Do you want to create a better future and make more money without working more hours?
Maybe you’ve heard people talk about things like how to make money work for you or earn passive income.
To many people, this sounds unattainable, but it’s honestly not that hard. You just have to be willing to save money, put in some work upfront, and then improve your passive income ideas as you grow your wealth.
We’ll introduce you to the world of passive income, then explain what historically has built the most wealth. Next, we’ll introduce you to Graham Cochrane to provide a case study on making passive income.
From there, we’ll discuss how to make passive income and answer some frequently asked questions about how to earn money passively. Keep reading or click on any of the links below to jump to the section that interests you:
What is passive income?
According to the Internal Revenue Service (IRS), passive income has to meet two standards:
- You don’t actively work to earn the revenue.
- You are paid regularly.
Remember to read IRS Publication 925 to learn about the tax treatment when you earn passive income.
What is the best passive income stream?
Historically, the best passive income stream is the stock market with a 10% annual return. There are multiple avenues to building wealth with stocks, including appreciation, dividends, splits, and spinoffs. These can all increase your passive income and net worth.
• Upfront time investment: Low
• Upfront financial investment: Your choice
• Passive income potential: 10% to 15% of investment
Many publicly held companies pay dividends on a quarterly, monthly, or annual basis. These dividend stocks can create passive income that increases the longer you hold them. If you use a brokerage account that offers a dividend reinvestment plan (DRIP), you can increase your income in two key ways:
- Asset value: If the stock price goes up, your net worth goes up. Stocks tend to double in value every seven years.
- Dividends: Every time you get a dividend, a DRIP reinvests that income into dividend stocks, which earns you more passive income.
You can automate functions like reinvesting dividends or purchasing more stock to help you grow wealth even faster.
I use Charles Schwab, but there are plenty of other brokerage services. There are large numbers of dividend stocks paying more than 5% in annual returns. I’d stay away from the ones paying 50% or more because they’re usually high risk.
| Pros | Cons |
| You don’t need tons of money to start | Long-term investment that won’t bring immediate returns |
| 100% passive using a brokerage service | |
| Low risk compared to other investment options |
Passive Income Case Study: Graham Cochrane
Graham Cochrane’s business is a prime example of a wildly successful passive income plan.
He’s made $1.6 million dollars this year and only works five hours a week.
Yes, you read that right. Graham got laid off from his job four months after moving his family to Florida during the Great Recession. He told us:
He had some experience recording and mixing for bands. He thought he’d start doing that as a side gig, so he started marketing the business.
Want to know his secrets? Get all the information in our interview:
Best Passive Income Ideas
If you want to know how to make money investing, this is the right section for you. These passive income investment ideas are the cornerstone of most wealth in the United States today.
#1. High-Yield Savings Account
These accounts are offered by legacy and online banks. They give customers higher interest rates than you would normally receive.
• Upfront time investment: Low
• Upfront financial investment: Your choice
• Passive income potential: 0.15% to 5% of investment
Money market accounts earnings change based on the interest rates set by the Federal Reserve. According to BankRate, some of the best are currently making between 4% and 6% annually. You should work on building up an emergency fund that can cover at least three months of expenses.
| Pros | Cons |
| Minimal risk | Lower return than other investment options. |
| Easy to set up and manage | Academy |
| Low minimum investment with few to no fees | |
| Wide variety of online banking options to choose |
#2. Real Estate
Real estate investing is a great source of cash flow and wealth building. It’s the number one source of wealth in the United States according to the U.S. Census Bureau.
• Upfront time investment: Moderate to high
• Upfront financial investment: $100K+ if investing independently
• Passive income potential: High ($10K+ monthly)
Find out how Mike Andes approaches rental properties in our interview below:
Emma Powell has turned real estate investing into a 100% passive income stream and shared her advice on getting started in an UpFlip podcast interview:
You’ll need to hire a property management team if you want cash flow without managing the property yourself. Make sure you aim for at least 10% annual return on investment.
| Pros | Cons |
| Builds long-term wealth along with short-term rental income | Large initial investment if you’re buying properties |
| Very high income potential if you invest in multiple properties | Immediate need for employees to make it truly passive |
| Potential for 100% passive income once your business is established |
#3. Affiliate Marketing
Another way to create a passive income is to start an affiliate marketing business. You can easily get links for most software companies and start adding passive income streams by reviewing the software you use everyday.
