25 Best Passive Income Ideas To Make Money in 2025

Understanding Passive Income

Passive income can be a great way to generate some extra cash and supplement regular earnings from your job. If you’re interested in passive income, stay away from “get rich quick” schemes found among search results for the term online. Cheng suggests you stay mindful of some common misconceptions about passive income.

“People often underestimate the initial costs of a passive income opportunity and as a consequence may not have adequate liquidity,” she said. Cheng gave some examples: “With a franchise, there are certain fixed costs that people will incur before they can experience positive cash flow.”

“With investment in real estate, there are mortgage payments, insurance payments, property taxes, maintenance, and management fees involved even if there is no rental income,” she said.

Passive vs. Active vs. Portfolio Income

There are three main categories of earnings: passive, active, and portfolio income.

While you can receive passive income without regular labor, active or earned income is money you get from direct effort or work. It includes salaries, wages, commissions, tips, or revenue from a business where you provide material participation.

Active income is the primary source of earnings for most individuals and households and also includes making investments that might later generate portfolio or passive income.

Portfolio or investment income is revenue from investments, including dividends, interest, capital gains, and other returns from stocks, bonds, currency exchange, and mutual funds. Unlike active income earned from employment or business activities, portfolio income is based on securities an individual or group owns.

Note that portfolio income is not passive income, although it seems to have many of the same elements. Even though you may wait months or years before reviewing or changing your portfolio selections, an investor is constantly making decisions about buying or holding different securities.

Thus, even if you don’t change your portfolio for decades, it’s your ongoing choice not to do so that makes income from it not wholly passive. Also, remember that the IRS may treat investment income differently than passive income. We discuss the taxation of these different forms of income below.

Passive Income Concepts in Depth

The ideas below are streams of income where you can limit your involvement to the beginning of the venture and expend less time or effort afterward. For 2025, we’ve included ideas that provide recurring income, from leveraging artificial intelligence (AI) to creating products and supporting the green economy.

“I think people can be really creative,” Cheng said. Many ideas on this list can be a great way to express your creativity in a way your career might not.

For the purposes of our list below, we’re using “passive income” in the more common usage that includes portfolio income within “passive” income (as opposed to the activity of working a job). However, it’s important to keep in mind the distinctions for income and tax purposes.

1. Premium Space Sharing

More sophisticated than basic storage units, premium space sharing through platforms like StoreAtMyHouse lets homeowners monetize specialized spaces in their homes. This upscale space-sharing approach can generate more income than primary storage, particularly in affluent areas or cities where such specialized storage is scarce. The key is marketing to the right audience—wine collectors, art dealers, vintage car enthusiasts, and fashion collectors who need more than just space but specific conditions for their valuable items local storage units can’t provide.

Income Potential

1. Climate-controlled spaces: $200-500 per month

• Wine storage in temperature-regulated basements
• Art and antique storage in humidity-controlled rooms
• Archive storage for businesses

2. Vehicle storage: $150-400 per month

• Garage space for classic cars
• Covered parking for luxury vehicles
• Indoor storage for motorcycles

3. High-end clothing storage: $100-300 per month

• Clean, secure closet space
• Cedar-lined storage for furs and woolens
• Designer handbag and shoe storage

4. Seasonal storage: $75-200 per month

• Attic space for holiday decorations
• Basement areas for seasonal sports equipment
• Protected storage for patio furniture

Advantages

• Higher returns than traditional storage
• Premium clients tend to be long-term
• Less turnover than basic storage
• Often involves valuable items, leading to respectful clients
• Can use otherwise unused home space

Disadvantages

• Could require specific home features (climate control, security)
• Insurance considerations for valuable items
• Need to maintain specific conditions (temperature, humidity)
• Could mean needing security upgrades

Tips for Success

• Install proper monitoring systems for temperature and humidity
• Obtain appropriate insurance coverage
• Set clear contracts specifying conditions and access rules
• Consider security improvements like separate entrances or smart locks
• Partner with specialty retailers or estate managers who can refer clients

2. Solar Farm Leasing

Leasing land for solar panel installations has become an increasingly lucrative form of passive income, particularly in sun-rich states like Louisiana, Texas, and California. Utility companies and solar developers lease land from property owners to build large-scale solar installations, offering steady, long-term income with minimal landowner involvement. In many areas, the space they would need might make even a smaller property fit for this purpose.

Income Potential

1. Large-scale installations: $500-2,000 per acre annually

• 25+ year lease terms common
• Some contracts include escalator clauses for inflation
• Bonuses for transmission line access
• Higher rates for land near existing power infrastructure

2. Community solar projects: $1,000-4,000 per acre annually

• Smaller installations serving local communities
• Often higher per-acre payments than utility-scale projects
• Shorter lease terms (15-20 years)
• More common in states with strong renewable programs

Advantages

• Very long-term, stable income
• Minimal maintenance requirements for landowner
• Often compatible with some agricultural uses (grazing)
• Property tax benefits in some states
• Helps meet the growing demand for renewable energy
• Land can be restored to original use after the lease ends

Disadvantages

• Sometimes requires significant acreage
• Land must meet specific criteria (flat, sunny, near power lines)
• May impact property value
• Long-term commitment required
• Local zoning laws may restrict development

Tips for Success

• Work with experienced solar developers
• Understand local zoning and land use regulations
• Consider multiple offers from different companies
• Review contracts carefully, especially regarding land restoration
• Consult with tax professionals about the implications for you.

3. Invest in Real Estate

Perhaps the oldest way to earn passive income on this list. You would invest in property to rent or sell at a profit. Consider different markets and property types for the best investments.

