17 Passive Income Ideas for Increasing Your Cash Flow

Putting your effort in upfront and collecting the returns forever after is the foundation of financial freedom.

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By R.L. Adams • May 9, 2021 Originally published Nov 1, 2019

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Passive income has long been the holy grail for entrepreneurs looking to free up their time, untethering the cord of daily duties and responsibilities from the potential to generate healthy monthly revenues. While the importance of passive income isn't often doubted, the monumental hurdle often required to achieve a respectable amount of cash flow from automatically-recurring revenue streams is often too great for most to bear.

Related: 5 Ways to Generate Passive Income and Keep Your Job

Clearly, it's hard to generate passive income. It requires the upfront investment of a significant amount of our time, usually with little to no returns for extended periods. Both beginners and veterans in the game can go months and even years without a single dollar produced from passive income activities, making even the most astute entrepreneur shake their head in sheer and utter frustration.

According to U.S. Census Bureau data, 20 percent of U.S. households use passive income to earnextra cash. While that percentage might seem like a large number, the average amount of passive income earned is only $4,200 per year.

Because passive income generally requires some start-up costs or upfront work, especially for investment income, there is a significant disparity among classes, making it challenging to generate a high amount of passive income.

The truth of the matter is that time is far more valuable than money. While money can be spent and earned, time can only be spent once, then it's gone forever. As we age and grow older, we understand the importance of time and being able to freely choose what we do with those precious moments that we do have in life.

Related: 11 Ways to Make Money While You Sleep

What is passive income?

Types of passive income

There are two types of passive income. Neither is necessarily better than the other; it depends on your style and where you can find your niche.

If you've got a creative side, there are plenty of avenues for that. And if you think you have more of a logical way of thinking and enjoy dealing with numbers, then you might be a great passive income investor.

Creating

A creator's passive income can include activities like:

  • Building and selling digital products
  • Writing, ghostwriting, or editing books
  • Creating or producing music
  • Creating any other miscellaneous product that suits your talents

Investing

An investor's passive income can include investments in:

  • Dividend stocks
  • Real estate investment trusts (REITs)
  • Renting or leasing property
  • Peer lending
  • Mutual funds
  • Interest rates and royalties

Passive income vs. active income

The most considerable difference between passive and active income is where and when the work comes in.

Active income is more of the traditional way people think about income, meaning that it requires constant or full-time effort and receives a consistent payment.

Passive income, however, requires much more hard work upfront. Because passive income requires little maintenance and upkeep, the work occurs at the beginning of the process.

Once content is created, or investments are made, the project should make money on its own.

Related: 2 Ways to Make Money Online This Month

Benefits of passive income

There are several benefits to passive income. By nature, passive income is meant to be more of a passion project or a way to earn extra cash doing something you love or as a way to supplement your current income.

The benefits of passive income can include the following:

  • Additional "side hustle" cash flow
  • Increased financial freedom
  • Extra opportunities to reach financial goals
  • A hands-off approach and additional income can help decrease stress
  • More options for flexible or remote work

Passive income does take a significant amount of work to get started, but if these benefits sound worth it to you, then it may be time to start brainstorming ways to set up your new venture.

If you're looking for some facts and figures from those at the top of the passive income industry, keep reading to find out more.

States with the most passive income

Curious about which states are using side hustles to build wealth? Take a look at the ten states that are making the most passive income annually, according to the U.S. Census Bureau.

1. Florida: Miami, Fort Lauderdale, and West Palm Beach

  • Average passive income: $9,000
  • Percentage of households making passive income: 16.9%

2. California: Los Angeles, Long Beach, and Anaheim

  • Average passive income: $8,050
  • Percentage of households making passive income: 19.1%

3. California: San Jose, Sunnyvale, Santa Clara

  • Average passive income: $7,600
  • Percentage of households making passive income: 33.9%

4. California: San Diego and Carlsbad

  • Average passive income: $7,500
  • Percentage of households making passive income: 22.5%

5. California: San Francisco, Oakland, and Hayward

  • Average passive income: $6,600
  • Percentage of households making passive income: 32.1%

6. California: Riverside, San Bernardino, and Ontario

  • Average passive income: $6,400
  • Percentage of households making passive income: 13.9%

7. New York, New Jersey, Pennsylvania: New York, Newark, Jersey City

  • Average passive income: $6,000
  • Percentage of households making passive income: 21.4%

8. Massachusetts and New Hampshire: Boston, Cambridge, and Newton

  • Average passive income: $5,300
  • Percentage of households making passive income: 26.1%

9. Arizona: Phoenix, Mesa, and Scottsdale

  • Average passive income: $5,200
  • Percentage of households making passive income: 18.4%

10. Arizona: Tucson

  • Average passive income: $5,100
  • Percentage of households making passive income: 19.7%

1. Start a blog or podcast

The most important method for generating passive income is to start a blog or podcast. Bloggersand podcasters can generate a tremendous amount of income, but not quickly. If you plan to start a blog or podcast, understand that it's going to take a vast amount of work, time, and equipment to succeed.

