A source of income known as “passive income” needs little or no ongoing work. It’s basically self-sustaining as a company concept; typically, passive income requires some sort of upfront or initial investment that yields consistent long-term benefits.

Two types of activities are formally classified as “passive” by the Internal Revenue Service (IRS): (1) trade or company activities that don’t need material participation, and (2) rental activities [1]. As per their definition, financial assets like stocks, mutual funds, and royalties, as well as rental property ownership, can generate passive income.

We’ll delve deeper into the definition of passive income in this post and provide some suggestions for getting started.

The antithesis of active income is passive income. You get compensated for your ongoing labor when you have active income. The majority of side jobs and vocations count as active income. With passive income, you put in the initial work and gradually receive cash; no additional work is needed.

Although the prospect of earning passive income can be alluring, it’s crucial to remember that growing your investments can take some time. You might want to think about launching a side business or going after a high-paying professional path if you’re searching for quick cash.

Building a passive income stream, however, can be profitable if you have the leisure to see your investment grow and, moreover, if you’re prepared to devote a small amount of consistent effort to fostering that growth.

The type of revenue that most people are familiar with is active income. It’s the money you make working actively, usually through employment or a side gig. This covers your hourly rate, regular salary, and revenue from actively managing your firm or rendering services. You must put in constant time and effort in order to be compensated for your work. Your earning potential and the number of hours you work determine your income level, which you can raise by taking on more work or landing a higher-paying job.

Characteristics of passive income 

There are many business ventures you can try, but the trick is knowing which initiatives are passive income. So, let’s break down its characteristics. 

• Low active involvement. Passive income requires less active effort compared to traditional work. You set it up, and it continues to generate income with minimal daily input. 
• Consistency. It provides a steady stream of income, often regularly, whether that’s monthly, quarterly, or annually. 
• Diversification. Passive income can come from various sources, reducing the risk associated with depending on a single income stream. 
• Residual earnings. You can continue to earn money from past efforts, such as royalties from a book you wrote years ago. 
• Scalability. Passive income can grow over time as you expand your income sources and investments. 
• Independence. You have more control over your time and can decide when and where you work. 
• Reduced time exchange. You’re not directly trading time for money, making it a more flexible and potentially lucrative way of earning. 

How to Make Passive Income

When people talk about “earning money in your sleep,” they’re referring to passive income. Traditionally, you would do this through financial investments. Nowadays, many creatives start a passive income stream by creating a digital product that you can sell repeatedly.

Here are some things to consider if you want to start earning passive income:

• What kind of upfront investments can I make (think in terms of money, time, and effort)?
• Do I have any skills or knowledge that other people may find helpful?
• How can I automate the process of sharing my skills or knowledge?

Depending on the passive income stream you choose to pursue, there may be things you can do to increase your short-term earnings. For example, some people who sell digital products will use various marketing strategies to enable more people to discover their products, which leads to more sales in a shorter period. Others may scale the scope of their passive income business with new products that further their initial offerings to recapture an established client base.

10 Passive Income Ideas You Can Start Today

Selecting the passive income source that best suits your needs is the first step to creating a steady stream of money. Here are 10 ideas to think about for your passive income plan, regardless of whether you want to create a business or make a financial investment:

1. Invest in real estate 

Real estate is a classic way of earning passive income. It involves buying properties like apartments or houses that you can rent to others. People pay you to live there, and over time, these properties can become more valuable. This way, you can generate money through rental income. 

There are several ways to do this: 

• Rental property. You can buy rental properties and rent them to tenants. The rent they pay becomes your income. 
• Flipping properties. This is when you buy a property, fix it up, and then sell it for a profit. 
• Real estate investment trusts (REITs). If you want to invest in real estate without buying properties, you can invest in REITs. These are investment funds that own and manage different real estate assets, and you get a share of the income they make. 

It’s essential to do your research and make sure the property is in a good location and well-maintained, as this can help it appreciate even more in value. 