Rental properties provide steady monthly income. The exact amount depends on the property’s location, size, and local rental market conditions.

Income Potential

• Rental income: $1,000 to $2,500 per month per property

Advantages

• Potential for high returns: Real estate investments have the potential to generate significant returns through appreciation and rental income.
• Diversification: Investing in real estate can help diversify your investment portfolio, reducing overall risk.
• Hedge against inflation: Real estate values and rental incomes tend to increase with inflation, providing a natural hedge against rising prices.

Disadvantages

• High upfront costs: Investing in physical real estate often requires a significant upfront investment, including down payments, closing costs, and renovation expenses.
• Liquidity concerns: Real estate investments can be less easy to convert into cash than other assets.
• Market fluctuations: Real estate markets can be unpredictable, and property values may fluctuate based on local economic conditions and other factors.
• Management responsibilities: Owning rental properties can involve property management responsibilities, such as maintenance, tenant screening, and rent collection unless you hire a property manager.

Tips for Success

• Research markets and properties thoroughly before investing.
• Spread your investments across different property types, locations, and risk levels to minimize the impact of market fluctuations.
• Develop relationships with real estate professionals, such as agents, brokers, and property managers, to access helpful and practical market knowledge and investment opportunities.
• Real estate investments often perform best over the long term, so be prepared to hold your investments for several years to maximize returns.

4. Rent All or Part of Your Property

Renting your property, entirely or partially, can provide regular rental income. This could include short-term rentals through platforms like Airbnb or long-term leasing.

Income Potential

1. Short-term rentals (e.g., Airbnb): $100 to $300 per day

Short-term rentals can be highly profitable, especially in popular tourist destinations. The income depends on the location, property type, and occupancy rate.

2. Long-term rentals: $1,000 to $2,500 per month

Long-term rentals provide steady monthly income. The exact amount depends on the property’s location, size, and local rental market conditions

Advantages

• Steady income: Renting your property can provide a consistent monthly income.
• Property appreciation: Over time, your property may increase in value given its rental income, potentially leading to a larger return on investment when you decide to sell.
• Tax benefits: You may be able to deduct certain expenses related to renting your property, such as repairs, maintenance, and depreciation.

Disadvantages

• Vacancies: There may be periods when your property is unoccupied, leading to a loss of income.
• Maintenance: Regular maintenance and unexpected repairs can eat into your profits.
• Problem tenants: Dealing with difficult tenants or eviction processes can be time-consuming and costly.
• Legal compliance: It is crucial to follow local laws, regulations, and zoning ordinances to avoid fines and legal issues.

Tips for Success

1. Research local rental laws and regulations to avoid any legal pitfalls.
2. Develop a detailed lease outlining the rental terms, including rent payments, security deposits, maintenance, and pet policies to protect you and minimize disputes.
3. Do regular inspections, address maintenance issues fast, and consider upgrading or offering amenities to attract and retain high-quality tenants while preserving or improving your property value.

5. Specialty Vehicle Storage

With the boom in recreational vehicle purchases and limited homeowner’s association (HOA) restrictions on storing them, providing specialized vehicle storage has become a profitable passive income opportunity. This niche offers higher returns than traditional storage units, particularly when offering climate control or enhanced security features.

Income Potential

1. RV and motorhome storage: $100-500 monthly per space

• Covered spaces command 30-50% premium
• Electrical hookups add $25-75 monthly
• Additional fees for washing/maintenance areas
• Higher rates in areas with strict HOA restrictions

2. Boat storage: $200-600 monthly

• Indoor climate-controlled: Up to $800 monthly
• Seasonal demand in northern regions
• Premium rates near lakes and coastal areas
• Additional income from shrink-wrapping/winterizing services

3. Classic or luxury car storage: $300-1,000 monthly

• Climate-controlled spaces command highest rates
• Security system inclusion mandatory
• Car enthusiast communities ensure steady demand
• Potential for added revenue from detailing/maintenance services

4. Seasonal recreational vehicles: $100-300 monthly

• ATVs, jet skis, snowmobiles
• Peak rates during off-season months
• Higher rates in tourist/recreation areas
• Package deals for multiple vehicles

Advantages

• Higher profit margins than traditional storage
• More stable, long-term tenants
• Less turnover than regular storage units
• Growing market with increased recreational vehicle ownership
• Limited competition in most areas
• Minimal daily management is needed

Disadvantages

• Higher insurance requirements
• Significant initial investment for climate control
• May require specialized security measures
• Seasonal fluctuations in some markets
• Could need wider doorways/higher ceilings

Tips for Success

• Install comprehensive security systems
• Offer basic maintenance packages
• Provide 24/7 access through automated systems
• Partner with local dealers for referrals
• Consider offering washing/cleaning stations
• Install cameras and individual unit alarms
• Create clear contracts regarding liability

6. Wind Farm Leasing

Wind energy companies lease land from property owners to install wind turbines, offering another green energy passive income opportunity. This option is particularly attractive in areas with consistent wind patterns, such as the Great Plains states, Texas, and parts of the Midwest.

Income Potential

1. Per turbine payments: $4,000-8,000 annually

• Additional payments for access roads and transmission lines
• Some contracts offer percentage of power sales
• Lease terms typically 30-50 years
• Annual escalators common

2. Land lease payments: $3,000-7,000 per megawatt of capacity

• Varies significantly by location and wind resources
• Higher rates for prime wind locations
• Additional compensation for substations or maintenance buildings
• Option payments during development phase

Advantages

• Among highest per-acre payments for land use
• Most agricultural activities can continue
• Minimal impact on total usable acreage
• Long-term income security
• May include free or reduced-cost electricity
• Can diversify farm/ranch income

Disadvantages

• Requires substantial acreage
• Wind resource assessment needed
• Construction period can be disruptive
• Visual and noise impact

Tips for Success

• Get independent assessment of wind resources
• Join with neighboring landowners for better negotiating power
• Understand setback requirements and local regulations
• Consider impact on current land use
• Work with an attorney experienced in wind leases
• Research developer’s track record and financial stability

7. Rent Out Items for People to Use

Offer items you own, like tools, specialized equipment, or even your car, for rent to others. This can include anything from gardening tools to camping gear.