You’ll be adding value for the people following you while you gain passive income.
• Upfront time investment: Moderate
• Upfront financial investment: Low ($50 to $500)
• Passive income potential: $1K to $100K+ monthly
Many affiliate programs can make thousands or millions from a few hours of work.
| Pros | Cons |
| Completely passive once you’re set up | Need a website with high traffic to earn reliable income |
| Wide variety of affiliate programs to choose from | |
| Make money recommending products and services you use and enjoy | |
| Low to no initial financial investment required |
Check out some of the best affiliate programs of 2024 or listen to our interview with Matt Diggity to learn more about affiliate marketing:
#4. Mutual Funds
Mutual funds are a good way to invest in multiple companies at once, and you’ll benefit from both gains and dividends.
• Upfront time investment: Low
• Upfront financial investment: $100 to $10K+
• Passive income potential: 0.04% to 1% of investment monthly
Mutual funds are starting to fade in popularity because electronically traded funds (ETFs) tend to have lower fees, which makes them a more attractive investment.
| Pros | Cons |
| Generating passive income through dividends | Can’t control the mix of investments |
| Appreciation of mutual fund values | Higher management fees than index funds |
| Ability to invest in multiple stocks at once | Minimum upfront investment may be higher than alternatives |
#5. Index Funds
Index funds are another way to invest in multiple companies at once while earning through gains and dividends. Index funds are a type of ETF that seeks to match the return of the index it tracks.
• Upfront time investment: Low
• Upfront financial investment: $30+
• Passive income potential: 0.041% to 1% of investment monthly
Index funds are available for most stock markets and industries. You can mix and match indexes to put more weight on the ones you think will go up.
| Pros | Cons |
|
Generating passive income through dividends |
Can’t control the mix of investments without purchasing other ETFs |
| Appreciation of mutual fund values | Minimum upfront investment may be higher than alternatives |
| Ability to invest in multiple stocks at once | Low chance of beating the market because they’re intended to match specific indexes |
#6. YouTube Channel
A YouTube channel can be quite lucrative. You’ll need to provide useful information, optimize your videos for search results, and share them to social media. You can start with equipment you already have, then upgrade as you go.
• Upfront time investment: High
• Upfront financial investment: $0
• Passive income potential: $800 to $1.4K monthly
Many channels make between $10 and $30 per 1,000 views. It’s easy to create a YouTube channel.
| Pros | Cons |
| Easy to monetize by integrating ads and affiliate links | Time consuming to make content |
| Fun way to profit from your areas of expertise | Takes time to grow your following before you see significant income |
| Doesn’t take any money to get started |
#7. Real Estate Investment Trusts
You can buy real estate investment trusts to generate passive income. REITs invest in real estate and earn money from rental income. They then pass those gains on to investors.
• Upfront time investment: Low
• Upfront financial investment: $1K to $25K
• Passive income potential: 10% to 15% of investment
You can buy REITs as stocks or use private equity. Publicly available stocks tend to pay investors less but have the advantage of being more liquid than private equity investments.
| Pros | Cons |
|
More liquid than other real estate investments |
Variability due to real estate market trends and interest rate changes |
| Completely passive income with a low upfront time commitment | Can take a long time to see significant returns |
| Affordable way to get into real estate investing |
#8. Bond Funds
Bonds allow you to lend money and generate passive income. A company or government asks for an upfront investment and agrees to pay you back more than you loaned them. Payment terms will vary based on the amount borrowed, the duration, and the borrower’s creditworthiness.