2. Invest in the stock market 

Stocks are like pieces of a company. When you own stocks, you can get a share of the company’s profits. You can earn passive income in two ways: 

• Dividend stocks. Some companies share their profits with you by paying you money regularly if you own their stock. The best part is you don’t have to work at the company to get this money. 
• Capital gains. This happens when the price of your stock goes up, and you can sell it for more money than you paid. Just remember that stocks can go up and down in value, so it’s important to be patient and not panic when they drop in price. 

3. Invest in peer-to-peer lending 

Peer-to-peer lending lets you lend money to people who need a loan instead of putting it in a savings account. You can do this through online platforms that connect lenders with borrowers. In return, you get back the money you lent plus some extra. Just be sure to check the platform’s rules and the creditworthiness of the people you’re lending to. 

Read Also: How Can I Make Real Money Online in Nigeria?

Here’s a bit more detail on how to invest in peer-to-peer lending: 

1. Choose a peer-to-peer lending platform. Popular platforms include LendingClub, Prosper, and Upstart. Each platform has its lending criteria and terms, so read through them carefully. 
2. Create an account. Sign up and create an account on your chosen platform. You’ll need to provide some personal information and often verify your identity. 
3. Fund your account. Transfer money from your bank account to your peer-to-peer lending account. This money will be used to fund loans to borrowers. 
4. Browse and select loans. Once your account is funded, you can browse through available loans and choose the ones you’d like to invest in. Typically, you can review information about the borrowers, such as their credit score, loan purpose, and the interest rate they’re willing to pay. 
5. Diversify your portfolio. To spread risk, it’s a good idea to invest in a variety of loans rather than putting all your money into one. Diversification can help protect your investment if some borrowers fail to repay their loans. 
6. Start earning interest. As borrowers make their monthly payments, you’ll start earning interest. This interest is your return on investment. 
7. Reinvest or cash out. Some platforms allow you to reinvest your earnings into new loans, helping your money grow faster. Alternatively, you can cash out your earnings and transfer them back to your bank account. 

It’s important to note that peer-to-peer lending carries some level of risk. Some borrowers may default on their loans, affecting your returns. That’s why it’s crucial to research the lending platform’s risk assessment and loan selection process. Only invest money you can afford to put at risk. 

4. Create and sell digital products 

Turn your knowledge and skills into money by creating and selling digital products. Some products you can create products include: 

• templates 
• printables 
• software and apps 
• graphics and design elements 
• digital art 
• filters 

Once you’ve made these products, you can sell them online to people who are interested in what you have to offer. It’s a bit of work upfront, but then people can buy your products again and again, and you keep making money while you sleep. 

5. Teach online courses 

Teaching online courses lets you share your knowledge and skills with students on websites like Udemy or Teachable. You can teach almost anything, from cooking to coding as long as you’ve got the skills to pass on. 

When people enroll in your course, they pay you, and you get to help them learn. It’s a great way to make money while helping others grow and learn new things. Just remember to make your courses engaging and useful so that more students join in. 

6. Do affiliate marketing 

Affiliate marketing is like being a middle-person for companies. You promote their products or services to others, like recommending a great book or a cool gadget. 

When people buy through your recommendation, you earn a commission – a percentage of the sale. To get easily started, we’ve listed down the steps you need. 

1. Join affiliate programs. Sign up for affiliate programs offered by companies. These programs allow you to promote their products or services. 
2. Choose products to promote. Select products or services from the affiliate’s offerings that you genuinely like and believe in. It’s essential to recommend things you trust. 
3. Get your unique affiliate link. Once you’ve chosen what to promote, the company will give you a special link. This link is unique to you and tracks anyone who clicks on it. 
4. Share the link. Promote the product or service using your affiliate link. You can share it on your website, blog, social media, or email. 
5. Earn commissions. If someone buys through your link, you get a percentage of the sale price. It’s like getting a small thank-you for referring people to something good. 

Affiliate marketing allows you to make money without having to create or manage the products yourself. Just be honest that you’re using affiliate links and only promote things you genuinely like and believe in to build trust with your audience. 

7. Sell stock photos and videos 

Turn your camera or smartphone into a money-making machine by selling stock photos and videos. If you’re good at taking photos or shooting videos, you can sell them on stock websites. People can use these photos and videos for various purposes, like websites, ads, or presentations. Every time someone downloads your work, you earn money.  