Income Potential

1. Equipment and tools: $25 to $150 per day per item

• Details: High-demand items like power tools, cameras, and drones can be rented out for substantial daily rates if they’re highly specialized and in need.

2. Vehicles: $40 to $100 per day

• Details: Renting out vehicles, including cars and recreational vehicles, can be profitable, and the more specialized the vehicle the more you can likely charge.

Advantages

• Income from unused assets: You can earn money from items that would otherwise be in a garage or closet, such as tools, sports equipment, or a vehicle.
• Flexibility: You can set your terms and prices and adjust them based on demand.
• Market reach: Online platforms can help you reach a wide audience looking to rent various items.
• Potential tax benefits: You may be able to deduct certain expenses, such as maintenance, insurance, and depreciation, from your taxes.
• Sharing economy benefits: Renting out your vehicle and other items contributes to a more sustainable sharing economy, reducing the overall number of cars on the road.

Disadvantages

• Wear and tear: Frequent use by renters can lead to increased maintenance or repair costs.
• Availability: You’ll need to manage the availability of your items to avoid having them rented out when you need them.
• Liability: Renting out one’s belongings can result in damage or loss, so appropriate insurance coverage is important.
• Storage space: You’ll need a safe and secure place to store your rental items when they’re not in use.

Tips for Success

1. Research popular rental items in your area to ensure a steady stream of customers.
2. Invest in durable, high-quality items that can withstand repeated use to minimize maintenance and replacement costs.
3. Create detailed rental agreements: Your rental contracts should clearly outline terms, including rental period, fees, deposits, and liability waivers to protect your business.
4. Offer excellent customer service: Respond promptly to inquiries, maintain open communication, and ensure items are clean and well-maintained to encourage repeat business and positive reviews.

8. Real Estate Investment Trusts (REITs)

REITs allow investors to buy shares of a fund of multiple commercial properties. They offer higher yields than individual bonds but come with management fees. REITs can also earn more or less money depending on interest rates and the state of the real estate market.

Income Potential

• Dividends: 1% to 10% or more annual yield
• Details:

Advantages

• Exposure to the real estate market without direct property ownership: REITs allow investors to gain exposure to the real estate market without the need to directly own, manage, or finance individual properties, making it a more accessible and hands-off approach to real estate investing.
• Professionally managed portfolios: REITs are typically managed by experienced real estate professionals who are responsible for property acquisition, management, and tenant relations, providing investors with access to expertise and resources they may not have on their own.
• Potential for dividend yields and capital appreciation: REITs are required to distribute at least 90% of their taxable income to shareholders in the form of dividends, which can result in higher dividend yields than other investment vehicles.
• As the table below shows, REITs are doing well after a couple of years of difficulty when the real estate market was still getting through its pandemic-era pause and the aftermath with higher interest rates. It’s again comparing well with the S&P 500 index, a standard comparison for seeing how well investments are doing.

Disadvantages

• Sensitivity to interest rate fluctuations and economic conditions: REIT performance can be impacted by changes in interest rates and overall economic conditions since higher interest rates can make REIT dividends less attractive, while economic downturns can lead to decreased property values and rental income.
• Lack of control over individual property decisions: As a REIT investor, you have no direct control over the specific properties in the REIT’s portfolio or the management decisions made by the REIT.
• Potential for high management fees: Some REITs may charge high management fees, which can eat into investor returns and make them less attractive compared to other investment options with lower fees.

Tips for Success

1. Before investing, thoroughly research and compare different REITs based on their portfolio composition, management team, financial performance, and dividend history to identify those that align with your investment goals and risk tolerance.
2. Spread your REIT investments across different property types (such as residential, commercial, or healthcare) and geography to diversify your risk.
3. Consider investing through a REIT exchange-traded fund that holds a basket of different REITs.
4. Monitor market conditions and adjust your investments as needed.

9. Bonds and Bond Funds

Bonds, bond ladders, and bond funds are popular investment vehicles that can provide investors with a predictable stream of income and potentially lower risk compared with stocks.

Income Potential

1. Government and corporate bonds: 2% to 5% annual yield

• Details: Bonds provide a stable and predictable income stream. Government bonds are generally safer but offer lower yields, while corporate bonds can offer higher returns with increased risk.

2. Bond funds: 2% to 6% annual yield

• Details: Bond funds pool money from multiple investors to buy a diversified portfolio of bonds. They offer higher yields than individual bonds but come with management fees.

Advantages

• Lower risk compared with stocks: Bonds and bond funds are generally considered to be less risky than stocks.
• Predictable income stream: Bonds and bond funds provide a more stable and predictable income through interest payments, and are less prone to the same level of market volatility.
• Potential for capital preservation: Bonds and bond funds can offer the potential for capital preservation, as the principal value of the bond is typically repaid to the investor at maturity, assuming the issuer does not default on their obligations.

