5 Passive Income Ideas

Passive income has an enormous appeal – who doesn’t like the idea of earning money for doing little? But, few people think they have the opportunity to get started, and believe it to be an activity from which only the wealthy can receive the benefits. So, if you have some passive income ideas, what do you need to know, and where should you focus your attention? In this guide, we’re going to take a look at five great passive income ideas that you can get started with.

First of all, though there is one thing to understand. Passive income does require a little work on your behalf. It’s not about getting something for nothing, and there is still work involved. The difference is that you put the work in place first and then get the income. It’s not simply the case of handing over some cash and sitting back and cleaning up. Once you understand that, you can start to take a look at some of your options. Here are our top five ideas.

Dividends from stocks and shares

Stocks and shares are the traditional entry point for making a passive income. You invest in a company; they do well, and you get paid in dividends. However, as is always the case, things can go wrong – and you could end up passively losing money, not making it.

The trick is to research any company you are thinking of backing with your investment. Take a good look at their history, the management team, and also, look at the wider industry. If you are a novice, it is worth getting a financial advisor in to give you a few pointers. And, of course, you can also take some finance classes so that you are aware of the terminology and theories behind sound investments.

Earn money from activities you already do

Another thing to think about is making money from the activities you already do. This idea is perfect for more creative folk such as artists, writers, musicians and photographers. For example, there are many websites out there that let you license your photos online. Try Shutterstock or a similar service to get started. There are similar services for musicians to use, too.

Writers can also get themselves a passive income by writing a book and releasing it on a platform like Kindle. You put the hard work in to write your book, release it, and every time you make a sale, you will get paid. If you can create a buzz about your book in the early stages of the release, you will stand a much better chance of earning more, for longer.

For musicians, you also have several opportunities. Take a service like BeatPick, for example. You can submit music to them, and they promote your music to film and TV show makers, advertisers and video game makers. Your music gets licensed out, and every time it picks up royalties, you get half the money.

Rental income

As you are most likely aware, rental property investment is an old and traditional passive income idea. It is, however, a lot more work than you might think. Again, the challenge is to learn about how to make your investment profitable before you get started. If you don’t, there are serious dangers that you will lose money instead of making anything – let alone passively.

The first thing to work out is what sort of return you want. You’ll also need to look at rental rates in the area, mortgage costs, and then throw in some extra for maintenance and taxes. Only when you know those figure inside out can you set your rental rate goals.

There are a few ways to squeeze a little extra out of your property, too. For example, if you let to students, you could create two smaller bedrooms out of one large room, giving you more potential returns.

Start a blog

If you are passionate about a particular subject and fancy yourself as a writer, why not start a blog? It’s a great way of generating income for doing something you love.

There is some heavy lifting involved, of course. Building a robust website is going to cost a little investment. But, once you start to get some decent traffic coming to your site and reading your articles, it could pay off.

Look into Google AdSense to get started. Google will post ads on your site when they are relevant to your article, and they will pay you for any views or click-throughs. You can also think about becoming an Amazon affiliate. If someone clicks through on an ad and ends up buying a product, you will get a small commission.

Peer to peer lending

Peer to peer – or P2P – lending is an increasingly popular way of generating passive income. You can expect returns of anything from 5% to 9% on small loans – which isn’t bad at all regarding investment. There are lots of ways to do it, from the likes of Lending Works or Zopa. Your money goes to someone else who needs to borrow some cash, and you get your return at a set date later on down the line.

You can also look into lending to people in developing countries, too. For example, services like Kiva enable you to lend to people who need a kick start to help themselves become more independent. There are lots of community projects you can get involved in, too. So, P2P lending isn’t just for the serious investors amongst you – it’s for philanthropists, too.

However, it’s important to make sure that you don’t invest too much in individual borrowers. You will need to do a lot of background work on each of your investments. Your best bet is to look at making many different investments for small amounts of cash. It will help you minimise your risk, and avoid any nasty surprises if a borrower can’t pay you back.

These are just five examples of how to earn a passive income – and there are many more. But, always remember – it will take a little work beforehand before you can sit back and enjoy a high return!

Elizabeth Goldman is the editor of AlternativeInvestmentCoach.com. She has written for Investing.com, Bullbearings.com and many others.