17 Best Passive Income Ideas: Earn More in 2024 - NerdWallet (2024)

You can earn passive income through investing in certain financial assets or by starting businesses that, after an initial investment, start to generate income without regular work. The taxes you'll pay on passive income may vary depending on the source of the money, so make sure you keep careful records of your earnings.

What is passive income?

Passive income is a regular cash flow that requires little or no daily effort to maintain. Passive income is considered unearned income by the IRS because it doesn't come from active employment. Examples include investment income or rental property income.

This is the opposite of active or earned income, which is generally defined as income received from working at a job or as a contractor. That's not to say passive income is easy money — in fact, the opposite can be true. Most ways to generate passive income require an upfront investment of either money, time or both;the income part comes later (in some cases, much later). But once you've made that initial investment, passive income can pay off for years to come.

17 passive income ideas

Investment-based passive income ideas

Here are a few different types of investments that pay dividends, which can create a passive income stream.

1. Dividend stocks

One way to build an income stream is to invest in dividend stocks, which distribute part of the company’s earnings to investors on a regular basis (typically quarterly). The best dividend stocks increase their payout over time, helping you grow future income. (Learn more about dividends and how they work.)

As a bonus, dividend stocks typically are less volatile than growth stocks, so they can help diversify and even stabilize your investment portfolio. Investors can also choose to reinvest dividends back into the stock, potentially increasing your investment if the stock does well.

2. Dividend index funds and exchange-traded funds

You can also invest in index funds or exchange-traded funds that hold dividend stocks rather than picking and choosing individual stocks to buy.

This is a form of passive investing for those who prefer a more hands-off approach.

Index funds hold a well-rounded selection of many stocks that aim to mirror the performance of a given index, such as the S&P 500. A dividend ETF or index fund will invest in a selection of stocks that pay dividends. Index funds can help balance portfolio risk, as market swings tend to be less volatile across an index compared with individual stocks.

Dividend ETFs offer the diversification benefits of index funds while mimicking the ease with which stocks are traded. To invest in dividend stocks, index funds, ETFs or other publicly traded assets, you’ll need to open a brokerage account if you don’t already have one.

3. Bonds and bond index funds

Rather than buy an ownership stake in a company through stock, bonds are a way for investors to lend money to companies — as well as federal, state and local governments — and collect interest income. Bonds are considered a safer investment than stocks, but also generally earn a lower return on your investment.

Experts suggest investing a portion of your portfolio in bonds because of their lower volatility and relative safety compared to stocks, then having a higher ratio of bonds in your portfolio the closer you are to your investing goal (such as retirement).

4. Real estate investment trusts (REITs)

If you want to build passive income from real estate without the fuss and bother (not to mention the hefty down payment) of buying and managing properties yourself, REITs may be the answer.

Similar to mutual funds, REITs are companies that own commercial real estate, such as office buildings, retail spaces, apartments and hotels. REITs tend to pay high dividends, but they vary in complexity and availability. Some are publicly traded on stock exchanges; others are not.

New investors may want to stick to publicly traded REITs, which you can purchase through an online broker. You can also diversify your real estate holdings by investing in mutual funds or ETFs that track multiple REITs.

5. Money market funds

Like high-yield savings accounts, money market funds are currently paying lucrative interest rates —you can find rates upwards of 4%. Money market funds are mutual funds that invest in lower-risk securities like short-term government debt or corporate bonds that pay income. In some cases, that income may be tax-exempt. Keep in mind that money market funds are not the same as money market accounts, which are more similar to a savings account and typically come with FDIC insurance.

Interest-based passive income ideas

These interest-based ideas are less risky than investments since their rates are set by the Federal Reserve, and there's no risk of loss of principal. Your money doesn't risk losing value in these types of interest-based investments the way it does in a stock or fund.

6. High-yield savings accounts

Another way to earn passive income (albeit at a lower level than stocks and bonds) is a high-yield online savings account, which can be ideal for growing your emergency fund. The interest paid by savings accounts is added to your balance.

High-yield accounts are a type of federally insured savings account that earns an interest rate that’s often much higher than the national average. The APY of these high-yield accounts may vary slightly, and over time, those small differences add up to real cash, so it pays to shop around for where you put your savings.

7. CDs

A certificate of deposit is a type of savings account that's used for a fixed period of time. For example, you might deposit funds in a three-year CD, and in exchange, you'll receive a fixed interest rate for those three years. This is in contrast to a high-yield savings account, which typically has a variable interest rate.

CDs often pay higher interest rates than savings accounts, because they require you to lock up your money for a set period of time. (You'll pay a penalty if you want to access your funds before the CD term ends.) If you're willing to do that, locking in interest rates while they're high can be well worth it — especially if you expect them to come down soon, as many experts do.

Property-based passive income ideas

These ideas revolve around owning and renting physical property. Some, like buying a rental property, may feel out of reach, but if you have a spare room you could consider renting it out.

8. Buy a rental property

Investing in real estate to earn rental income is another way to build passive income. Long-term rentals can provide a reliable source of cash if they are located in a healthy market for renters, but they also carry long-term stressors like maintaining those properties, as well as paying multiple mortgages, property tax bills and other costs.