Disadvantages

• Lower potential returns than stocks: While bonds and bond funds offer greater stability and predictability compared with stocks, they also typically provide lower potential returns over the long term, which can impact the overall growth of an investor’s portfolio.
• Interest rate risk: Bond prices have an inverse relationship with interest rates, meaning that as interest rates rise, bond prices generally fall, and vice versa. This interest rate risk can lead to potential losses for bondholders, particularly those with longer-term maturities.
• Credit risk: Bonds and bond funds are subject to credit risk, which is the risk that the bond issuer may default on their payments or fail to repay the principal at maturity. This risk is higher for lower-quality, high-yield bonds compared with investment-grade bonds.

Tips for Success

1. To manage risk, diversify your bond investments across a range of issuers, sectors, and maturities, rather than concentrating your holdings in any single area.
2. Consider laddering your bond portfolio. This involves investing in bonds with different maturity dates to mitigate interest rate risk and ensure a steady stream of income over time.
3. To minimize credit risk, focus on investing in high-quality, investment-grade bonds from reputable issuers with strong credit ratings.
4. Monitor your bond investments regularly and adjust your portfolio as needed based on changes in interest rates, credit quality, or your individual financial goals and risk tolerance.

10. Dividend-Paying Stocks

Dividend-paying stocks provide investors with a steady income stream through regular payments, which can be reinvested or used to supplement other income sources.

Income Potential

• Dividend income: 2% to 7% annual yield

Advantages

• Potential for capital appreciation: Besides dividend payments, dividend-paying stocks may also appreciate over time.
• Liquidity and flexibility: Dividend-paying stocks are often traded on major stock exchanges, giving investors the liquidity and flexibility to buy and sell shares to manage their portfolios or access their funds.
• You can let experienced fund managers do the work for you: Fund managers like ProShares provide exchange-traded funds (ETFs) whose shares you can buy. They do the work of finding and weighing the right proportion of the fund to give to so-called “dividend aristocrats”—those that have grown their dividends for 25 years of more. When you buy a share in the ETF, then, you’re indirectly getting their pick of stocks that have the longest track records of paying income to shareholders.

Disadvantages

• Volatility: Stock prices can be volatile and unpredictable. Like all stocks, the prices of dividend-paying stocks can be subject to market volatility.
• Unpredictable: Dividend payments are not guaranteed. While dividend-paying companies aim to maintain or increase their dividend payments over time, there is no guarantee that they will continue.
• Learning curve: It requires research to choose the right stocks. Investing in dividend-paying stocks requires careful study and analysis to identify companies with strong financial fundamentals.

Tips for Success

• Invest in well-established, financially stable companies with a history of paying dividends.
• Diversify your portfolio across different sectors and industries.
• Reinvest dividends to benefit from compound growth.
• Monitor your investments regularly and adjust your portfolio as needed.

11. Peer-to-Peer Lending

Lending money through peer-to-peer lending platforms like LendingClub and earning interest can earn you more than you would from a traditional savings account.

Income Potential

• Interest earnings: 4% to 12% annual return
• Details: Peer-to-peer lending platforms allow individuals to lend money to others in exchange for interest payments. The returns depend on the risk level of the loans.

Advantage

• Higher returns: Peer-to-peer lending can offer higher returns compared with traditional savings accounts or bonds
• Diversification: By lending to multiple borrowers, you can spread your risk across various loans and minimize the impact of defaults.
• Low barrier to entry: Most peer-to-peer lending platforms have low minimum investment requirements, making them accessible to a wide range of investors.
• Direct impact: Your investment can directly support individuals or small businesses in need of financing that you wish to support for reasons beyond generating income for yourself.

Disadvantages

• Risk of borrower default: Borrowers may always default on their loans, which could lead to a loss of invested capital.
• Lack of liquidity: Once you invest in a loan, your money is typically tied up until the loan is repaid, which can take several years, limiting your access to funds.
• Platform risk: The success of your investments depends on the stability and reliability of the peer-to-peer lending platform you use.

Tips for Success

1. Assess risk carefully: Thoroughly review borrower information, including credit scores, income, and debt-to-income ratios, to assess the risk of each loan.
2. Research and compare different peer-to-peer lending platforms, considering their track record, default rates, and investor protections.
3. Begin with small investments to familiarize yourself with the platform and the lending process before committing larger amounts of money.

12. Index Funds

Index funds are among the most popular investments (see the chart below), with passive exchange-traded and mutual funds offering easy ways to earn passive income.

Income Potential

• Dividend and capital gains: 7% to 20%+ annual return
• Details: Index funds provide a diversified investment in the stock market. The returns depend on market performance. For example, in 2023, the S&P 500 grew by about 26%, but the year before, it was down about 18%

Advantages

• Broad market exposure and diversification: Index funds are designed to track a specific market index, exposing investors to a wide range of stocks or bonds in a single investment.
• Low costs and fees: Index funds typically have lower expense ratios than actively managed funds, aiming to mimic an index’s performance rather than outperform it.
• Simplicity: Investing in index funds is straightforward and requires minimal research or expertise, making it accessible to many investors.

Disadvantages

• Limited control over individual holdings: When investing in an index fund, you have no control over the specific stocks or bonds included in the fund, as the underlying index determines the fund’s composition.
• Exposed to overall market fluctuations and downturns: As index funds track the performance of an entire market, they are subject to the same fluctuations and downturns as the broader market, providing little downside protection.

Tips for Success

1. Choose index funds with low expense ratios and a proven track record.
2. Put money into your index fund regularly and consistently, regardless of market conditions.
3. Maintain a long-term investment horizon and avoid trying to time the market.

13. Create an Online Course

Share your expertise by designing and selling courses in your field of knowledge. Platforms like Udemy are a popular choice. While putting a course up with lectures, quizzes, and so on is a lot of work upfront, some courses resonate and earn their creators money for years.

