The Holy Grail of everybody who finally expects to get ahead is passive income—or, as some would say, “make money while sleeping.” However, as Kristin Wong points out in her LifeHacker article Most Passive Income Isn’t as ‘Passive’ As You Think, there is no such thing as a constant money generator.
Each of us is allotted the same number of hours per day. Most of our time is spent trading hours for money with clients who are willing to pay for our time and skills. Some of us have learnt to price based on the value of the work performed rather than the time it takes—which is a step in the right direction.
The well-known drawback to providing services, though, is that when for any reason you can’t or don’t want to work, the income stops. There are two obvious ways to make sure you don’t run out of money when you aren’t working:
- Develop your skills to the level that you can charge so much when you do work that you can cover times when you are not working.
- Create products you can sell through e-commerce systems that will deliver them whether you are available or not.
Do some freelancers and bloggers earn passive income and make money while sleeping? Absolutely, yes. But it is typically built upon a lot of work they’ve already done and will need to continue to do to keep the money flowing.
The myth of passive income is that you don’t have to ever work ever again to keep the income flowing—false!
Regardless of which method you decide to use to generate income when you’re not working, most people prefer turning their expertise into something buyers can access around the clock.
The most common way to do this is by offering consulting services. Live consulting, however, is anything but passive, so many freelancers create either membership sites or they create training materials to sell.
The key to earning a passive income is turning your expertise into something you can sell: e-books, training courses, videos, etc. First, you have to acquire the knowledge, then actively make the products and finally reap repeated income from sales that come in while you’re sleeping and any other time.
Let’s take a look at some of the most profitable passive income ideas, many of which you can do as a freelancer from your home:
1. Start a dropshipping business
Dropshipping is a type of retail business in which the merchant functions as a middle man between a supplier and a customer. Wayfair, for example, doesn’t have a physical store or warehouse. Instead, it partners with suppliers who manufacture and ship the products directly to customers. When a customer orders a product from Wayfair, the order is forwarded to the supplier, who handles the fulfillment process. This allows Wayfair to offer a wide selection of products without having to invest in inventory or manage a supply chain.
While starting a business typically requires upfront investment, dropshipping has very little cash risk. You don’t need to invest in a physical space, and you only pay your supplier when a customer makes a purchase. Most dropshippers earn a profit of 20 to 30% of the final sale price, including the costs of the product and the price of the supplier.
2. Sell digital products
Another business you can start with little money is a digital product store because you don’t need to pay for the costs of physical items, storage, or shipping. Selling digital products is a great source of passive income because you only need to create a digital good once, and it will be in infinite supply for years to come. Think downloadable guides, eBooks, templates, printables, and digital kits. UX designers, for instance, can create and sell wireframes, flowcharts, and personas for professionals to download and use.
3. Invest in the stock market
Revenue generated from stock market investments is probably the most well-known source of passive income. While sometimes risky and daunting, it’s an effective way to build lasting wealth without much effort.
Keep in mind that stocks and the stock market itself are constantly in-flux, so this passive income idea is a way to generate income over the long-term. Instead of approaching this with the goal of getting rich quickly, you’ll want to slowly grow your investments over the course of your lifetime.
Note that we’re not here to give you investing advice–you’ll need to do your homework and consult with your own financial advisor about the types of stocks that best fit your needs.
4. Become an affiliate marketer
Affiliate marketing involves sharing or posting links to products, and then earning a commission whenever someone clicks and makes a purchase. Joining affiliate programs such as Amazon Associates, CJ Affiliate or ShareASale is an easy way for anyone to get started.
Just how much money can you expect to make? Around 81% of affiliate marketers make over $20,000 annually. That said, some people make a living off affiliate marketing. Adrian Brambila cites affiliate marketing as one of his main sources of income. In 2020, he generated $750,000 from affiliate marketing alone by sharing affiliate links on his blog, social media accounts and newsletter.
Of course, the more followers, shares, and views you have on your website and social media accounts, the more people will purchase from your links. With that in mind, you’ll need to start by using these platforms to build your authority in a particular niche. Once you’ve established your expertise, share product recommendations with an affiliate link to encourage people to buy.
While getting followers and subscribers does require time and effort, you’ll be able to earn passive income from your links once you have an established fan base.
