12 Smart passive income ideas to actually start making money

12 Smart passive income ideas to actually start making money

How awesome would it be to make a passive income?

If you’re like me, you’ve surely thought about it at some point or another. Imagine being in a situation where before you’ve even woken up in the morning you’ve earnt money. It would be pretty nice to know your rent and bills were always covered.

If you’re worried that you won’t be able to make much money through a passive income it’s vital to have the mindset that every bit counts! The hardest part is getting started, but once you’re up and running, you’ll be able to get to a point where you have multiple passive income streams coming in, offsetting your cost of living and then some.

If you’re reading this thinking it sounds good but that you couldn’t do it...don’t despair! Earning a passive income doesn't have to be a distant dream forever! You can make it happen, you’ve just got to be willing to hold yourself accountable to working towards your goals. With social media, e-commerce and the multitude of online selling platforms available in 2018, generating a smart passive income online (or offline) is easier than ever.

If you’re constantly dreaming about escaping the rat race, or just want a bit of extra cash, keep reading because I’m going to go through some of the best ways you can begin generating your own passive income.


How to generate passive income

1. Get paid to shop or for searching the web
2. Setup your own Drop Shipping business
3. Run an E-commerce brand
4. Rent out your car
5. Write your own ebooks
6. Own a Herd of Goats or Sheep
7. Create an App
8. Rent out your stuff
9. Sell digital files on Etsy
10. Sell stock photos for a passive income moneymaker
11. Make a niche or guide website and become affiliate marketer
12. Create a online course

What is a passive income?

Firstly, what exactly is a passive income? Well, unlike an active income, a passive income is a form of residual income that, once you’ve set it up will appear in your account every month. It’s basically the holy grail of businesses because as it grows, your reliance on active income (ie time-consuming stuff) will drop, leaving you with time for the more important things in life.

Now, to be clear all of these ideas will require some time or cost on your behalf.

If you want to generate a passive income and do absolutely nothing to get it I have one suggestion for you...keep dreaming! Anyone who tries to sell you a way to earn a decent amount of money that will literally take you no time or money at all is straight up lying. Logically thinking about it, that doesn’t make sense. Don’t waste your time and money on snake oil ideas!

The only way you may be able to do that is if you’re wealthy enough (ie: millionaires and billionaires) to generate interest or invest in low risk shares and businesses. A 5% annual return on a 2 million dollar bank account is an “easy way” to make a $100,000 a year, if you’ve got that kind of cash. Considering that’s about 1% of us, it's probably not you (or me).

There are ways to be smart in your attempts to generate a passive income. For those non-millionaires who aren’t afraid of putting in a little time and effort to set yourself up for your future, keep on reading.

How much passive income do you need?

It's important to manage your expectations when you set your goals around how much money you can earn with a passive income. This is especially important when you’re beginning as this is going to be the most challenging time - when you are working hard and not making money (yet).

I’m not saying you can’t earn enough to escape the 9-5, quit your job and live a semi-retired life. That is definitely possible! What I am saying is that you need to be realistic about the time that will take.

Is there a chance you’ll take one of my passive income suggestions below, find a perfect product or niche market and absolutely smash it out of the park? Of course there is!

And I sincerely hope that you do manage to generate enough passive income to live your best life. (And to remember, which helpful article it was ahem that led you to your money making side hustle.)

Do-you-boo

It’s also very important (and totally okay) to acknowledge that you might not find that level of success right off the bat. There is a chance that you start this and make no money, or very little.

Before you click off this page, ask yourself this: do you want to be at least trying to generate passive income and getting closer to your goal, or just thinking about it?

As the great Thomas Edison once said “I have not failed. I've just found 10,000 ways that won't work.” “Many of life's failures are people who did not realize how close they were to success when they gave up.”

That kind of mindset is what you should hold onto, always remembering that every single person who is making a passive income has been where you are now.


How much money can you make with passive income?

Let’s say you start with a $150 a month goal. Don’t think that sounds like much?

If you can find a way to easily make even a $150 extra dollars a month, that’s $1800 dollars a year.

One of the cool things about setting up passive income streams is that while you may scoff at my suggestion of $150, if you have a dozen of those, that’s almost $22,000 a year you’re banking. And a dozen may sound like a large number, but you’ll find once you start putting these concepts into practice it is certainly achievable.