Online courses can offer depressingly low income, given the work and expertise you put into them, or highly profitable, especially if they cover in-demand skills or topics. Platforms like Udemy and Teachable facilitate course creation and sales. Some platforms offer subscription models where users pay a monthly fee for access to all courses. You get a small percentage of this.

Income Potential

• Course sales and subscriptions: $50 to $500 per course

Advantages

• Scalability: Once created, your course can be sold to unlimited students at no additional cost.
• Flexibility: You can design the course around your schedule and update it as needed.
• Establish your authority: Teaching a course can set you up as an expert.

Disadvantages

• Time investment: Creating a high-quality course requires a lot of time upfront.
• Market saturation: Depending on your niche, there may be a lot of competition, including free courses, making it harder to stand out.
• Technical skills needed: Developing an online course may require video production, audio editing, and course platform management knowledge.

Tips for Success

1. Choose a topic you’re passionate about and is in demand in the market.
2. Create engaging content with a mix of video, text, and interactive elements to keep students engaged.
3. Provide support and engagement by providing students with resources, Q&A sessions, or a community forum to foster engagement and support their learning journey. This will also leave them wanting to recommend your course to others.

14. Automated Dropshipping

Run an ecommerce store without holding inventory using a dropship model. This involves selling products without holding inventory. The income depends on the products and marketing efforts.

Income Potential

• Profit from sales: $500 to $10,000+ per month

Advantages

• Low startup costs: Automated drop-shipping requires minimal upfront investment, as you don’t need to purchase inventory or manage a physical warehouse.
• Hands-off fulfillment: Once an order is placed, your supplier handles the packaging and shipping, allowing you to focus on marketing and customer service.
• Wide product selection: You can offer a broad range of products without the need to store them yourself, providing more options for your customers.
• Scalability: You can scale your business quickly, adding new products and suppliers without significantly higher costs.

Disadvantages

• Lower profit margins: Because you’re purchasing products from a supplier at retail prices, your profit margins may be lower than traditional inventory-holding models.
• Limited power over the supply chain: You depend on your suppliers for product quality, availability, and shipping times, which can mean customers become dissatisfied for reasons beyond your control.
• Intense competition: Automated dropshipping has a low barrier to entry, leading to high competition and potential price wars with other sellers.

Tips for Success

• Partner with reputable suppliers who provide quality products and reliable shipping.
• Ensure your online store is user-friendly, with clear product descriptions and an easy checkout.
• Identify niche products with solid demand and low competition to differentiate your store and attract targeted customers.

15. Upload Content on YouTube

You can take your favorite interests, like travel, and use social media to earn extra income. “If you enjoy travel…writing a travel blog takes time, energy, and commitment—you could consider creating a YouTube channel,” Cheng said. 

While most who earn money from YouTube have a constant presence, you may have an idea for content that fits a perennial need and can earn you income from ads, sponsorships, or affiliate marketing.

Income Potential

• Ad revenue and sponsorships: $1 to $5 per 1,000 views
• Details: YouTube content creators earn money through ad revenue and sponsorships. The income depends on the number of views, engagement, and niche.

Advantages

• Global audience: YouTube’s vast reach allows you to connect with viewers worldwide.
• Diverse revenue streams: You can earn money through ad revenue, sponsorships, and merchandise sales.
• Creative freedom: You can create content that aligns with your interests and expertise.
• Low barrier to entry: Creating and uploading content on YouTube is free and relatively easy, requiring only a camera, essential editing software, and an internet connection.

Disadvantages

• Time and effort: Building a successful channel requires significant time and effort, especially in the beginning.
• Algorithm changes: YouTube’s search methods can be unpredictable, affecting your video’s visibility and earnings.
• Competition: The platform is highly competitive, with many creators vying for viewers’ attention.

Tips for Success

1. Regularly upload high-quality content to keep your audience engaged and attract new subscribers.
2. Use keywords, tags, and compelling thumbnails to improve your videos’ visibility in search results.
3. Interact with your audience through comments, live streams, and social media to build a loyal community.
4. Find your niche: Identify your content’s specific niche or target audience to help you stand out and attract dedicated viewers.

16. Create an App

Develop a mobile app and generate income through sales or ads. This requires some technical skill but can be highly rewarding if the app meets a market need.

Creating a successful app can generate significant income through sales and in-app purchases. The income depends on the app’s popularity and monetization strategy. Many apps, of course, find little interest given the many found in the app stores.

Income Potential

• Income Range: Extremely variable

Advantages

• High demand: The global app market continues to grow, with millions of users downloading apps daily, providing a large potential customer base.
• Recurring revenue: If your app offers in-app purchases, subscriptions, or ads, you can generate a steady stream of passive income.
• Scalability: Once developed, an app can be easily distributed to a global audience through app stores, allowing for rapid growth and scaling.
• Brand building: A successful app can help establish your brand, increase customer loyalty, and open up ideas for future products or services.

Disadvantages

• High development costs: A high-quality app can be expensive, especially if you hire a professional development team or require complex features.
• Intense competition: The app market is highly competitive, with millions of apps available, making it challenging to stand out and attract users.
• Continuous updates and maintenance: Apps require ongoing updates, bug fixes, and improvements to keep up with changing user expectations and technology advancements.
• Marketing challenges: Promoting your app and acquiring users can be difficult and costly, often requiring a significant marketing budget.

Tips for Success

• Develop an app that solves a specific problem, fills a market gap, or offers a unique feature to differentiate yourself from competitors.
• Research your target audience, competitors, and market trends to ensure your app meets user needs and has a viable market.
• Focus on the user experience and create a seamless, intuitive, and engaging platform that will prompt positive reviews.
• Use app store optimization techniques like keyword optimization and compelling descriptions to improve your app’s visibility and discoverability.

