive Income Streams
This list contains actual passive income strategies. Side hustles, such as food delivery, are great. However, they’re not passive.
Here are the best ways to make money while you sleep or watch Netflix.
1. Investing in Dividend Paying Stocks
Investing in dividend-paying stocks is one of the classic passive income ideas. It does take effort to research the best stocks for your needs and portfolio.
To amplify your efforts, it’s best to invest a serious amount of money. You will need at least several thousand dollars to start really taking advantage of monthly or quarterly dividend checks.
If you don’t have that much money, you can still get started and earn dividend income. Reinvesting your earnings will cause them to grow over time, enhancing your efforts.
M1 Finance is a leading online broker that lets you invest in premade expert pies of stocks. You can also create your own if you are a DIY person. It’s free to build and invest in a portfolio regardless of the path you choose.
The broker offers free quarterly auto rebalancing and allocates each contribution to your portfolio to ensure it stays on track. This is all provided at no charge. Additionally, there are no minimum deposit requirements.
If you don’t like the pie approach, SoFi Invest is a good alternative that lets you invest in stocks commission-free. SoFi has no minimum balance requirement.
*Right now Frugal Rules readers who sign up for an Active Invest brokerage account for the first time are eligible to play “The Claw” interactive game. Play and you could win a random dollar amount of stock ranging from $5 to $1,000!
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$5 minimum balance requirement
No management fees make it easy to transfer over old 401(k) and IRA plans.
2. Crowdfunded Real Estate
Investing in real estate may sound like something only for the wealthy or those with the time and skills to manage properties. It also sounds like it requires a lot of work.
Thanks to crowdfunding, real estate is one of the best ways to start generating passive income.
Crowdfunding platforms let users pool resources together to invest in commercial and residential properties. This is done through Real Estate Investment Trusts (REITs).
Fundrise is our favorite platform to invest in real estate in small amounts. You only need $10 to start investing. Through the REITs, you accrue earnings from sales and income from selected properties.
No expertise is required on your part. You simply open an account and invest in the fund that best matches your goals. The fund manager chooses the investment properties.
Many people only look to the stock market for investment ideas. Real estate is an excellent addition that adds diversification and another potential stream of income.
Think of each additional revenue stream as another way to enhance your wealth-building efforts.
Read our review of Fundrise here to learn more about the platform.
|Fundrise - start investing in real estate|
$10 to start
This popular crowdfunding real estate platform makes it possible to invest in real estate with as little as $10!
Stocks are an effective way to generate passive income. Unfortunately, not everyone is comfortable with the stock market or has the time to manage their investments.
Robo-advisors alleviate that problem by managing your investments and ensuring they’re on track to reach your given objective.
For example, if your goal is to create passive income opportunities in retirement, they can help you succeed.
Think of robo-advisors as financial advisors that have minimal requirements, making them accessible to the masses. They offer tools that were once only available to those with means.
Betterment is a popular automated investor with no minimum balance requirement. They only charge a fee of 0.25 percent annually. This means that if you invest $5,000, they charge $12.50 per year. There are no other fees.
Betterment doesn’t just offer investment advice. It also offers a full-suite of banking and financial products to help you manage your finances.
Read our full review of Betterment here to learn more about the platform.
4. Put Your Cash in A High Yield Savings Account
A savings account doesn’t sound like one of the best passive income ideas, but it serves two purposes.
First, you don’t want your cash sitting and earning nothing. Second, you need to maintain a level of liquidity as you pursue additional income producing assets.
A high yield savings account or a money market can help you accomplish both these objectives. Even though interest rates aren’t the highest right now, you don’t want to overlook growing your cash.
CIT Bank is a top bank to consider for savings. Its money market currently pays 0.45 percent and requires just a $100 balance to start. It has the same FDIC insurance that a savings account has without locking your cash up long-term.
Read our CIT Bank review here to learn more.
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$100 minimum deposit requirement
Open a high yield savings account or money market with $100!
5. Invest in Rental Property
Rental properties are awesome income generating assets, but they require effort on your part. If you don’t have the necessary skills to manage rental homes, this also poses an issue.
Crowdfunding is an excellent way to earn passive income from rentals. Some platforms let you invest in turnkey rental properties to create a stream of income.
Roofstock is our favorite resource to invest in single-family homes. The platform has no minimums, and you don’t need to be an accredited investor.
The company manages the property for you. They also vet properties to ensure they offer a legitimate income opportunity.
If you’re not happy with a property, Roofstock offers a 30-day satisfaction guarantee, making it one of the best Fundrise alternatives if you want to invest in real estate.
*Related: Looking for other real estate investment options? Read our guide on the best ways to start investing in real estate with $1,000 or less for the best available choices.*
Read our review of Roofstock here to learn more about the platform.