The point of suggesting smaller, more manageable targets is to remind you that you don’t need to stress if you don’t find that one magical niche market that’s making you a truckload of money. Building smaller, steady passive income streams is not only more achievable, but enables you to diversify your portfolio. If one of your ten money makers has a bad month, you won’t be crippled by it the same way you would if you only have one source of passive income.

Every little bit counts when it comes to residual income, so don’t be put off by a “low performer”. To put that first passive income example into an even greater context, an extra $150 a month would buy you subscriptions for Netflix, Stan and Spotify, a $5 coffee at work every day, and a couple of weekend drinks. Not a bad start!

How much passive income you can make and what you can spend $150 extra on


What you’ll need to start making a passive income

When you’re looking for passive income ideas, remember that in order to start you’ll need to put in one of two things - time or money, so use both wisely!

In a practical sense, since the majority of these are online passive money makers you’ll need a computer and an internet connection.

Without further ado, here are some of the easiest and smartest things you can start doing to earn a passive income.


1. Get paid to shop or for searching the web

There are a lot of apps and programs where you can sign up and then get cashback from shopping, or earn points for watching ads.

Aside from the fact these aren’t really ever going to become truly passive incomes, since you need to engage with it to earn money, personally I think they are a bit of a waste of time. Most of them will only pay out cents when you watch ads.

As for the cashback, if you’re very specific and measured in what you purchase perhaps it will work out and you might be able to get a discount. But it’s really more of a money saving strategy - when you need to buy something you might find a good cashback deal. Don’t forget, those sites exist because they incentivise people (i.e., you and me) to buy things we don’t really need. Don’t be fooled by these “passive income” or get rich schemes. If you really want to make money from a site like this, you’re far better of building a website that offers the service, which I’ll be talking about more in the affiliate marketing section.


2. Setup your own Drop Shipping business

What is drop shipping? How does it work?

Essentially, drop shipping is a supply chain technique where you (the seller) don’t need to actually keep any stock on hand.

How does drop shipping differ from normal online e-commerce? I’ll give you an example:

You’ve decided to sell metallic laptop stands because you feel there is a demand for it. Normally you would have to purchase X number of laptop stands. You’d then keep the stock at your house, and then once someone orders one you ship it to them.

I’m sure by now you’ve sensed one of the biggest limitations of this type of selling, which is what happens if you don’t sell all of your metallic laptop stands - you take the financial hit. If you’ve purchased 100 stands at $10 each and only sell 20 at a profit of $20 a unit:

$10 x 100 = $1000
20 sold at $20 profit each = $400
Loss = $1000 - $400
Your loss = $600

With a more traditional structure of buying the stock and then reselling there is a lot more risk for you if you don’t manage to move all the stock. This risk is intensified if you choose to sell a perishable product such as food or flowers.

Unlike this strategy, drop shipping is a fulfillment method where you don’t keep any stock at all. Instead, when your store sells a product, you then purchase that item from a third party (typically a wholesaler or manufacturer) who ships it directly to the customer. As the merchant, you never see or physically interact with the product being sold.

Because you don’t have to worry about the costs storing your product, buying too much stock or even packing and shipping orders, drop shipping is a flexible and simple ecommerce business you could start tonight. If you think you know there is a great niche product you could start selling, you can setup a online store through a prebuilt storefront like Shopify or build your own on Wordpress site, or even sell through eBay or Amazon.

The biggest advantage of this strategy is that it has an extremely low start up cost. You don’t need to risk purchasing stock that won’t be sold or invest in a number of high overheads. The biggest factors to consider are what product you think you could sell, and whether you want to pay a subscription to a site like Shopify or build your own site.

Of course, drop shipping isn’t without its downsides, the biggest being the lower margins. Since it is fairly simple to set up a drop shipping site, it’s also likely you’ll have a larger number of competitors for your product. As you’re purchasing on the behalf of a consumer, you also won’t have any unique branding on the product itself. But if you can find a great niche product, drop shipping is a good way to dip your toe into the e-commerce game with low risk!


3. Run an E-commerce brand

If you'd prefer to create your own brand and do it the old fashioned way, setting up an ecommerce brand may be for you!

If you’ve decided you want to sell your own product online, building some brand awareness is key. Unless you have the budget to do some R&D, it’s likely you’re selling a physical product that has been manufactured by someone else.