9. Rent out your own house

If you can't afford to buy an entire rental property you can consider renting out your own residence while you're away on vacation. AirBnb and Vrbo allow you to set exact dates when people can rent your spot. If you're away for the summer or over the holidays, it may be an opportunity to earn some extra cash.

10. Get a roommate

If you're looking to get into real estate, you can also start small: Rent out a room. Getting a roommate will provide regular, most likely monthly, passive income. Unfortunately, it may mean you have to share a bathroom and fridge space.

Alternative investment passive income ideas

These investments are quite a bit riskier than stocks and bonds, so be sure to read the fine print and make sure you fully understand them before diving in.

11. Peer-to-peer lending

An alternative to traditional bank loans, peer-to-peer lenders, like Prosper and Lending Club, match investors who are willing to lend money with borrowers who are vetted by the platforms for creditworthiness. It’s riskier than putting cash in a high-yield savings account or money market fund, but also potentially can earn more interest — as much as 5% or more.

12. Private equity

Perhaps the original form of peer-to-peer lending, another common form of passive income is funding a private business you believe has the opportunity to generate future income. For high-net-worth individuals, this might be investing in private equity funds, which are typically only available to accredited investors who meet certain net worth or income requirements.

Another way is to back a family member, friend or other trusted partner to help fund their business with an agreement to earn returns from any future profits. But beware: No matter how large or small, investing in a single business is an inherently risky, long-term bet. Never invest more than you can afford to lose.

13. Crypto staking

Crypto staking is a way of growing your holdings in certain cryptocurrencies by using them to help verify activity on an underlying blockchain network. When you stake a cryptocurrency, you can be rewarded with more cryptocurrency.

Staking, for most people, involves delegating your cryptocurrency to someone who is compiling records of transactions on the network on which it runs. Those verifiers need to put some tokens at stake to guard against fraudulent transmissions. By giving the voting power of your tokens to a reputable verifier, you can get a share of the rewards they receive for carrying out their job accurately.

But there is some risk: If the verifier you're working with is penalized, you may be as well. And staking sometimes requires you to commit your holdings for a set period of time, meaning you can't sell or trade them.

Several crypto platforms offerstaking programs, though these arrangements have recently experienced regulatory scrutiny in the U.S. It's important to note that staking is not available on all cryptocurrencies — notably Bitcoin does not support staking.

Product creation passive income ideas

These ideas are based on creating something, such as content for a blog or an online course, and then allowing the sales of those items to happen in the background. While these ideas require significant initial effort, they may make money for you for years to come.

14. Write content

A way to build passive income at home is through payments for the use of intellectual property that you have created yourself, or for which you've purchased the rights.

Creating content can be a lot of work, especially for work that is engaging and reaches a large enough audience to generate income.

But once you've created something that people are using, it’s possible to generate revenue through display advertising, using a program such as Google Adsense, or to run sponsored content, which means companies pay you a fee to publish a post on your blog.

Another way to monetize a blog is affiliate marketing, which allows you to earn commissions if your readers purchase a product or service you’ve recommended or linked to. You may, however, find that creating content is not as hands-off as you might expect; there's always pressure to create more content or update what you have to keep it viable.

15. Publish a digital course

Have a unique skill? You can create and publish an online course teaching others to do what you do — whether that's watercolor painting, coding or closet organizing. Keep in mind, creating a course may involve a lot of upfront work. You may have to write lesson plans, film videos and update the courses depending on the platform where you publish your course.

It's also difficult to know how much you can make from an online course. Some course instructors publish many courses and can make a full-time living on their work. Others may only make a few hundred dollars a month — if that.

Car-related passive income ideas

If you've got a car or a parking spot, you could try to make some extra income through ads or renting out a parking spot.

16. Wrap your car with ads

Did you know you can get paid to have your car wrapped in advertising? According to Carvertise, drivers can make between $100 to $500 a month just for driving around. Be careful when vetting companies as there are lots of scams when it comes to car wrapping. Check out Carvertise and Nickelytics — but be aware that these companies do have some negative online reviews.

17. Rent out a parking space

If you live in a city, near a concert venue or any area that can attract a crowd, the Spacer app allows you to rent out a parking spot. You'll need a few photos of the spot, the dimensions and details on the spot's security, access and distance from public transit. While how much you make will depend on where you live, according to the website, the average host earns around $200 a month for renting out their driveway.

Other ways to save money

These ideas may not technically create passive income, but one of the best ways to make money is to not spend the money you have. Easier said than done, but so are some of the ways to make passive income. Here are the easiest ways to save money — meaning you can start right now with zero initial investment:

Reduce your electric bill. Lowering your electricity bill isn't just about turning off the lights. Changing your showerhead, using smart power strips and doing an energy audit can make a big difference.

Cancel unnecessary subscriptions. According to 2022 research from C&R, Americans spend $219 a month on subscriptions. If you use and enjoy your subscriptions that's great, but it may be worth an audit to make sure you're actually using everything you're paying for.