• Upfront time investment: Low
• Upfront financial investment: $25 to $10K
• Passive income potential: 4% to 7% of investment
Bonds purchased from TreasuryDirect are the gold standard of safe investment opportunities.
| Pros | Cons |
| Very low risk | No earnings until the bond matures |
| Ability to reinvest funds to increase earnings over time | Interest locked at the rate at the time of purchase |
| 100% passive |
Passive Income Business Ideas
Next, we’ll review some business ideas that can help you generate passive income.
#9. Laundromat
Everyone needs to do their laundry, and not everyone has a machine at home. Everything in a coin-op laundromat is automated, and it’s common for them to operate without employees on-site to supervise.
• Upfront time investment: Moderate to high
• Upfront financial investment: $85K+
• Passive income potential: High ($24K+ monthly)
If you hire someone to clean and maintain the machines, it’s a completely passive business. It won’t be much of a time commitment if you handle it yourself.
However, like any brick-and-mortar business, a laundromat can be a big investment. Dave Menz bought his first laundromat for $85,000 in 2010. Now, he owns four laundromats and provides self-service, pickup, delivery, and full-service laundry.
Find out how he became the Laundromat Millionaire:
If you enjoyed his interview, check out the UpFlip Academy where we provide 66 lessons about how to maximize income from a laundromat business.
| Pros | Cons |
| Multiple revenue streams | May take years to pay off |
| Providing an essential service | Maintenance and labor costs |
| Lots of tangible assets and equipment to help secure funding | Variable outcomes based on location and local community |
| High earnings potential |
#10. Car Wash
Car washes are a steady income stream, especially in areas where most residents own vehicles.
• Upfront time investment: Moderate to high
• Upfront financial investment: $267.5K+
• Passive income potential: High ($22K+ monthly)
Self-service and automated car washes require few to no employees. For full-service car washes, you can hire employees to help make it passive income.
| Pros | Cons |
| Lots of tangible assets and equipment to help secure funding | Need lots of money upfront |
| High earnings potential | Slow growth rate |
#11. Vending Machine Business
Vending machines are another source of income.
• Upfront time investment: Moderate
• Upfront financial investment: $2K to $120K
• Passive income potential: High ($10K+ monthly)
If you’re wondering how to create passive income from vending machines, check out our vending machine business course taught by Adam Hill. He turned an investment of $120K into $600K in annual revenue.
| Pros | Cons |
| Fairly easy to earn enough to replace a full-time job | Ongoing time commitment unless you have employees (not completely passive) |
| Variable time commitment and startup costs | Potentially high initial investment if you want to purchase an entire vending route |
| No specialized skills, knowledge, or training required |
Ways to Make Passive Income
Keep reading to discover even more ways to make passive income.
#12. Digital Products
You’ve likely seen online marketplaces of fonts, website and store themes, and other graphics. These are often made by independent artists and designers who can make extra income selling their digital files through platforms like Creative Market.
• Upfront time investment: Moderate to high
• Upfront financial investment: $0
• Passive income potential: $50 to $10K+ monthly
This isn’t just an option for artists. You can also sell spreadsheet templates, patterns for crafts, or templates for physical items like business cards. If it’s something people need and will search for online, you can sell it for extra income.
Here are some other sites to check out if this seems like something you might want to do:
- Easy Digital Downloads: Easy Digital Downloads is one of the most popular digital download marketplaces, boasting nearly four million downloads from their platform. They also have a wide range of third-party integrations and analytical tools to help creators.
- Gumroad: The easy sign-up process and knowledge resources on Gumroad make it ideal for new digital creators. You can sell just about anything through their platform.
- SamCart: SamCart is an all-purpose site for courses, membership subscriptions, or digital products. There’s a membership fee to sell through their platform, but you’ll also get access to a range of resources and tools in return.
| Pros | Cons |
| Easy way to monetize your unique skills and knowledge | Need to sell a lot of files to make a significant income |
| Little to no upfront financial investment with a low overhead | Risk of your content being copied or shared illegally |
| Income potential increases as you create more items to sell |
#13. Online Courses
Making online courses is one of the most profitable and popular passive income ideas.
