Everyone should be interested in adding at least one passive income source to their earnings. Passive income means you do practically nothing but receive a steady cash flow. As far as truly passive income goes, there are not many choices. It makes sense that you need to do at least a little ‘work’ to receive payment. Therefore, even the most passive income sources will require some action on your part.
Some of the passive income suggestions out there require more work than others. One example is owning and renting real estate. The money coming in is extra income, but some people wouldn’t categorize this option as passive. Owning and renting the property requires painting, cleaning, advertising, mowing, other yard work, and maintenance work.
Some people who own several properties hire a property manager to care for all these details. In this case, owning and renting property is a hand-off, money-making venture. But for the average person with one to three houses, hiring a property manager is not feasible, and doing all of this upkeep can become a daunting task that is far from passive.
The following list contains six mostly passive income ideas that require little effort on your part. The first two are unoriginal saving options everyone should consider over regular savings accounts. They are the genuinely passive choices on the list. With more effort, some of the other ideas can become business opportunities. These specific options require you to decide how much you want to work with your passive income. Let’s look and see if one or more of the following choices is right for you.
1. Buy CD’s
This option is not very original. However, there’s a reason people put money away in CDs instead of socking it away in a savings account. Interest rates are so low on traditional savings accounts that no one would consider them a good source of passive income.
Interest rates on CDs are not a great source of income; however, they are a little better than similar options. Many factors go into place regarding a CD’s rate, like how long you want your money tied up — one year? Two? Five or more? All institutions offer better rates for more extended periods. According to the FDIC, the national savings interest rate average is 0.05 percent. The average rate for a five-year CD is around 0.32 percent.
Let’s put that into cash figures. If you have $5000 in a regular savings account earning 0.05 percent yearly, that’s $2.50 in interest per year and $12.50 over five years, without considering compounded interest. However, if your money is in a five-year CD earning 0.32 percent yearly, you make $16.00 per year in interest. That’s $80.00 over five years.
You can earn even more keeping your money in longer-term CDs because the interest rate increases with the term’s length. However, placing your money in a CD means you do not have access to it the way your would in a savings account. Cashing in the CD before the required term will cost you money rather than generate it.
2. Invest in mutual funds
Mutual funds offer investors a great way to diversify their portfolios. Whereas mutual funds allow investors to put small amounts of money into one or more investment options, stocks do not.
Because mutual funds are tied to the stock market, there is some risk. However, the risk is much less than most other stock market investments. And you can withdraw funds from your mutual account at any time, provided it is an open-ended fund.
Mutual funds are generally managed by a fund manager, making them true passive income options.
3. Maximize on credit card rewards
True, credit cards can get people into some serious financial trouble. However, if you know how to use them, you can cash in on their rewards.
The key to staying out of credit trouble is not charging more than you can pay by the next billing period. Using a credit card to pay for things is a lucrative source of passive income if you pay your balance in full monthly and have a generous rewards program.
If you want a credit card to assist with passive income, look for ones with hefty sign-up bonuses and cashback plans. Sign-up bonuses on new cards can drop some significant cash into your cashback account for meeting specific criteria. This criterion is usually spending a certain amount in the first few months of owning the card. Just be careful not to overextend your spending to reach the bonus. The interest rates on an unpaid balance can quickly erase the money you received initially.
For the best cashback return, you can get a categories card where you earn more cashback on certain types of purchases like gas and groceries. Category cards often have high cashback percentages and might require signing up for the categories quarterly. Forgetting to sign up can mean losing money.
If you don’t want to worry about the categories, look for a card with a high overall cashback percentage. Then, every time you make purchases with your credit card, you earn extra cash effortlessly. Just remember not to carry a balance on your card, or the interest you end up paying can exceed your passive income.
4. Buy an ATM for your business
Usually, you see ATM’s associated with banks. But did you know you can buy your own? You can get a used or new basic model ATM for a couple of thousand dollars. Of course, you can purchase more expensive ones, such as the type you build into a wall. You will just need to decide which model is right for your business.
With your own ATM, you will have to pay the installation cost and all maintenance, plus have enough available cash around to keep it filled, usually a couple of thousand dollars. After all of your expenses, you get a hefty cut of the service fees for all transactions. If you don’t want to bother refilling the machines, you can outsource this step. Just be aware that this service will cut into your profits.
The main thing with owning your own machine is finding the perfect location. Making access to cash visible and convenient means your device will get used more. This fact means more money in your pocket.
5. Rent out your extra space
This passive income idea can make a driveway a rentable parking spot in a metropolitan area. Or, a shed or space that could house a boat or other vehicle over the winter also offers an opportunity for monthly passive income. Maybe you have an extra garage that someone needs, and you don’t. Anywhere you have extra space, someone might pay to use it. Be sure to ask your insurance agent what type of insurance you need for whatever rental deal you have going. Your homeowners might cover it, but ask to be sure.
If you want to up your rental space game, owning a storage building can be a lucrative business. Advertising and getting the spaces rented would not be considered passive. However, after that chunk of work is done, the checks come in with little attention to the business.
Of course, additional costs come with owning property and a company. And other stresses such as delinquent tenets can be an issue; however, those are the chances you take if renting space becomes more of a business than a passive income source.
6. Advertise on your car, building, or other property
This idea is pretty ingenious. Businesses need advertising, which can be quite expensive. Companies also need advertising that reaches a lot of people. If you develop a plan to offer affordable advertising and market the right customers, you could use this idea for just your car or branch out to several, raking in the dough.
For real passive income, you could require the business to provide the advertising such as a removable magnetic sign. However, if you wanted to make this more of a company and service, you could add making the signs or other advertisement part of your package deal. You could even hire drivers who get part of the cut. As with any passive income or side-hustle, you can make it as hands-off or hands-on as you want.
7. Create an online course or instructional video
Most people have a skill they could share. You could share that skill with the world by marketing an online course or instructional video. The work on the front-end of this project could be extensive. Therefore, the passive element comes in after all this work is finished.
Online courses and videos can be very lucrative if done well. You will need to research the project and develop your plan based on your needs and skills. Several capable companies specialize in creating online course platforms. Hiring some help to establish and maintain this venture is well worth the cost and keeps the project professional and passive. However, some people will have the skills and time to maintain it themselves. Either way, this option is a passive income idea to keep in mind.
One of the best features of passive income is the minimal effort required to create additional cash flow. If you want to put your money in a CD or mutual fund, you will have relatively no work or effort expended.
Additionally, you can entertain other passive income options with a little creativity and vision. Just be sure to figure out how much time you can dedicate to this venture because almost all passive income options require at least a little effort.