6. Invest in CDs
A CD isn’t the most exciting passive income opportunity, but they work for some people and allow you to make money while you sleep.
CD laddering is one way to earn interest on your cash. Even though it sounds complicated, it is fairly straightforward. You put cash into several CDs of differing lengths and staggered maturity dates.
Five-year ladders are a common practice. Here’s how a sample one would work:
- 1 Year CD – 2.00 percent
- 2 Year CD – 2.10 percent
- 3 Year CD – 2.25 percent
- 4 Year CD – 2.35 percent
- 5 Year CD – 2.50 percent
As each CD matures, you put it into a new five year one. You can also opt to put it in another investment. CIT Bank is a good resource as they have multiple CD products available for investors.
Brokered CDs are an additional choice for spare cash, but they have longer terms and may allow more than the FDIC limit at an individual bank.
7. Refinance or Consolidate Debt
When it comes to how to create passive income, paying off debt is an overlooked strategy. Since debt restricts you from pursuing other goals, paying it off frees up cash that you can apply to other passive income investments.
Refinancing or consolidating your debt to a lower interest rate can you save hundreds, if not thousands, of dollars. If you have high-interest debt, this is of particular importance as the rate reduction is a direct return.
Credible is a perfect platform to refinance your debt. The company lets you compare multiple lenders to find the best fit for your needs. You can also refinance students loan through Credible.
If you have credit card debt, you can do the same thing with a balance transfer card. Some cards even have 0 percent interest for 15 months to help you kill debt for good and move one step closer to becoming financially independent.
You can learn more about the available cards here.
The stock market is a popular way to create a source of passive income. However, you may not have the funds necessary to start investing, or you may want something simple that requires minimal effort.
A micro-investing stock trading app like Acorns is a helpful resource to mitigate those problems. You can open an account with as little as $5. The app then connects to your credit or debit card and rounds up all purchases.
For example, if you spend $25.01 on a tank of gas, it rounds up the remaining $0.99 and invests it for you. Those funds go into a low-cost exchange-traded fund (ETF) of your choice.
This puts your money to work and helps you grow it as you look for other passive income sources.
Read our full review of Acorns here to learn more about the platform.
9. Invest in Farmland
Real estate crowdfunding hasn’t just disrupted investing in commercial or residential properties. There are also growing opportunities to invest in farmland as you pool money with other investors.
FarmTogether is a leading player in the space and lets people invest in shares of entities that hold farmland. The only drawback is you need at least $10,000 to invest.
You receive returns through cash distributions and land appreciation. Farmland has a historical return of nine percent, making it a legitimate passive stream of income.
10. Rent Out Your Car
It may sound like an odd way to create residual income, but renting your car is a unique way to earn money. Think of it like renting your home.
If your car sits unused, you can make passive income by renting it out. This helps travelers save money and puts cash in your pocket.
HyreCar is a leading platform to rent your car. Listing your car is free, and they even provide insurance coverage.
The company claims you can earn up to $1,000 per month depending on the make, model, and age of your car.
11. Start or Advertise on Your Blog
Blogging is one of my favorite ways to earn passive income. It does take work to be successful, but blogging offers many ways to make money while you sleep.
You can earn money blogging in various ways, including:
- Affiliate marketing
- Display ads
- Selling digital products
- Sponsored campaigns
If you’re not technically inclined, Bluehost is a helpful resource. They will set up your site, provide a design, and give you a domain name for just $2.95 per month for Frugal Rules readers. Normally, this costs $7.99 each month.
Watch our video on how to start a blog to learn how to start a profitable website.
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12. Sell A Course
Are you highly knowledgeable in a certain area, such as computer programming or photography? If so, a fun source of mailbox money is creating a course.
Courses take time to create and are a minimal investment, but they can be one of the more lucrative ways to make passive income.
Udemy is a top-notch platform to create and sell courses. As of publication, the site has over 130,000 courses. These can be about anything from the basics of real estate investing to drawing.
After you create a course, Udemy handles sales and marketing for you. This makes it super easy to launch a course on their platform.
13. Cashback Rewards Credit Cards
Do you use a credit card to pay bills and purchase items? If so, you can earn cash back for something you’re already doing. You won’t become wealthy, but it is a real way to put cash in your pocket.
You have two ways to use rewards, including redeeming cash each billing cycle or letting it grow and redeeming it to use on another passive income strategy.
Learn more about rewards credit cards here.
14. Sell Stock Photos
Do you have an eye for images? How about a love for taking photos? You can use your skills to make money from websites or magazines that are searching for quality images.
DepositPhotos is a leading website to sell stock photos. Account owners upload pictures for companies and individuals to purchase. You earn a royalty each time you make a sale.