• Upfront time investment: High
• Upfront financial investment: Low ($150 to $300 monthly)
• Passive income potential: Moderate to high ($500 to $10K+ monthly)
When Graham Cochrane lost his job, he expected to make money mixing music. Instead, he quickly found that people were more interested in learning how to do it themselves and were willing to pay to learn those skills. Graham created a course that made over a million dollars—without ever updating it.
Jacques Hopkins, creator of Piano in 21 Days, saw similar success with his online course. He started off with a budget of around $150 a month. He now earns $40,000 a month in revenue with a profit margin of roughly 50%.
Listen to our interview with Jacques to get advice and hear more of his story:
Today’s environment is more competitive, but creating courses is still one of the best ways to make passive income in 2024.
| Pros | Cons |
| Easy to publish and market your course through an online course platform | High initial time commitment if you’re writing the course yourself |
| 100% passive income once the course is published | Course platform fees that can cut into your profits |
| Scalable income with high profit margins |
#14. Stock Photography
If you love photography but want to avoid taking on clients, stock photos might be your answer. Businesses use stock photos for marketing purposes.
You take pictures of in-demand products and post them online with keywords and descriptions. Companies pay to use them, and you earn a small amount each time.
• Upfront time investment: Moderate
• Upfront financial investment: Low to none
• Passive income potential: 15% to 45% of sales
There are various sites that you can use to earn a passive income stream, but Getty Images is the leader in this market. You can earn up to 45% on each image used, which converts to $0.015 and up.
Other stock photo websites have different rates, but Getty sells approximately $1 billion of stock photos, graphics, and videos each year.
| Pros | Cons |
| Allows creative entrepreneurs to make money with their passions | High threshold to earn higher royalty rates |
| 100% passive after images are taken and uploaded | Low earnings if images don’t sell |
| Easy to scale your income by adding more photos | |
| No need to find or communicate with clients directly |
#15. Sell Household Items
If you have tools or other useful household items, you can rent them out to other people using a variety of sites.
• Upfront time investment: Low
• Upfront financial investment: $0
• Passive income potential: Moderate (up to $4K monthly)
Check out SideHusl’s blog for a list of sites to rent specific items.
| Pros | Cons |
| Make money from items you already own | Some risk of your items being damaged or stolen |
| Easy to get started through one of the many online platforms | |
| Very low ongoing time commitment |
#16. Rent Parking Spaces
If you live in an urban area, especially close to places like a sports venue or fairground, you can monetize your parking space for a bit of extra income.
• Upfront time investment: Low
• Upfront financial investment: $0
• Passive income potential: $50 to $300 monthly
Apps like CurbFlip make this easy. All you have to do is list your space. Drivers can reserve and pay for it right through the app.
| Pros | Cons |
| Fast and free to set up | Relatively low earning potential |
| High demand in busy and urban areas | Variable outcomes based on location |
| Complete control over when you rent your space and to whom |
#17. Peer-to-Peer Lending
If you just want to earn some passive income on your existing cash, peer-to-peer lending on platforms like Prosper can give you great returns.
• Upfront time investment: Low
• Upfront financial investment: $25 minimum
• Passive income potential: 6.99% to 10% of investment
Take note that higher earnings come with higher risk (i.e., borrowers with lower credit scores), so it might not be the best idea to go straight for the top interest rates. The platform will likely take a portion of the loan for themselves if they have to pursue collection.
| Pros | Cons |
| Easy to invest through a P2P platform | Higher risk for loans with the highest returns |
| Low ongoing time commitment | No collateral on loans |
| Access to vetted borrowers through the platform |
#18. Start a Blog
Blogging is a passive income idea that involves writing, affiliate marketing, and SEO.
