6 Ways to Generate Passive Income


Passive income is money that is earned with little to no continuing work. Billionaires earn it simply by putting their money in the bank and earning interest. Landlords earn it by owning multiple properties and getting a steady stream of rent checks. But passive income isn’t just for those with lots of money—new technologies and business models have put passive income within the reach of millions. Although the name makes it sound easy, setting up a reliable passive income stream can be challenging. Let’s look at the best and most popular ways to get into the passive income game.

1) eBooks

The advent of eBooks means everyone can be an author. People with little to no literary experience have written bestsellers. The Martian, by Andy Weir—an amateur writer—sold millions of copies and became a movie. Yet you don’t have to write a bestselling novel to make a chunk of change on Amazon. Many people who are not professional writers create nonfiction eBooks that solve problems and provide useful information.

When people think about writing a book, they often think about writing fiction—a dramatic mystery, an adventure, or a book filled to the brim with drama. While books like this do sell, it’s hard for a first timer to break into a field dominated by people named Grisham and Rowling.

If you’re seeking to build passive income—not become a fulltime author—you should focus on an area you have expertise in and write a nonfiction book about that. Niche books that fulfill a need that is underrepresented in the market are probably your best bet.

For example, Pat Flynn of Smart Passive Income got his start by creating a website and eBook about an architecture test. While that seems like a small market, it was a dedicated but underserved community without the resources it needed. He started selling niche eBooks for $19.99 and made nearly $200 his first day. He filled a void. What void can your eBook fill?

Further reading:

2) Advertisements and Affiliate Marketing

Advertisements are a standard way to monetize a blog or website. There are many companies to choose from, and although this is hotly debated, most people agree Google’s Adsense is the best platform.  Ads are complicated—entire books have been written about online ad optimization—but the basic way to make real money with online ads is to either have a very popular site or a very targeted niche site.

Regardless what your site is about, affiliate marketing is one great way to make passive income. You simply place a link or advertisement for someone else’s product on your website, and if someone clicks through that link and buys the product, you receive a cut of the sale. Rates vary, but are generally between 4% and 20%.

There are multiple ways to make affiliate marketing work. One way is to create a niche website specifically designed around the products you are referring people to. By focusing on a particular niche, you’re more likely to get a high search ranking.

Furthermore, by occupying a niche, you’ll be the go-to website for people interested in your topic. An engaged audience translates into more clicks, which translates into more money for you.

Read: How to make money as an affiliate

3) Courses

Popular websites like Udemy sell online courses, often for hundreds of dollars. If you have an expertise, this is a great way to monetize it. You’ll need to create a professional looking video or presentation to get great sales, but for those who put in the work, the payoffs can be huge.

In fact, Udemy claims that the average instructor earns $7,000. Those with an existing following often make much more. Most importantly, once the course is up, it requires no extra work to maintain. It is true passive income.

4) Create a Great Website

The best passive income methods are multi-strategy and mutually supporting. A truly winning strategy requires a great website at the center of a network that works in synergy to make money. For example, let’s say you are a great chef. You want to make passive income, but you know making other people dinner every day is far from passive.

If you want to maximize your income, you need to create multiple ways to get paid.

You can create an eBook about fast and healthy eating, a course about cooking, and then tie it all together with a great website with tips from your life as a chef. On this website, you can have ads and affiliate links promoting your favorite products, in addition to linking visitors to your books and courses.

This is the linchpin of most passive income strategies. A great website is the very minimum to having a successful online business. To do affiliate marketing or make money off ads, a website is required. To market an eBook or course, a website is highly recommended. You don’t need to know how to code to make a great site using WordPress, there are many resources which can help you get started. (Read: How to Start a Blog in 3 Quick Steps)

5) Fulfillment by Amazon

Don’t want to create a website? Just piggyback on Amazon’s success! Fulfillment by Amazon is one of the easiest ways to sell products online.

You simply ship products—these could even be items you find cheap and resell online—to an Amazon fulfillment center, and Amazon takes care of all other aspects of the ordering process. Your products are listed on Amazon, so you benefit from their huge established customer base.

This can be very profitable, and some have even made six figures doing it. While it is less work than a full time job, it is not truly passive.

Further reading:

6) Buying an Existing Business

Another way to get into the passive income game without building a site is to simply purchase an existing business. Websites like Flippa and EmpireFlippers sell and auction web businesses, many of them generating healthy amounts of passive or nearly passive income.

Buying an existing business brings its own risks and rewards. On the one hand, this strategy allows you to skip initial setup issues like branding and logistics. It may also be a good strategy if you already have a similar site and want to expand or leverage the acquisition’s resources.

However, buying an existing business will also generally be more expensive than starting your own. Before you buy an existing passive income business, be sure to do your homework and verify the sites traffic, revenue, and other important metrics.

There are several horror stories of people who bought an online business and ended up with far less than they expected.

Read: Buy Don’t Start a Business

What’s Best For You?

Ultimately, the best way to start a passive income business depends on your circumstances. If you only want to invest time, writing an eBook and selling it on Amazon is completely free. Those happy to make a small initial investment can look into creating a website, while those with large amounts of capital can purchase an existing business, or look into other income generating assets such as rental properties.

Remember, passive income is truly only passive after you have put the work in to get everything set up. Before that, it will seem far from passive, and will actually involve quite a bit of work. This hump is what prevents many would-be entrepreneurs from realizing their passive income dreams. Generating passive income is not painless, but it is doable.

Put in the work today to enjoy the rewards tomorrow.

Alexander Webb is an author and freelance writer. He is the co-author of Shock Markets, published by the Financial Times Press, and recently made substantial contributions to a book published by National Geographic. He founded Take Risks Be Happy, an online magazine on entrepreneurship, and was shortlisted for the 2015 Bracken Bower Prize.