Related: How to Start a Blog and Make Money Online

Regardless of your niche, as long as you have a clear understanding of things like searching engine optimization, social media marketing, and the ability to write or speak on high-value content, then you will succeed in the blogging and podcasting space. Once your content becomes popular, it provides you with the platform and audience to generate multiple streams of revenue by marketing relevant products and services to your visitors.

Related: 5 Tips to Dominate Social Media Marketing in 2019

2. Write and publish an eBook

Another great method for generating a respectable amount of passive income is to write and publish an eBook. Non-fiction eBooks that help to educate your audience on topics such as online marketing, business, or other self-development areas, are going to sell far better than fiction books at the outset.

Clearly, fiction can make tremendous amounts of money, but it's also highly competitive if you're a self-publishing author rather than an already-established writer with an existing following.

Utilize the Amazon Kindle Direct Publishing platform and publish ebooks that will fill an existing need in popular niches where you have some level of expertise.

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3. Create an online course

Have a technical skill you're confident in? Want to convey that skill to others out there while generating a healthy passive income stream? Creating an online course on Udemy is a great way to automate some of your cash flow. However, like any other income stream that's passive, it takes a significant amount of effort on the front end.

There are so many things that can be taught through an online course. I opt to teach technical skills in my courses such as how you can become a web developer or learn search engine optimization, but you can also opt to teach other skills such as playing an instrument, learning a new language, becoming a photographer and so on and so forth.

Related: 15 Free Online Business Courses You Can Take From Harvard, Yale and Other Amazing Schools

4. Produce an audiobook

I've been in the audiobook business for some time now and it's an incredible stream of passive income if you do things the right way. Leverage Audible's ACX platform to push out your audiobooks to the world's most robust platforms such as Audible and iTunes.

If you have specialized knowledge or advanced skill sets in some area, you could opt to teach them through audiobooks. However, you have to focus on delivering an enormous amount of value and ensure that you have a high-quality production. Don't try to slap things together and expect to earn any money online.

Related: How This Writer Embraced the F--- It Mentality and Turned a Crazy Idea Into an Audiobook Project Starring Jon Hamm

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5. Become an affiliate marketer

Affiliate marketing is likely one of the most powerful ways that you can produce multiple passive income streams. However, this isn't easy by any measure. To succeed at affiliate marketing, you need a large social media following. In other words, you need a big platform and audience.

When you don't have a platform or audience, you need to run ads, which can get costly. If you know what you're doing and you're a seasoned internet marketer (IM), you'll succeed. But it takes time to learn the ropes. Still, this is a great way to sell products and services that you don't own, effectively becoming like a broker while earning a healthy passive income stream.

Related: 3 Tips to Get Started with Affiliate Marketing

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6. Build a sales funnel

Anyone in the marketing business understands the concept of sales funnels. Sales funnels conceptualize the process of taking prospective customers from browsers to buyers. However, building the proper sales funnel is no easy task. It requires a serious amount of upfront investment of your time, and it also requires lots of browsers to drop into the top of the funnel.

In order to build your sales funnel, you need to offer something in exchange for an email address, effectively creating a free offer. Sign up to a system like Aweber or Mail Chimp and work on building out your sales funnel. Create a free offer and build an automated email series that will move your leads up the value ladder of products that you're selling.

Related: 7 Mistakes to Avoid in Your Sales Funnel

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7. Develop a smartphone app

Okay. Okay. I know it's not easy to develop a smartphone app. You either need a lot of skill or a bit of money to get someone to make your vision into a reality, but it is still possible. While the overnight gold rush to app riches might be over, you can still earn a respectable income if you develop the right mobile app.

If you can create the next Uber, then great. If not, you can opt for some niche app that will help to solve a problem or fill a need that might not have yet been properly covered. Think you can do something better? Why not give it a shot? If you're at all technical and understand the dynamics of business and smartphone applications, this is definitely worth your while.

Related: 15 Money-Saving Apps for People Tired of Being Nickle-and-Dimed

8. Earn real estate rental income

Real estate has long been the source of passive income for ages. Investors and owners have opted to rent out homes, apartments, condos and office space to generate a healthy monthly revenue. Clearly, real estate is a great source for generating some automatic income, but it also requires a sizable upfront investment.

If you have extra cash lying around, you can certainly opt to invest in real estate (or even in REITs — more on that in the related link below!). You can purchase real estate to rent out to long-term tenants or you can try your hand at vacation rental properties through sites like AirBnB or VRBO. Either way you look at it, this is a great passive income idea if you have the cash lying around.

Related: Direct Real-Estate Investing or REITs: Which Should You Choose?

9. Sell digital products on Etsy

Etsy might be geared toward small business owners, but it is a massive resource for people wanting to sell all types of handcrafted goods. But, did you also know that you can sell digital products on Etsy? These digital products require little to no maintenance once they're up and running. All you need to do is put the time into creating the digital products and set up quality listings.