• Upfront time investment: High
• Upfront financial investment: $0
• Passive income potential: $800 to $1.4K monthly
You’ll need to provide useful information, optimize blogs for search results, and share them with your target audience.
| Pros | Cons |
| Easy to monetize by integrating ads and affiliate links | Time consuming to make content |
| Doesn’t take any money to get started | Takes time to grow your following before earning significant income |
| Fun way to profit from your areas of expertise |
#19. Build a Mobile App
Everyone who has a smartphone is a potential customer for mobile apps. If you can solve a problem or make an entertaining game it can quickly get thousands of downloads, even if it’s targeted to a very specific niche.
• Upfront time investment: High
• Upfront financial investment: $100 to $5K
• Passive income potential: $100 to $500 monthly per app
You don’t need to be a programmer to write an app, either, thanks to low-code and no-code platforms. NeoITO has a list of the best free platforms for non-coders to develop apps if this is something that interests you.
| Pros | Cons |
| Low time commitment once it’s approved by the app store | High initial time investment with no guarantee of a return |
| Easily scalable with the potential for high income | |
| In-app purchases to earn more beyond initial purchase |
How to Make Passive Income
Let’s review Graham’s simple steps for developing your passive income idea into a thriving source of income:
- Explore passive income stream ideas.
- Perform market research.
- Create a customer avatar.
- Build the system.
- Create content or ads.
- Compile an email list.
- Convert followers to customers.
Step #1. Explore Passive Income Ideas
You’ll want to explore different passive income sources to see which ones fit your budget and goals. Check whether each strategy generates the amount of income you’re looking for with a liquidity risk you’re comfortable with.
It’s normally best to start with building one source of income first. Most people start with high-yield savings accounts because they provide a safety net and prevent cash from losing value due to inflation.
If you already have a high-yield savings account, you can add other types of passive income to your investment portfolio over time.
Step #2. Perform Market Research
Once you’ve chosen the best passive income ideas that you’d like to investigate, it’s time to do some market research. You’ll want to understand at least the following factors:
- Industry revenue and profit benchmarks
- The major players and how they make their money
- Trends in the industry
- Gaps in the current offerings
After you understand all this and have decided to enter the industry, it’s time to create a customer avatar.
Step #3. Create a Customer Avatar
Create your own avatar profile withthis template.
To earn passive income, you’ll want to have a customer avatar. There are two ways you can create a customer avatar depending on what kind of passive income streams you pursue:
- Avatar of your future self
- Avatar of your future client
Let’s look at each.
Avatar of Your Future Self
If you plan to earn passive income from dividend stocks, real estate investment trusts, or ETFs, you may want to create a customer avatar of what your life looks like in the future. You’ll want to include aspects like:
- The year
- Where you live
- Your monthly income
- Your family scenario
- Your work schedule
These details will help you define what financial freedom looks like to you. With a picture of where you’re going, it’s easier to commit to the upfront time investment and monthly payments necessary to reach financial independence.
Avatar of Your Future Client
If your passive income streams involve selling a product or service to generate income, then you’ll also want to define your ideal client. You should know everything you can about them, including:
- How they make money
- Where you can reach them online
- What’s important to them
- How you intend to interact with them
- Their preferred communication methods
The more you know about your client, the better you can prepare a passive income strategy.
Step #4. Build the System
This stage is when those who shine at running business ventures or creating passive income differentiate themselves from those who fail. You need a system in place. Otherwise, you’ll burn out.
Graham started his first passive income stream with the following tech stack:
- A cheap WordPress site
- MailChimp
- eJunkie
He told us:
Kajabi offers a free trial and flexible payments.
Step #5. Create Content or Ads
The next step is to create content or ads to get your passive income ideas in front of your target market. If you’re creating content, you’ll want to share regularly with your audience. You can use your customer avatar to create ad accounts on the appropriate social media platforms.
Graham explained how he spends just five hours each week to earn passive income:
You can use programs like Canva to make content generation easy, but Kajabi also has design tools built in.