17. AI-Backed Tools and Apps

Create AI-driven applications and tools that create revenue through automated language learning tools, tutoring apps, or games. You can also earn through in-app purchases.

Income Potential

• Subscription revenue: $5 to $100 per user per month

Advantages

• Easier distribution: Mobile app stores like Google Play and the App Store make it easy to distribute your apps to a global audience.
• Increased efficiency and productivity: AI-backed tools and apps can automate repetitive tasks, streamline processes, and provide intelligent recommendations, enabling users to work more efficiently and productively.
• Personalized user experiences: AI-powered tools and apps can learn from user behavior and preferences to provide customized recommendations, content, and interfaces.

Disadvantages

• Intense competition: The mobile app market is highly saturated, with thousands of new releases daily, making it challenging to stand out.
• Rapidly changing trends: Mobile trends can shift quickly, requiring you to adapt and innovate to stay relevant constantly.
• Dependence on data quality and availability: The effectiveness of AI-backed tools and apps relies heavily on the quality and availability of relevant data.

Tips for Success

• Before developing an AI-backed tool or app, clearly define the problem you are trying to solve and ensure that AI is the most appropriate solution for addressing that problem.
• Select the best AI techniques and algorithms for your specific use case, considering factors such as the type of data available, the desired output, and the interpretability requirements.
• Incorporate social elements like leaderboards, challenges, or multiplayer modes to encourage more user interaction and engagement.
• Conduct thorough keyword research, create compelling app store descriptions and screenshots, and encourage user ratings and reviews to improve visibility.

18. Design Custom Products

Designing and selling custom products like t-shirts, mugs, and phone cases can be profitable. Platforms like Redbubble, Etsy, Shopify, and Teespring facilitate this process.

Income Potential

• Product Sales: $5 to $50 per item

Advantages

• Creativity: This avenue lets you express your creativity and design unique products that cater to niche markets.
• Scalability: Print-on-demand services allow you to sell custom products without the need for inventory, making it easy to scale.
• Brand building: You can establish your own brand and build a loyal customer base around your designs.

Disadvantages

• Market saturation: Depending on your niche, your product market might be highly saturated, with many designers competing for attention.
• Marketing: Effective promotion is crucial to stand out and attract customers to your products.
• Production costs: Depending on the products you design, production costs can be high, especially for small batches or one-off items.

Tips for Success

• Focus on a specific niche or target audience to create designs that resonate with them.
• Use social media platforms to showcase your designs and engage with potential customers.
• Develop a strong brand identity, including a logo, color scheme, and messaging, to make your custom products recognizable and memorable.
• Streamline your design process using templates, mockups, and design software to work efficiently and consistently.
• Research and partner with reputable suppliers or manufacturers who can produce high-quality products based on your custom designs.

19. Affiliate Marketing

Affiliate marketing involves promoting products and earning a commission on sales. The income depends on the number of sales and the commission rate.

Income Potential

• Commission: $100 to $10,000+ per month

Advantages

• Low startup costs: You can start with minimal investment, as you don’t need to create your own products.
• Flexibility: You can promote products or services that align with your interests, focus, or target audience, and work on your own schedule.

Disadvantages

• Competition: The affiliate marketing space can be competitive, with many marketers vying for the same audience.
• Dependence on other parties: Your income is tied to the performance and reliability of the affiliate programs you join.
• Building traffic: Generating consistent traffic to your affiliate links requires effective marketing and SEO strategies.

Tips for Success

• Select products or services relevant to your audience and have a good reputation.
• Track and optimize: Use tracking tools to monitor the performance of your affiliate links and adjust your strategies based on what works best.
• Promote products or services that you genuinely value and align with your niche or target audience to build trust and credibility.

20. Sell Stock Photos

“If you enjoy travel, you can consider taking pictures and selling them online,” Cheng suggested. You can earn royalties by selling your photography to stock photo websites like Shutterstock or Adobe Stock.

Income Potential

• Photo sales: $0.01 to $2 or more per photo per sale
• Details: Selling stock photos can generate passive income, but the earnings depend on the quality and demand for the photo.

Advantages

• Low barrier to entry: If you already have a camera and an eye for photography, you can start selling stock photos without significant upfront costs.
• Artistic variety: You can capture a wide range of subjects, from landscapes and nature to people and events, catering to various customer needs.
• Recurring income: Popular photos can be sold multiple times, providing ongoing passive income from a single image.

Disadvantages

• Lots of competition: The stock photography market is saturated, with millions of images available, making it challenging to stand out and generate significant sales.
• Lower prices: Stock photo prices are often lower than commissioned photography, which can limit your income potential per image.
• No guaranteed sales: There’s no guarantee that your photos will sell, and you may need to submit a large volume of images to generate a steady income.
• Intellectual property concerns: When selling stock photos, you typically transfer some or all rights to the buyer, limiting your control over how the images are used.

Tips for Success

1. Work on developing a distinctive photographic style that sets your images apart from the competition and attracts potential buyers.
2. Study the types of images that are in high demand on stock photography platforms and cater to those needs.
3. Use relevant, keyword-rich titles, descriptions, and tags to make your photos more discoverable to potential buyers.
4. Submit to multiple platforms such as Shutterstock, iStock, and Getty Images.

21. License Your Music

Licensing music for use in films, commercials, and other media can be profitable. The income depends on the demand for the music. In the age of Spotify and AI musical creation, you’ll have to find a niche that isn’t easily repeatable.

This can be through platforms like AudioJungle or by directly licensing to content creators and businesses. “One of my clients’ passions is music,” Cheng said. “In retirement, he is earning passive income from creating and selling stock music.” 

