Passive income is any kind of money you generate without having to continuously monitor or actively participate. For example, the salary you earn from your job is considered active income, as you worked to earn it. But passive income generates money in your account with little or no effort on your part. Typically, investments are the source of passive income.
18 Best Passive Income Investment Ideas
However, there are many other ways to earn passive income with little to no effort on your part. The caveat, of course, is that it usually takes some kind of asset or investment to turn on the income spigot. Here’s a look at some of the best passive income investments to build your wealth in 2023.
- Certificates of Deposit
- Dividend action
- High yield savings accounts
- Real estate rental
- Real estate investment funds
- Crowdfunded Real Estate
- Private Equity
- Government obligations
- Corporate Bonds
- Vending machines
- Online sales
- Parking lots
- Airbnb a room
- Car rental
- Online courses
1. Certificates of Deposit
The yields on certificates of deposit are the highest they have been in years, thanks to the The Fed’s campaign to raise interest rates to tame inflation. If you are unsure of the direction of interest rates, you can construct a CD ladder so that a CD matures each year and can be reinvested at the end of the ladder.
CDs may be the easiest passive investments to get started, as you only need to apply to open an account. You can start with your own bank. Here is a list of some Best CD Accounts to help you decide.
2. Dividend shares
Dividend shares Income payment that is typically above the market average as a whole, and tends to grow every year as companies increase their payments. Dividend stocks also offer the potential for capital appreciation.
3. High-Yield Savings Accounts
Like CDs, high yield savings accounts they carry FDIC insurance and pay their highest returns in years. However, HYSA offers the advantage of being fully liquid, which means you can access your funds whenever you need them. This makes a HYSA a great option for an emergency fund or to finance a short-term goal.
4. Real Estate Rental
Rental real estate requires a larger initial investment, but can provide consistent returns that increase annually. If you properly screen your tenants, you can earn a reliable high return on your real estate investment.
5. Real Estate Investment Trusts
REITs it offers many of the benefits of direct real estate investing – such as high dividends – without requiring a large amount of initial capital. You can also sell most REITs at any time on public exchanges, giving you a high level of liquidity.
6. Crowdfunded Real Estate
Crowdfunding is a third way to generate passive income from real estate. It works by using an online portal to join forces with other investors and create a pool of investment capital that a manager uses to buy real estate. Just be sure to check the rules, restrictions and fees before going this route.
7. Private Equity
Private capital it is typically only available to sophisticated and high net worth investors. However, if you can access a private equity fund, you may be able to get into the game. Private equity managers can adapt portfolios based on the needs of their clients, so if you are looking for a high income, you should be able to find a suitable option.
8. Obligations of the US government
US government bonds are among the safest investments in the world. Backed by the full faith and credit of the US government, there is really no default risk for bonds, although you still have to deal with inflation and interest rate risk. But in terms of earning a secure income, there is no better option, even if you can earn more elsewhere.
9. Corporate Obligations
For many investors, corporate bonds nicely straddle the divide between risk and reward. Paying more than CDs and government bonds, but safer than more speculative options, you can earn decent passive income with a portfolio of high-quality corporate bonds issued by some of America’s best-known companies.
How can I make $500 a month in passive income?
Any number of the ideas in this list could be used to generate $500 and even $1,000 a month. You may need to try more than one to maximize how much income comes in, but the good thing is that you can start earning today. Choose the ideas that you like and know that it may take a little extra investment up front while the projects are underway.
Peer-to-peer lending networks carry a little more risk than more traditional income investments, but they can also yield more. You just need to do your due diligence on who will receive your money. Online sites can help screen loans and facilitate transactions, but this is still a bit of the wild west when it comes to passive investing.
11. Vending Machines
Vending machines are not investments that you can trade in an exchange, but they can be a lucrative source of passive income if you understand the market. Success in the vending machine game it’s a bit like investing in real estate, however – you have to buy machines that are in the right places to generate consistent income.
Writing a blog will take some effort on your part, but once it’s up and running, it can be a good source of ongoing income. Blogs and websites that get a lot of views can charge more money for advertisers, so you should create something that has a wide interest – or simply buy an existing, winning blog.
13. Online Sales
Sometimes, you can earn passive income without even putting money out of your own pocket – although you may have to do some work. Many Americans have many things around the house that are more valuable to others than to themselves, from electronic gadgets to bed frames to collectibles. With a little marketing, packaging and shipping, you can earn passive income without investing additional money yourself.
14. Parking lots
In some high-impact urban areas, parking spaces can be more valuable than apartments. If you have an extra parking space that you are not using, renting it out can be a very lucrative source of passive income, potentially even earning you $1,000 per month or more in places like Manhattan.
15. Fixed Annuities
A traditional fixed annuity convert your lump sum investment into a regular income stream that can last your entire life, depending on the contract you buy. This can be a great way to earn passive income while making sure you don’t outlive your money.
16. Airbnb a Room
Your home can be a great source of passive income. If you have an extra room in your house, you can rent it on Airbnb or another online service and make a regular income without having to invest in a completely new property. You may be able to draw $500 per month or more from a single bedroom rental.
17. Car Rental
As Airbnb and other services have revolutionized the property rental market, others, such as Teaching, have taken up the mantle of personal car rental. If you have an extra car at home, or simply do not use your car very often anymore, you can rent it online to those who need to get some extra passive income.
18. Online Courses
If you have special skills or knowledge, or if you are simple to make complicated material easy to understand, you can create online courses and sell them. Once you have done the work of building the courses, your income will be completely passive, since you can just sit back and collect the income from the customers’ purchases.
The Bottom Line
There are countless ways to earn passive income. Some offer higher returns, some carry more risk, and some involve additional work on your part. But with a little research, you can decide which option is best for you.