Step #6. Gather Emails
You’ll want to collect email addresses to communicate with your followers. Kajabi has a built-in system to collect emails that’s really intuitive. You can even take the Kajabi Academy List Building Course to learn the best ways to build an email list using their platform.
If you prefer MailChimp, they also offer educational resources on using their platform. Here are the main things you need to know about any email list:
- Real emails: You need real emails. If your spam rate is too high, you’ll be flagged by email operators. If the email addresses don’t look real, they probably aren’t.
- Disclosures: Tell customers how you’ll use their email addresses before you collect them. People are hesitant to give their emails to unknown companies.
- Compliance: Comply with the strictest laws you fall under. In most cases, this is Europe’s privacy regulations, the General Data Protection Regulation.
Step #7. Convert Followers to Customers
The final step in earning a passive income is converting followers into customers. This requires an automated email funnel.
There are a ton of places you can get free or low-cost email templates. Edit them to suit your niche. If you wish, you can also use paid ads with retargeting as long as you have the proper tracking codes on your site.
Next, we’ll answer some commonly asked questions about the best passive income investments.
Passive Income FAQ
People ask a lot of questions about the best ways to invest passively. While I’m not in wealth management, nor am I a certified financial planner, I have experience investing and I’m happy to share my opinions.
Make sure to consult with a professional who actively handles wealth management before pursuing any types of income that require an investment.
What is the difference between earned income, passive income, and investment income?
Earned income is the money you make at a job. For most people, it’s your primary source of revenue.
Many people also earn income from businesses that don’t require much work from them directly. This is considered passive income.
Lastly, investment income is money earned from buying or selling assets like stocks or bonds. Dividends also fall into this category.
Each of these types of earnings have different tax structures that you’ll need to consider when making investment decisions. Taxes can dramatically impact the amount of cash flow you have at your disposal.
How to generate passive income with no initial funds
Many of the top streams of passive income are online. Fortunately, most software companies offer a free trial.
You just have to be willing to trade an upfront time investment for future income. If you are low on cash, consider getting into:
- Custom products
- Online courses
- Ebooks
- Stock photography
- Affiliate marketing
- Blogging
- YouTube
- Podcasts
How to make your money work for you
To make your money work for you, invest it in passive income ideas that are strictly financial instruments. You can invest money in the following moneymaking ideas:
- Dividend stocks: Earn dividend income on a monthly, quarterly, or annual basis by playing the stock market.
- Mutual funds: These funds hold multiple types of stocks and require a minimum investment. Mutual funds focused on income will pay out similarly to dividend stocks.
- Retirement accounts: You’ll pay taxes on either when you make deposits or when you withdraw money but not both. If you work with a company with a matching 401K, that’s an automatic gain right from the start.
- Peer-to-peer lending: These financial instruments lend money to people and businesses in exchange for interest. You may be required to be an accredited investor on some platforms.
- Real estate investment trusts: REITs allow you to make money off real estate investing without actually buying a property and managing it.
A high-yield savings account or money market fund is another option, but I would recommend going for something that beats inflation. Savings accounts and money market funds normally have horrible interest rates.
How can I make passive income with real estate?
Buying real estate to earn rental income is just one way that people earn passive income. This strategy is best if you want to be hands on and involved in a business.
Otherwise, consider investing in real estate investment trusts. You can make money on real estate without owning real estate or managing a rental property. Plus, these are some of the highest-yielding stocks.
Have you figured out how to get rich in 2024?
At this point, you’ve learned about the definition of passive income and some of the best passive income ideas in 2024. We also discussed how to earn passive income and how to build passive income using Graham’s strategies.
Now, you just have to invest some time and money to start your passive income streams. As you bring in more money, keep reinvesting in a mutual fund or stocks to earn passive income dividends.
Just as a reminder, don’t consider this blog to be formal investment advice. You’ve heard from business owners who are passionate about helping others succeed, but that isn’t the same as a professional opinion. Any investment decisions should be made in consultation with a licensed financial advisor.
What passive income strategy has made you the most money?