5. Buy rental properties
Buying and renting out real estate is one of the most effective ways of earning passive income. In fact, some people make their entire income on their rental properties. Take 32-year-old Michael Albaum, who makes $431,000 per year from his 61 rental properties. His strategy is to buy homes in markets where the rent is higher than monthly mortgage payments and to only buy properties that a management company can run without his involvement. To make sure he doesn’t have to work hard, he buys property only when it’s clear it will be fairly easy to outsource to run through a management company.
6. Rent out space
Even if you don’t have the money to invest in rental properties, you can rent out a portion of your own home–whether that’s a spare bedroom, your driveway or a backyard shed. This is a low-effort, home-based business idea that’s great for people with room to spare.
There are plenty of online platforms to connect you with customers. Spacer, for instance, lets you rent out your parking space, while Neighbor lets you rent out your driveway, garage, basement or shed. The advantage of renting space through these platforms is that you don’t need to do much marketing.
7. Become a social media influencer
Another source of passive income is social media. On platforms like Instagram and YouTube, people make money just by gaining a following and becoming influencers. Like most other strategies for building passive income, this requires some work upfront. Once you have an established group of followers, you can keep the cash flowing fairly consistently.
Influencers can earn money in the following ways:
- Advertising
- Premium subscriptions
- Sponsored content
- Brand partnerships
- Affiliate marketing
- Dropshipping
8. Sell online courses
Do you love teaching or have specialized knowledge to share with the world? Selling online courses is another source of passive income once you have an established customer base. You can also sell subscriptions for your digital content and courses. You can sell your online courses through your website or learning marketplaces like Udemy or Masterclass.
9. Run a print-on-demand store
Print-on-demand is another online business idea that you can start from home and that requires little investment. All you need to do is make a design, put it on a product like a T-shirt or mug, and start selling.
If you don’t already have design know-how, take a look at creative online marketplaces like Etsy. This will give you insight into the kinds of products and designs that are trendy and profitable.
Once you have a design idea, partner with a print-on-demand company to manage your inventory and sell through your eCommerce website. As you create your own site, take a look at these websites that sell handmade goods or eCommerce business ideas for inspiration.
10. Sell stock photos
If you have a knack for photography, you can sell your photos as stock images under a royalty-free license. This is an effective source of passive income because you aren’t just selling a photo once; instead, you’re able to license it over and over again for a fee.
Read Also: Top 10 Passive Income Jobs You Can Start Today
You’ll also find that there’s very little actual work when you join a stock photo agency. These are companies that offer large catalogs of images and cut a commission from the sale price. This means you won’t need to put time and effort into marketing your photos, growing your brand, or setting up a store.
Some of the most popular places to sell photos include the Shutterstock contributor program, the Adobe Stock contributor program, and Getty Images.
11. Become a pet or house sitter
If you love dogs and cats, you can earn extra cash on the side as a pet sitter. While this will sometimes require active tasks like feeding or walking the dog, most of it—like watching TV while petting the cat or just being around when the dog needs you—is fairly passive. To connect with pet owners who need your help, try platforms such as Rover or Fetch.
Not a pet person? Try looking for jobs as a house sitter. Typically, this involves watering the plants, taking in the mai or just keeping everything safe and secure. For house-sitting jobs, try MindMyHouse and Housesitter.com. To avoid commissions and fees, you can also offer your own services on Facebook or Nextdoor, or create your own website with a built-in appointment scheduler.
If you’re already working from home, both pet sitting and house sitting are side gigs you can do at the same time to supplement your existing income.
12. Create and monetize a blog
Starting a blog requires time and effort at first, but it can evolve to become a lucrative stream of passive income. Lots of people either earn full-time income as bloggers, or use the extra revenue to supplement their career.
Elna Cain, for example, is a successful freelance writer who uses her blog to sell coaching resources to aspiring writers. Jeanine Donofrio, creator of the blog Love and Lemons, is a full-time food blogger and recipe creator who uses her blog to build her personal brand, share her recipes and sell her merchandise.
How can you start something similar? There are a couple ways to earn passive income through your blog:
- Use your blog to build a lovable brand and sell your own products
- Link to affiliate products within your blog posts and earn a commission on every sale
- Offer premium resources like eBooks, templates, guides and courses available for purchase
- Partner with a brand and create sponsored posts
- Run ads on your blog through Google AdSense
Top 5 Passive Income Streams For Freelancers
Adding passive income streams to your existing business can create a revenue source with markedly different underlying economics. Typically, these income streams will have higher profit margins and can scale more easily than services or physical products – giving you more flexibility overall in your business. So if you’re looking to add more assets over liabilities to your portfolio, then read on.