If for example you’re selling fitness wear, realistically your shirts with your nice logo are probably not going to be particularly different from another merchant who purchases shirts from the same manufacturer. The biggest difference is the brand and how you present yourself. Building a presence on social media or specific forums or groups that you believe will be interested in your product are great ways to build a customer base and stand out from the crowd.

The advantage of running your own brand is that you can differentiate your product and therefore have more varied pricing and increase your profit margins. The biggest downside is the added financial risk.


4. Rent out your car

If you own a car, chances are you don’t drive it every minute of the day. However, regardless of whether you drive it once a week or once a month, a car is always going to have fixed costs like insurance and registration. These can add up to around $1500 a year on the low end. That's $125 a month you’re spending on your car before you’ve even driven it. This is excluding the cost of the car itself, petrol and other any running costs.

If you’re going to be spending that money anyway, why not rent out your car when you aren’t using it and start offsetting its costs? If you can make just $150 a month renting out your car, your car is now essentially costing you nothing to keep!

Car Next Door is a peer-to-peer car-sharing platform that makes it easy and safe to rent out your car to others at times you don't need it yourself.


How much can I make on Car Next Door?

Owners earnings vary depending on vehicle type, location and their availability, but to give you an idea:

Angie rents out her RAV4 in Surry Hills and earns between $100 - $300 a month by sharing her car.

I think I’ve made $2000 since I joined Car Next Door last year. After all my driving expenses like insurance, petrol and rego, I end up with between $80 and $100 a month. Last month it was $300.

Thomas lives in Melbourne and earns $1000 a month renting out his van.

“I was umm-ing and ahh-ing at the time about getting a van, whether I could afford the upkeep. I thought if I could make a couple of hundred a week it would pay for itself eventually.”

The experiment “went really well” and the van soon ended up paying for itself. He now makes around $1000 a month

Man-earns--1000-a-month-renting-out-van

Start earning passive income from your vehicle!


5. Write your own ebooks

Did you know you can self publish e-books on Amazon and Smashwords? Thanks to Kindle and other e-readers, e-books are becoming increasingly popular. Traditionally if you wanted to be a writer, you’d need to find a publisher, convince them to publish your book and then they would organise the design of the cover, the printing and of course getting it into bookstores around the country.

This model still exists, but with the rise of e-books it's now easier than ever to self-publish a book. You may have a fictional story you wish to write, but educational books also do well.


6. Own a Herd of Goats or Sheep

This one may sound a little bizarre but would you believe me if I said a friend of friend is doing just this? There are companies right now who offer goat and sheep herds for rent as a way of clearing weeds, unwanted vegetation or fire hazards. You just plonk the goats on some land and let them do their thing. Of course, you’ll need to purchase the goats, but once you’ve got them there they’ll just munch away and earn their keep.


7. Create an App

If you’ve got some technical skills, building an app is an easy way to earn some passive income. If you don’t know how to build your own app, then the cheapest way to make it a reality is to learn how to code, or team up with someone who can. Developing an app can cost well into the tens of thousands if you pay someone to build it.

Once you’ve decided on an idea and built your app, there are five ways you can generate passive income from your app.

  • Purchase price for the app. You can give the app a price so people have to pay a few dollars before they download it.
  • Freemium app. This is a fairly common structure, where the app and a number of limited features are free, sometimes you’ll see it as the “lite” version of the app, and then once you’ve got people downloading and trying your free version you upsell them to the full version.
  • Subscription based app. If you can build a subscription based app, this is a fantastic way to generate a passive income. One of the best things about subscriptions is that you’ll be able to predict your base income each month. This will be based on the number of subscribers you have currently and your average monthly subscriber churn rate.
  • Selling items through your app. If you make a game for example, and are able to sell credits for some kind of add-on or feature in your game, this is a fantastic way to earn additional income, since you aren’t actually selling a physical product.
  • Advertising. If you make your app free, you can instead earn money from advertisements that will run when somebody downloads it.

8. Rent out your stuff

I’ve already mentioned renting out your car, van or other vehicle to start generating income right now, but you may not be aware that there is a lot of stuff you can rent out for cash, including your garage, backyard or tools.

Take a look at all of the things you can rent out for cash

Link to Rent my Stuff

I want to turn my car into a source of passive income


9. Sell digital files on Etsy

Etsy is a little like Ebay, but with a focus on handmade, vintage or unique factory-made items.