15. Invest in Gold
Investing in precious metals is a good way to add diversification to your portfolio, especially during a recession.
You can invest in gold in one of two ways. These include investing in a precious metals ETF or buying physical gold.
Vaulted is a leading platform to invest in physical gold. The company stores your gold bullion at the Royal Canadian Mint.
They charge a 1.8 percent transaction fee on a purchase or sale. There’s also a 0.40 annual fee for account holders.
As of publication, the price of gold is just over $1,800. Vaulted lets you invest in $10 increments.
If you want to grow your wealth through precious metals, this could be a good option.
16. Rent Out A Room In Your Home
Do you have a spare room in your house, or do you have an extra residence? If so, you can make relatively passive income by listing it for free on Airbnb.
Listing your property on Airbnb will require some work in between guests to clean. You can hire that out if you’d prefer to keep your workload to a minimum.
Rates vary by city, but the average host earns nearly $1,000 per month. You can use these earnings to pursue another passive income venture or reach some other goal.
Read our Airbnb host checklist to learn how to maximize returns.
17. Rent Out Ads on Your Car
It may seem far-fetched, but you can earn several hundred dollars a month by putting an ad on your car. Companies view this as a form of advertising and pay decent money, depending on where you live and how much you drive.
Beyond the initial setup, it’s passive income you earn for doing something you’re already doing.
Read our guide on ways to make money driving your car to learn more.
18. Design T-Shirts or Mugs
Are you a graphic artist? Do you like to design items in your spare time?
Like course creation, design does require some effort. That said, you can develop it into residual income with minimal effort.
CafePress is one site where your designs can be printed on anything from coffee mugs to t-shirts. The site markets and sells your designs or products, giving you a commission on each sale.
19. Peer-to-Peer Lending
Peer-to-peer (P2P) lending sites like LendingClub allow you to loan money to other people. You receive the principal back plus interest as the borrower repays the loan.
Many P2P lenders allow you to earn a six to ten percent return on your investment.
People who borrow through P2P platforms need funds for various things. These can include remodeling a room in their house or paying off a car.
Instead of just putting your money in a savings account, you can earn a higher return and help people at the same time.
What is Passive Income?
Most passive income ideas require some form of effort. They either take work and time to establish, or they require you to raise funds to get started.
If you receive a salary or income tied to working, that doesn’t count as passive income. It’s active work. This is different for tax reasons and misses the point of trying to create multiple streams of income.
The IRS has specific standards for what it considers passive activity. Per Publication 925, the IRS classifies passive activity as including:
- Spending less than 500 hours in a business annually
- Not doing most of the work in the business in a year
This is important to monitor. If you have questions, you should consult a tax professional.
Residual income is handled differently than your active income from a tax perspective, so you want to ensure you’re protecting yourself.
In short, if you go to work, have a side hustle, or consult, it’s a job. It’s not passive income.
How Can I Make $1,000 a Month in Passive Income?
It is possible to earn $1,000 a month in passive income, but it depends on what you are investing in and how much you can invest. For example, if you choose an eight percent yield investment, you need to invest $150,000.
If the investment has a two percent yield, you need to invest $600,000.
Can Passive Income Make You Wealthy?
Yes, investing in income-producing assets can help you get rich. The average millionaire has at least seven streams of income. Some are active, but some are passive.
The idea is that with each stream of income you create, you multiply your efforts. Some will perform better, or some may be seasonal.
As each stream begins to raise additional cash, you can deploy that into additional opportunities. Doing this improves your chances of achieving financial freedom.
How Can I Make Passive Income With no Money?
When it comes to how to make passive income, many options require money to get started. Investing in real estate is one example. You need at least $10 to invest with a platform like Fundrise.
However, there are some opportunities to create income with minimal resources. Some ideas are:
- Selling stock images of photos you take
- Creating a course to sell online through Udemy
- Earn for something you’re already doing, like getting cash back when you shop online
Some opportunities will have higher returns than others. Take what you earn and apply it to another investment to maximize your efforts.
Does Passive Income Really Work?
Yes, passive income really works. It’s how the wealthy grow their wealth. While it may be a challenge to start, effort and creativity will increase your income streams.
Your efforts will snowball and help you generate more passive income over time.
Residual streams of income are essential to wealth creation. Earning an income requires time or money. A career is great (and necessary), but your time is limited.
You need to leverage your resources for your money to create more money.
If you don’t know where to start, this list has numerous opportunities you can pursue with minimal resources. Pursue one you like and use the earnings to take advantage of additional opportunities.
Over time, you’ll start building passive income streams to help you pursue financial freedom.
What are you doing to pursue financial independence? How are you actively trying to earn money in your sleep?
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