Passive Income Opportunities

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on April 27, 2023

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Passive Income Definition

The Internal Revenue Service (IRS) views passive income as businesses or trade activities that demand no material participation from an individual.

Under this definition, the IRS has established several criteria for identifying material participation. For instance, an activity is classified as material participation if more than 500 hours of work in a year has been dedicated to the project.

For a complete list of the criteria, you may check here.

Passive income includes dividends earned from stocks, interest from savings accounts, and rental income from properties you own but do not actively manage.

In contrast to passive income, active income is generated from doing actual work. This can include both full-time jobs and part-time jobs. If you are an employee, active income is the money you earn from working.

Passive Income Opportunities

Let us look at some of the finest ways to generate money without working a traditional job.

passive income opportunities

1. High-Yield Savings Account

A high-yield savings account is a kind of bank account that offers a higher interest rate than a traditional savings account. This means you will earn and generate more money on your deposited funds over time.

How: Look around for the best interest rates before opening a high-yield savings account. Once you find an account you prefer, deposit your money and start earning interest.

Pros: This type of savings account can provide a modest return on investment. It is also a safe and low-risk way to invest money.

Cons: The interest rates may be lower than other investment options. Also, funds may not be accessible for a period of time.

Tips: Many online banks offer high-yield savings accounts with competitive interest rates. Before creating an account, read the terms and conditions carefully to avoid hidden fees.

2. Stock/Bond Investments

When purchasing stocks or bonds, you invest in a company and loan them money. In return, the company pays you periodic dividends (with stocks) or interest payments (with bonds).

Over time, the value of your investment may increase, providing you with capital gains when you sell.

How: Work with a financial advisor to help select the right stocks or bonds for your portfolio. Once an investment has been made, monitor it regularly to ensure it performs as expected.

Pros: These types of investments can steadily provide a stream of income, which has the potential to grow in value over time. They can easily be sold if needed and income is not dependent on any action other than the original financial investment.

Cons: However, it is riskier than other investment options because it is affected by many factors, such as inflation. Furthermore, it may not provide immediate income as these investments may need time to grow.

Tips: Consider investing in stocks or bonds with a dividend yield or interest rate higher than average. Also, be prepared to hold your investment long-term to minimize volatility.

3. Rental Property

You may buy a house, do repairs or modifications, and then rent it out to tenants. After it has been rented out, you will have very little work to perform. Meanwhile, your rental revenue will just be transferred into your bank account each month.

How: Find tenants through an online marketplace. Alternatively, you may also contact property management companies in the area. To protect your investment in the property, you can request a security deposit and purchase insurance.

Pros: This activity can give a stable monthly income which can increase in value over time. Thus, it can be used to supplement retirement income.

Cons: It demands an initial investment and it can be time-consuming to operate. In some cases, it is challenging to attract occupants.

Tips: Before selecting a price for your rental property, study the market rent in your location. Also, be prepared for periodic repairs and maintenance that may be required.

4. Affiliate Marketing

Affiliate marketing involves promoting other companies’ products or services on a website or blog. You earn a commission every time someone purchases these products or services upon your recommendation.

How: Join an affiliate program for products or services you use and recommend. Then, embed affiliate links on your website or blog. You earn a commission whenever someone clicks on the link to make a purchase.

Ensure that your website or blog's contents attract audience members who are likely to be interested in the products or services you promote.

Pros: Affiliate marketing can be a very profitable way to earn money online. It requires little effort once set up and it can be done in addition to other online income streams.

Cons: This option is subject to competition and may require heavy traffic to the website or blog. It can also take time to build up. Thus, commissions may be low at first.

Tips: Choose affiliate products or services that you are familiar with and that would be relevant to your website or blog’s audience. Also, consider promoting multiple affiliate products to increase your earnings potential.

5. Audiobook Recording

One of the latest and most popular forms of passive income is generating money through recording audiobooks. This is a convenient and ideal option if you have a knack for public speaking or storytelling.

How: Make your own recording and sell it on audiobook platforms. Also, you can look for companies that are looking for audiobook narrators. Narrators earn money through royalties every time the audiobook is sold or downloaded.

Pros: Recording can be a fun and creative way to make money. This can be done at the convenience of one's own home.

Cons: An upfront time investment upfront to record the audiobook is necessary. The initial income stream may not reap large profits.

Tips: When choosing what book to narrate, consider picking a title that is popular in your genre or niche. This will greatly help increase the likelihood that your audiobook sells well.

6. Peer-to-Peer Lending

Peer-to-peer lending (P2P) is where individuals lend money to other individuals or businesses through an online platform. Lenders earn interest on the loans and borrowers make payments back with interest.

How: Join a peer-to-peer lending platform like Lending Club or Prosper. Filter the loan applications you want to invest in through criteria such as credit score, loan term, and loan purpose.

Once you have found a loan you want to invest in, funding is as simple as transferring money from your bank account to the lending platform.