Income Potential

• Licensing fees: Negligible to $5,000+ per license

Advantages

• Passive income stream: Once your music is licensed, you can earn royalties each time it is used, providing a passive income stream.
• Exposure and recognition: Licensing your music can increase exposure and recognition for your work, potentially opening up new opportunities.
• Retain ownership: When licensing your music, you typically retain ownership of the copyright, giving you control over how your music is used.

Disadvantages

• Unpredictable income: Royalty payments from music licensing can be unpredictable and vary significantly depending on the usage and popularity of your music.
• Upfront time and effort: Creating high-quality, licensable music requires significant time, effort, and resources upfront.
• Competitive market: The music licensing market is highly competitive, with numerous artists vying for placement prospects.

Tips for Success

• Develop a varied catalog of high-quality music in different styles, moods, and tempos to appeal to a wide range of licensing opportunities.
• Ensure you have clear ownership and rights to license your music and consider registering your copyrights for added protection.
• Ensure your music is well-produced, mixed, and mastered to meet the quality standards expected by music supervisors and clients.
• Include accurate and detailed metadata and tags for your music files to make them easily searchable and discoverable by potential licensees.
• Join a performing rights organization like ASCAP, BMI, or SESAC to collect royalties.

22. Advertise on Your Car

Turn your vehicle into a moving billboard for businesses using services like Wrapify or Carvertise.

Income Potential

• Ad revenue: $100 to $400 per month
• Details: Companies pay car owners to display advertisements on their vehicles. The income depends on the advertiser and the amount of driving done.

Advantages

• Very little to do: Once your car is wrapped with advertisements, you can earn money simply by driving your daily routes, requiring a little extra effort.
• No upfront costs: Most companies that offer car advertising opportunities cover the costs of designing, producing, and installing the ad wraps on your vehicle.
• Flexibility: You can choose the length of the advertising contract and often have the option to pause or stop the agreement if your circumstances change.

Disadvantages

• Limited control over ad content: You may have little say in the type of ads displayed on your car, which could be for products or services you don’t personally endorse.
• Damage to vehicle paint: Improperly installed or low-quality ad wraps can potentially damage your car’s paint or leave residue when removed.
• Altered car appearance: Most obviously, driving a car covered in advertisements can draw attention and may not suit everyone.

Tips for Success

1. Partner with reputable car advertising companies with a track record of timely payments and satisfied drivers.
2. Maintain a clean vehicle in good operational condition to attract more advertising opportunities and higher payouts.
3. Review the advertising agreement thoroughly to understand your obligations, payment terms, and any restrictions on driving habits or locations.
4. Keep accurate driving records to ensure you meet the company’s requirements and maximize your earnings.
5. When driving a car with advertisements, be prepared for passersby’s attention and explain the opportunity to interested individuals.

23. Flip Retail Products

Buy products at a lower price and resell them for a profit, commonly through online marketplaces like eBay or Amazon.

Income Potential

• Profit from sales: $100 to $5,000+ per month
• Details: Buying products at a discount and selling them at a profit. The income depends on the products and market demand.

Advantages

• Flexibility: Start small and scale up as you gain experience and capital.
• Variety: There’s a wide range of products to flip, from vintage clothing to electronics, allowing you to specialize in niches that interest you or where you have expertise.
• Low startup costs: Flipping retail products often requires only a small investment upfront. You can begin by selling items you own or purchasing low-cost items to resell.

Disadvantages

• Time: Flipping requires time to source, list, and ship and handle customer inquiries.
• Managing inventory: Flipping retail products requires storing, organizing, and tracking your stock, which can be challenging if you have limited space or a large volume of items.
• Market saturation: Popular products may have high competition from other sellers, making it difficult to stand out.
• Shipping and returns: You’ll need to handle packaging, shipping, and potential returns or refunds, which can be costly and time-consuming.

Tips for Success

1. Begin with a small investment in products you’re familiar with to minimize risk.
2. Sell on various platforms like eBay, Amazon, or Facebook Marketplace to reach a wider audience.
3. Ensure the products you’re flipping are in good condition and accurately described to maintain a positive reputation.
4. Respond immediately to customer inquiries, ship items quickly, and handle returns or refunds professionally to build a positive reputation and encourage repeat business.
5. Stay organized and track your finances and inventory.

24. Create an Ecommerce Subscription Box

Offer a subscription service for a curated box of goods, focusing on a specific focus like beauty products, food items, or your favorite hobby.

Income Potential

• Subscription revenue: $20 to $100 per subscriber per month
• Details: Subscription boxes provide recurring revenue. The income depends on the number of subscribers and the box’s price

Advantages

• Predictable revenue: Subscription boxes provide a recurring revenue stream, making it easier to forecast income and plan for growth.
• Customer loyalty: Subscription boxes foster customer loyalty by providing a unique and personalized experience, leading to higher retention rates and lower customer acquisition costs.
• Cross-selling opportunities: Subscription boxes enable you to introduce customers to new products or brands, giving you prospects for cross-selling and partnerships with other businesses.
• Reduced decision fatigue: Customers enjoy the convenience and surprise element of receiving curated products without having to make multiple purchasing decisions.

Disadvantages

• Shipping costs: Shipping physical products on a regular basis can be costly, especially if you offer free shipping as a perk for subscribers.
• Product sourcing challenges: Consistently finding new, high-quality products that align with your subscription box theme can be challenging and time-consuming.
• Managing your inventory: Predicting demand and managing inventory can be difficult, as you need to ensure you have enough products to fulfill subscriptions without overstocking.
• Competitive market: The subscription box industry is increasingly competitive, making it harder to differentiate your box and attract subscribers.
• Product curation: Continuously sourcing new and interesting products to keep subscribers engaged can be challenging.