1. Print Stores
If you’re an artist, designer, or entrepreneur, print on demand can be a profitable passive income idea and monetize your creativity. It involves working with suppliers to customise white label products like t-shirts, posters, backpacks, or books and selling them on a per-order basis. Similar to drop-shipping, you only pay for the product after you sell it.
There’s no buying in bulk or inventory needed. Print-on-demand stores are a good passive income stream because you can create and sell products incredibly quickly – just a matter of minutes, you only pay for what you need so there’s no cash tied up in surplus stock or fulfilment fees, and once your store is set-up, you can automate the marketing and sales process.
With a print-on-demand company like Printful, you can easily create products to sell in your online store quickly. Overall, print on demand is a low risk, simple business idea you can get up and running with fast.
2. E-Products
Digital products are assets or pieces of media consumers can’t touch physically. These include downloadable or streamable files such as Kindle books, templates, plug-ins, or PDFs. This is becoming incredibly popular as it’s so easy to do and allows people to monetise their hobbies, especially if they enjoy writing, researching and reading.
Digital products are great passive income streams because they have high profit margins. You only have to make the asset once, and you can sell it repeatedly online. There’s no storage or inventory needed. You can sell as many digital products as you want. Many creators scale their passive income by selling kits, printables, files, and other assets professionals can use.
3. Blogging
Starting a blog can be a challenging venture, but the blogging business model is only becoming more successful as a passive income stream. You don’t need to be an internet celebrity anymore to earn money online. All you have to do is find your people on one or two platforms, and then send them to your website.
It takes a little bit of time to build a blog. But if you create quality content and promote it through your platforms, you’ll build an audience big enough to monetize. The key to ranking better with a personal blog is consistency and time. As your blog ages, the Google algorithm automatically starts increasing its domain ranking, provided you’ve been updating it consistently over time.
You can have multiple out-branches from a core blog, which generate extra passive income, including affiliate links and products, paid blog features from other brands, sponsored products, your own products, and Google ads. You don’t need any design or coding skills to start a blog. With a content management system and hosting service like Squarespace, you can get a blog up and running in no time.
4. Stock Photography
One of the biggest drawbacks to running a service-based business like photography is that you get paid for your time. You must be at an event or photoshoot to make money with photography, which, even if you’re making a killing, can be tiring after a while. If you’re a full-time photographer or own a good camera, you can create an extra revenue stream by selling photos online. Stock photo sites like Pexels, Shutterstock, and other online media houses will pay for high-quality photos and videos.
There’s no inventory to keep around the house besides your camera and laptop. These websites do the marketing for you, so once you load your photos onto the platform, getting your work out there and selling it is done for you. If you run your photography business on platforms like Shopify, you can also easily tie in digital products like prints or print-of-demand products like shirts and hats, giving you even more passive income streams so you can work less and make more. These websites are also a great form of free advertising if you have photos of products that you’re trying to sell.
5. Investing
Although the stock market might have a steep learning curve and can be confusing, it’s a great way to build lasting wealth. A common mistake most people make with stock investments is thinking short-term instead of playing the long game. The goal for investing in stocks is to diversify your portfolio and reduce risk. You can do this through investing in exchange-traded funds (ETFs) and high-dividend stocks that earn you income slowly over time. To start investing in the stock market, you need to open up a brokerage account and fund it.
Have a lot of cash that’s not working for you? Try Peer-to-peer lending. P2P lending involves lending money to borrowers or small businesses. To make the process easy, you can sign up on a website like LendingClub, Prosper (for individuals), and Worthy (for businesses) that connects borrowers with lenders. These sites usually host loan requests along with interest rates based on the borrower’s history. The return on these loans is usually around 5%–6%.
For shopaholics – cashback reward sites like Swagbucks, MyPoint, and Rakuten allow you to earn money when you shop online. After signing up, you don’t have to do anything extra, aside from shop, to make money from these sites. The more you shop online, the more points you gain. And the more money you can make.
There is only so much time in a day, and finding ways to scale your income in more efficient ways can give you flexibility in your business to hit the next level. That level might be taking a vacation, hiring more help or ordering new inventory, but whatever it is, adding streams of income with different underlying economics can give you the freedom to explore it.