Selling handmade items on Etsy is one way to make money, but it's not a passive income source. Producing handmade items is a active income source, since you’ll need to keep making the items to keep generating money. If you have a talent for arts and crafts you may be able to charge enough per item to make a decent income, but the focus here is on building easy passive income streams.

Luckily, you’ve still got an option for selling on Etsy, which is to generate passive income selling digital files on Etsy.

Digital files on Etsy can be anything from cards, such as birthday or anniversary cards, to prints for peoples walls, inspirational text or digital copies of your paintings. You could also provide something educational, such as calligraphy practice sheets if you have that skill.

The most obvious advantage of this is once you’ve made the digital file, much like my e-book suggestion above, you can sell it over and over again.

If you wanted to be clever, there are also companies you can outsource printing to. But you may find it is more profitable to sell a digital print for $5 (minus Etsy’s fees) than it is to sell a print for $25 (minus Etsy’s fees and the manufacturers fees for printing and delivery).

10. Sell stock photos for a passive income moneymaker

If you like photography, why not sell your photos to stock sites to start making passive income? If you’d like to start selling stock photography, make sure your images are high resolution and in focus. You can also sell high resolution pictures of particular objects, but you’ll need to ensure they have a clear or white background.

To start earning money compare different stock photo sites for their terms of payment before you sign up. Many sites will pay you a small fee for your images - eight photos for $1 or more for a specified number of photos. When a buyer then downloads one of your images you get a small commission fee. If you choose to sell stock photos, make sure you really do spend the time checking out the pricing of different sites before committing. You’ll also need to check the terms and rules for that site, particularly around people, logos or company names you may have inadvertently captured in your image.

Some sites will pay you a higher, flat fee for your image instead of a commission but these will wind up earning you less in the long term. It’s much better to be able to generate ongoing revenue instead of a marginally higher upfront payment.

You’ll find at the beginning your earnings will be very low, but stick with it! Once you’ve built up a larger library of images you’ll start to see better returns.


11. Make a niche or guide website and become an affiliate marketer

Writing a blog or making a website about a topic you are passionate about is a great way to generate additional income. Of course with a blog it isn’t entirely passive - you do need to actually create it.

However, once you’ve written that content, assuming it’s relevant to your niche topic, people will keep reading and bringing traffic to your site. From this, you can start generating income from affiliate marketing and advertising.

What is Affiliate Marketing

Affiliate Marketing enables you to earn a commission by promoting other people's (or companies') products. You find a product you like, promote it to others and earn a piece of the profit for each sale that you make.

For example, if you are passionate about hiking, you may recommend a certain brand of shoes because you think they are good quality. If your readers click a link on your site to visit that shoe retailer's site and make a purchase, you generate a commission from that sale.

If you decide to engage in affiliate marketing, there a few important things to remember:

Be an ethical blogger, and don’t promote products you wouldn’t use. If you want to retain your credibility, only support products you actually like and would purchase yourself. Your audience reads your site because they trust and like your opinion. As soon as they realise you will recommend any product that pays you, you’ll lose that trust.

Be transparent with your audience. Most bloggers will have a note on their site that lets their readers know they use affiliate links. Most people won't begrudge you for using affiliate links to earn money as long as you're being honest about it. They've come to your site to get ideas and recommendations on your topic of interest and expertise after all. But nobody likes feeling like they are being manipulated or lied to, so be upfront about your connections.

12. Create an online course

If you’d like to create a online course to generate passive income, you’ll need to be willing to invest a solid amount of time to build premium educational content. However when done properly, it will allow you to build a healthy passive income stream.

You can offer your course on sites like Udemy, which currently has over 3 million students. The other thing to remember about this one is that it can tie into some of your other passive income streams. If you have a blog on a niche topic, you already have a built in audience that trusts and enjoys reading your posts. For example, if that blog is about building ships in bottles, then why not develop a full course around it to sell to your readers?

Final Notes

If you've got any other suggestions on ways to earn a passive income, I'd love to hear them - message us with your feedback!

But most importantly, remember -

Why you should start one of these ideas NOW is because…

...why not?

If you’ve ever thought how nice it would be to get off the hamster wheel, why not take the leap and start working towards generating a passive income today.

Sign up to start renting out your car and begin your first passive income stream!

Related Topics

If you’re still hungry for ideas check out some suggestions for easy weekend work to bring in some extra cash.
41 easy ways to earn some extra money on your weekends

Need a car?
Rent one from your neighbour from $5/hour or $25/day. Join for free