It’s a way to make your creative skills pay off, despite not being a professional photographer or filmmaker. Or if you are a pro and have a photography business, you can use it as a side gig to your full-time job. 

8. Start a dropshipping business 

Starting a dropshipping business involves creating an online store without the need for a warehouse. You choose products to sell from suppliers, but you don’t have to keep them in stock. When someone buys from your store, the supplier ships the products directly to the customer. 

You’re the middle person – you make a profit by selling products at a higher price than you pay the supplier. This way, you can run an online shop without worrying about storage and shipping. 

1. Choose a niche. Decide what type of products you want to sell. This could be anything from fashion and accessories to electronics or home decor. 
2. Find suppliers. Look for suppliers or wholesalers who offer dropshipping services. These companies will ship products directly to your customers. 
3. Set up an online store. Create your online store and customize your it’s design and structure. Web.com offers a simple, yet robust online store builder that’s customizable to your needs and goals. 
4. Add products. Import products from your chosen suppliers to your store. You can often do this with just a few clicks. 
5. Set prices. Determine the prices at which you’ll sell these products. Make sure to consider your costs and the competition. 
6. Market your store. Use online marketing strategies to attract customers to your store. Web.com offers marketing solutions such as pay-per-click ads, business listings, directory services, and search engine optimization (SEO) to kickstart your marketing efforts. 
7. Process orders. When customers make purchases, you forward the orders to your suppliers, who then handle shipping directly to the buyers. 
8. Improve customer service. Offer excellent customer service, including responding to inquiries and handling returns or issues. 
9. Optimize and expand. Regularly review your store’s performance and consider adding more products or exploring new marketing strategies to grow your business. 

Starting a dropshipping business requires lower upfront costs and minimal inventory management, so you can focus on marketing and growing your brand while the suppliers take care of the rest. 

9. Create a print-on-demand business 

When you create a print-on-demand business, you only produce your products when customers place orders. This eliminates the need for large upfront inventory and saves you money. Here’s a simplified list of steps to get you started right away: 

1. Start on market research. Getting market data is crucial for every business venture. Identify your target audience and niche, and research popular product categories. 
2. Create a business plan. Outline your business strategy, including pricing, branding, and marketing. 
3. Choose your products. Select the types of products you want to offer, such as T-shirts, posters, or phone cases. 
4. Select a print-on-demand provider. Find a partner that offers the products and quality you need. 
5. Design your products. Keep your target audience in mind when you design your products. 
6. Set up an online store. Create a website or use an eCommerce platform to showcase and sell your products. 
7. Integrate with print-on-demand provider. Connect your store to the print-on-demand service so orders can be automatically fulfilled. 
8. Market your business. Promote your products through social media, email marketing, and other advertising channels. 
9. Handle customer service. Provide excellent customer support for inquiries, issues, and returns. 

Remember that the success of your print-on-demand business largely depends on the quality of your designs and the effectiveness of your marketing efforts. 

10. Write e-books and blog posts 

If you have a passion for writing, consider creating written content about topics you’re passionate about. With e-books, you can publish your own books and sell them online. Find your audience and think about the: 

• content 
• layout 
• visuals 
• editing 
• distributing platform 
• pricing 
• copyright and licensing 

For blog posts, you can earn money from ads, affiliate links, and sponsored content. It’s a fantastic way to share your knowledge, interests, and creativity while making some money along the way.  

Web.com offers a convenient way to set up your blogging website with our DIY website builder. This way, you can publish your first blog right away. 

Final Thoughts

The best passive income strategies include investing in dividend stocks, real estate rentals, peer-to-peer lending, creating an online course, and writing an ebook. These require varying levels of initial effort but can provide ongoing income with minimal maintenance. Adopting passive income techniques can help you secure a better future by changing your financial situation. A variety of choices, such as digital goods and real estate investments, provide ways to achieve steady income growth with no continuing work. Begin modest, increase your wealth gradually, and see its growth.

Your path to financial freedom may just need one wise decision away. Invest and allow your finances to work for you.