Pros: Peer-to-peer lending has a low entry barrier and takes less capital to get started. P2P investors may determine the degree of risk they are comfortable with and choose to whom they can lend money to.

Cons: Mastering the parameters of P2P lending takes time. In addition, the skill to properly assess prospective borrowers is essential.

Tips: Consider investing in multiple loans to spread out your risk. You can also try to choose borrowers who have a history of making timely payments.

7. Online Course Creation

If you have proficiency and expertise in a particular subject, you can create an online course to share your knowledge with others and generate income in the process.

How: Develop a course and upload them on an online platform such as Udemy for possible clients to browse.

Once your course is live, promote it through social media and your website to attract students. When students enroll in your class, they will pay you directly.

Pros: You can work on your course at your own pace. You have complete control over your course content, price, and length. A successful course can generate a recurring income stream for years to come.

Cons: Creating a quality course can be time-consuming. It will require research and planning. You have to make downloadable items, such as templates and recordings, for students to take away.

Tips: When creating your course, consider what topics you are passionate about and have expertise in. Make sure your course has value and is well-organized and engaging.

8. Real Estate Investment Trust (REIT)

A real estate investment trust is a business that owns and manages income-generating real estate. When you invest in a REIT, you can earn dividends from the rental income of the properties it owns without needing to purchase or manage a property yourself.

How: You can purchase shares of a REIT through an investment broker just like you would with any other stock. It is also possible to invest in REIT mutual funds or exchange-traded funds.

Pros: REITs offer high dividend yields and the potential for capital appreciation. There is less volatility in REITs than in the stock market as a whole.

Cons: The overall success of REITs may depend on geographic demands and leasing occupancy. In addition, REITs' above-average payouts are taxed at a higher rate than most distributions.

Tips: Consider investing in a REIT ETF to diversify your portfolio and minimize risk. Spending time doing a lot of research is important before investing in any particular REIT.

9. Online Coaching

If you are an expert in a particular field, you can offer coaching or consulting services to clients online. This could range from topics like business advice to relationship counseling.

How: Use your website, social media platforms, or an online marketplace to promote your coaching or consulting services. When you land a client, you can communicate with them via phone, video chat, or email to deliver your services.

Pros: You can bring in a lot of money if you are good at what you do. Moreover, this is a highly flexible way to make money since you can set your own hours.

Cons: It can be arduous and challenging to find clients since you need to be able to market yourself effectively. There is also the potential for client cancelations or no-shows, which can impact your income.

Tips: Offer a free consultation to potential clients to show them what you can do, and create a marketing plan to help you attract clients. It is also important to build a strong relationship with your clients so they keep coming back to you.

10. Setting up Vending Machines

A vending machine business is an excellent method to earn passive income. You can place vending machines in strategic locations, such as office buildings or schools. Then, you can stock the machines with the products of your choice and earn money from the sales.

How: There are many ways to get started in the vending machine business. You can buy a machine outright, rent one from a company, or even start your own vending machine business.

Pros: Vending machines are a great way to earn passive income. They are relatively low maintenance and can be placed in high-traffic areas to generate sales.

Cons: Vending machines can be expensive to acquire or rent, and there is always the potential for vandalism. You also need to regularly stock the machines and keep track of inventory, which can be more time-consuming than other forms of passive income.

Tips: Do your research before buying or renting a vending machine. Choose a high-traffic location for your machine and stock it with products that are in demand. Regularly check on your machine to restock it and ensure it is in working order.

11. App Development

If you have a great idea for an app, you can develop it and earn passive income through ads, in-app purchases, or subscription fees.

How: To get started, you will need to come up with an excellent idea for an app and then develop it. Once the app is completed, you can launch it on the App Store or Google Play to start generating sales.

Pros: You can draw a lot of money from an app if it is successful. It is also a comparatively low-cost way to start a business.

Cons: Developing an app can be expensive and time-consuming. There is also no guarantee that your app will be successful.

Tips: Research the market to see if there is a demand for your app idea. Create an effective marketing plan to promote your app. Make sure the app is high-quality and bug-free before launching it.

12. Cryptocurrencies

Cryptocurrencies like Bitcoin can be traded on decentralized exchanges. They are typically used as an investment because they have the potential to appreciate in value.

An individual can earn passive income from cryptocurrencies by investing in them and then selling them when their price goes up.

How: There are many ways to invest in cryptocurrencies. You can buy them directly from exchanges, such as Coinbase or Binance. You can also invest in a cryptocurrency index fund, which gives you exposure to a basket of different digital assets.

Pros: Cryptocurrencies have the potential to generate high returns. They are also relatively easy to trade and store.

Cons: Cryptocurrencies are volatile and can lose value rapidly. They are also not backed by any government or central bank.

Tips: Do your research before investing in any cryptocurrency. Be careful to only invest an amount that you can afford to lose. Consider investing in a cryptocurrency index fund to diversify your portfolio.