Tips for Success

1. Focus on a specific theme for your subscription box to target a well-defined audience and differentiate yourself from competitors.
2. Establish strong relationships with product suppliers to secure favorable pricing, exclusive items, and reliable fulfillment.
3. Provide a range of subscription options, such as monthly, quarterly, or annual plans, and allow subscribers to skip or pause deliveries to reduce churn.
4. Create a memorable unboxing experience with personalized notes or bonus items to create a lovely unboxing experience that customers might share over social media.

25. Buy a Vending Machine

Buy and place vending machines in strategic locations for passive revenue. Ideal locations include high-traffic areas like malls, offices, or schools.

Income Potential

• Vending machine revenue: $50 to $500 per month per machine
• Details: Vending machines can generate steady income. The income depends on the machine’s location and products.

Advantages

• Low startup costs: Compared with other businesses, vending machines have relatively low upfront costs, making them an accessible passive income option.
• Low time commitment: Once set up, vending machines require minimal daily time investment, mainly for restocking and maintenance.
• Scalability: As your vending machine business grows, you can easily add more machines in new locations to increase your passive income.

Disadvantages

• Location-dependent: The profitability of your vending machine largely depends on its location, with high-traffic areas commanding higher costs and competition.
• Maintenance and restocking: While low-maintenance, vending machines still require regular restocking, cleaning, and occasional repairs, which can be time-consuming.
• Handling cash and security: Vending machines can be targets for theft or vandalism, requiring you to implement security measures and collect cash regularly.
• Product expiration and spoilage: If you sell perishable items, you’ll need to monitor expiration dates and potentially dispose of unsold products, influencing your profits.

Tips for Success

1. Select products with high demand, good profit margins, and long shelf lives, and consider offering unique or niche items to stand out from competitors.
2. To attract more customers, get reliable, energy-efficient vending machines with modern payment options like credit cards or mobile payments.
3. Set up a schedule for restocking, cleaning, and maintaining your machines to ensure they remain in good working condition and appealing to customers.

Passive Income According to the IRS

Passive income is revenue you get from neither your portfolio nor wages and does not require an ongoing effort. The term “passive income” is frequently used loosely for any revenues, including investment returns, that appear to require little or no effort by the one receiving it.

The IRS, which gets the last word on this when you’re filing your taxes, rules out the following as passive income: “interest, dividends, annuities, and royalties not derived in the ordinary course of a trade or business,” income tax refunds, and income derived from the cancellation of debt.

Meanwhile, the agency defines passive or unearned income as “net rental income,” income from a “business in which the taxpayer does not materially participate,” and, in some cases, self-charged interest.

When you record a loss on a passive activity, only passive-activity profits can have their deductions offset instead of the income as a whole. It would be prudent to ensure that all your passive activities were classified that way to make the most of the tax deduction. These are allotted and applied to account for the next year’s earnings or losses.

To save time and effort, you can group two or more passive activities into one larger activity if you form an “appropriate economic unit,” according to the IRS. When you do this, instead of providing material participation in several activities, you only have to provide it for the activity as a whole.

In addition, if you include several activities in one group and have to dispose of one of those activities, then you’ve only done away with part of a larger activity as opposed to all of a smaller one.

The organizing principle is that if the activities are located in the same geographic area, if the activities have similarities in the types of business, or if the activities are somehow interdependent, they can be grouped.

Let’s deal with the specific types of income with special tax considerations:

Businesses in which you don’t “materially participate”

Investing in a business where you don’t materially participate offers the potential for passive income. This typically involves putting capital into a venture without involvement in its day-to-day operations or management decisions. The key is that your role is not active; your involvement is primarily financial.

This kind of investment can appeal to those who want to diversify their income streams but don’t have the time to engage in a business themselves. The returns are usually generated through profit-sharing, depending on the entity’s business, allowing you to benefit from its activity without the demands of actively managing a business whose trade you may know little about.

Here’s an example. Suppose you put $500,000 into a candy store with the agreement that the owners would pay you a percentage of the earnings. This would be considered passive income as long as you do not participate in the operation of the business beyond investing.

If you help manage the company or take up the tasty role of eating each type of candy to recommend what to stock, your efforts may count as “material “participation.”

Here are the IRS’s criteria for material participation:

• If you’ve dedicated more than 500 hours to a business or activity from which you’re profiting
• If your participation in an activity has been “substantially all” of the participation for that tax year
• If you’ve participated up to 100 hours, which is at least as much as any other person involved in the activity

Rental properties

Rental properties are defined as passive income with a couple of exceptions. If you’re a real estate professional, any rental income that you’re making counts as active income. If you’re self-renting, meaning that you own a space and rent it out to a corporation or partnership where you conduct business, that also doesn’t constitute passive income. (That’s unless the lease was signed before 1988.)

Income from leasing land does not qualify as passive income, either. However, a landowner can benefit from passive income loss rules if the property nets a loss during the tax year.

Self-charged interest

When money is lent to a partnership or an S corporation acting as a pass-through entity (essentially, a business designed to reduce the effects of double taxation) by the corporation’s owner, the interest income on that can qualify as passive income.

The Bottom Line

Passive income can be derived over time using different means. From renting out property and leveraging automated technologies to creating digital content, these avenues offer the potential for sustainable financial growth.

While each method carries its own set of risks and rewards, the key to successful passive income lies in initial strategizing and occasional monitoring. As we move further into an era where traditional income models are being supplanted by gig and other non-traditional forms of work, many are finding they need more flexible income streams as they work toward a more secure financial foundation for themselves.