13. Online Currency Exchange

You can trade online currencies and earn a passive income. Foreign exchange (Forex or FX) trading involves buying and selling different world currencies in the hopes of making a profit from the price change.

It can be done online through brokerages or trading platforms.

How: You will need to open an account with a broker or trading platform that offers Forex trading. Once you have an account, you can buy and sell different currencies online.

Pros: Forex trading offers the potential for high returns. It is also a relatively easy, flexible and inexpensive way to trade online.

Cons: Forex trading is risky and can result in losses. It is essential for you to have some knowledge of the market before you start trading.

Tips: Do your research before opening a Forex account. Start with a demo account to get some experience before risking real money. Be careful of the risks involved and only trade with an amount you are willing to lose.

14. Stock Photography

If you are talented in photography, you can sell your photos online and earn passive income. There are several available stock photography websites where you may upload your work and sell your photos.

How: To get started, create an account on a stock photography website. Once you have created an account, you can upload your photos and set a price for each one. When someone purchases your photo, you will earn a commission.

Pros: You can make money from your hobby if you are a good photographer. It is also a relatively easy way to make passive income.

Cons: You will need to have high-quality photos to be successful. The competition on stock photography websites is also fierce.

Tips: Take some time to learn about photography and how to take good photos. Make sure you have a strong portfolio of photos before uploading them to a stock website.

15. Flipping Retail Products

You can buy retail products and then sell them for a higher price to earn a profit. This can be done online through websites like eBay or Amazon. You can also do it offline by buying products at garage sales or thrift stores.

How: To get started, you will need to create an account on an online marketplace like eBay or Amazon. After making an account, you can start listing products for sale. When a buyer purchases your product, you will earn a commission.

Pros: Flipping products can be a profitable way to make passive income. It is also a relatively easy way to get started.

Cons: Flipping products is risky since you may not be able to sell them for a higher price. You will also need to be knowledgeable of the market before you start flipping products.

Tips: Do your research before buying any products to flip. Be sure to only purchase products that you are confident you can sell for a higher price. Promote your products on social media to help them sell quickly.

Which Is the Best Passive Income Source?

The ideal passive income source depends on a number of elements, the most important of which are the capital required, the overall size of the opportunity, your interest and ability in the field, the amount needed and the potential to succeed.

The lower the entrance barriers, the more crowded the field of rivals and the lesser the probability of success. As a result, you must measure the opportunity against these variables to determine which passive income plan is ideal for you.

Having a passion for your chosen option might inspire you during the early days when things are likely to be difficult. It can keep you going through the rigorous effort and commitment needed in the initial stages.

Taxes on Passive Income

A passive income can be a terrific way to supplement your income. However, just like other forms of income, it is also subject to taxation.

Passive income is frequently taxed at the same rate as wages from a job. However, deductions can occasionally be used to reduce the burden.

It may be practical to consult with a tax professional for advice on how to avail of deductions and reduce tax responsibilities.

Taxes should not discourage aspiring passive income earners since the benefits often outweigh the costs. A notable example is retail e-commerce. With projected sales of around 8.1 trillion dollars by 2026, it is an outstanding passive income opportunity.

How to Get Started With Passive Income

Choose a Concept.

There are numerous ways to generate passive income, so you will need to narrow down your options before moving forward. It is advisable to start with one passive income stream at first.

Once you have selected a concept, research it thoroughly. This will aid in determining whether or not it is a viable option for you and will offer you a better understanding of the work that will be required to make it successful.

Create a Plan.

After researching and deciding on a concept, the next step is to create a plan. This plan should outline your goals and objectives for generating passive income and should detail the steps you need to take to achieve those goals.

Be sure to include a timeline in your plan so that you can track your progress and measure your success over time.

Implement Your Plan.

Once you have created a plan, it is time to start putting it into action. Allot time and effort into learning the necessary skills, particularly in the early stages.

This will require some work and effort on your part, but if you stick to it and do not give up, you will eventually start to see results.

One of the most important things to remember when implementing your plan is to stay consistent. Passive income does not happen overnight, so it is important to be patient and keep at it even when you do not see immediate results.

Maintain Your Streams of Passive Income.

Once you have established one or more streams of passive income, it is important to maintain them so that they continue to generate money for you over time.

There are many different ways to generate passive income and there is no one-size-fits-all approach to maintaining your streams. However, some general tips can help include staying up to date on industry trends and keeping your marketing efforts fresh.


The Bottom Line

Passive income can be an excellent way to supplement your income. However, it is important to remember that passive income initially requires some work, effort, time, and capital.

When choosing a passive income source, it is important to consider the amount of money or effort you have to spend, the overall size of the opportunity, and the potential to succeed.

There is no foolproof answer when it comes to passive income. The best passive income source for you will depend on your individual circumstances. Overall, passive income can be a great way to build wealth if careful planning and execution are done first.

Passive Income Opportunities FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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