Clearly, this will require some maintenance on your part and ensuring that the right traffic hits your listings. However, digital products require virtually no overhead and will sell automatically as long as they are high in quality and are appealing to the relevant audience that you're targeting.

Related: Can Etsy Continue to Thrive After the Pandemic

10. Generate royalties from jingles or audio tracks

If you're musically inclined, one idea for generating some passive income could be to create jingles or audio tracks that you can then license out through popular websites such as Audio Socket, Sound Cloud or Song Freedom, just to name a few. Clearly, this isn't easy. But it is well worth your time if you can come up with something great.

Do your research and due diligence to create audio tracks that are appealing to a large audience. Search for other popular tracks that are being heavily licensed and see what they're doing that you could try to replicate in some format, while not outright duplicating.

Related: This Music Entrepreneur Makes Guitars Out of Torn-Down Buildings in Detroit

11. Make YouTube video tutorials

Creating a YouTube channel is a great resource for earning a large stream of passive income. While it's not easy, and it will effectively take millions upon millions of views to earn some semblance of a real income from this stream, YouTube does offer a very cost-effective avenue to market.

Research what the most popular YouTubers are doing. For example, Blippi, which is a kid's series created by creative entrepreneur, Stevin John, helps to teach children about all types of subjects and has become one of the most popular YouTube series in its niche with over 500 million views in the past couple of years alone. Seek out successful people and try to replicate their formulas while being unique.

12. Sell professional photos online

Another avenue for passive income is to leverage photo-selling websites such as iStockPhoto and ShutterStock to earn extra money while you sleep. Clearly, you need to understand photography and things like Photoshop if you're serious about succeeding in the photo-selling business.

There's a lot of competition when engaged in this line of work. However, if you have a knack for photography, then selling your stock photos online should come almost naturally to you. Get really good with photo-editing software and find your niche. Whether it's portraits, landscape photography, business photography, or something else, find it and stick to it.

Related: 20 Business Ideas You Can Start With Less Than $10,000

13. Use cash-back credit cards

Cashback credit cards offer a great resource for earning some passive income, especially if you're already going to be spending the money. While this revenue stream likely won't make you rich, it will help give you some kickbacks on money that you're already likely budgeting for in your day-to-day life.

Do a few searches online for the best cash back credit cards and sift through all the posts that detail what the right card would be to fit the bill. Be wary of linking through on some of the posts that might try to push you towards the card that will help them earn the greatest income by referring you to it.

Related: Credit Card Hacks to Help You Build up Big Rewards

14. Purchase dividend stocks

Dividend stocks are great resources for generating passive income. You also won't need to sell the stock to generate that income. However, you will need to buy a significant amount of stock market shares to see a healthy stream of revenue from whatever dividend stock you end up selecting.

Do the proper research and due diligence on finding the right dividend stocks. You don't need to start out by knowing everything, but you do need a desire to learn and understand. Start small and build up from there while constantly keeping an eye out for high-income producing dividend stocks.

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15. Invest through peer-to-peer lending platforms

Peer-to-peer lending platforms such as the Lending Club and the Funding Circle make it easy and straightforward to invest in people and businesses to generate a passive income stream from interest payments as a lender. Many of these sites have accurate algorithms that will predict risk, taking much of the guesswork out of the equation for you.

Clearly, this will require some upfront investment. If you have some money stashed away, this might be a good avenue for investment without having to rely on low-interest-producing CDs at banks or high-risk stocks. Do the research and judge borrowers and situations for yourself on whether this passive income idea works for you.

16. Become an ATM vendor

Depending on where you live, you could quite possibly make some great passive income by setting up ATMs in a variety of locations such as small corner stores or in malls and so on. Locate a good company that will allow you to place their ATMs at various businesses and earn a small percentage of the income that these generate.

Outside ATM machines can charge upwards of $5 per transaction, and you could get a small piece of that. On volume, this can amount to a lot of money. Clearly there is some maintenance involved in this and it's not fully passive, but it is a great resource for earning a respectable amount of monthly cash flow depending on the volume of ATMs you're able to setup.

Another vendor option? Vending machines. If you've already found a high-traffic area to place your ATM, using that same space for a vending machine could also earn you some extra cash. A vending machine is a piece of equipment that will cost you upfront and take a bit of upkeep to replenish, but buying in bulk and selling at a slight premium will add up in time.

17. Build niche or "guide" websites for lead or referral income

If you have an understanding of SEO and online marketing, you might want to build niche or guide websites to help generate leads and referral income. Popular industries include insurance, credit cards, the make money niche, diets and weight loss, amongst many others.

Find something that you know and ensure that you source the right relationships with the right companies to sell your leads, or make sure that people are referred to the right products or services that will allow you to earn a commission with each subsequent sale.

Related: Teach Yourself Online Marketing With This Simple Technique

What about crypto as a source of passive income?

One source of passive income that didn't make this list is cryptocurrency. Because this endeavor is still relatively new and often volatile, it's hard to say what the short-term and long-term benefits of investing might be.

If crypto interests you, be sure to complete your due diligence on the concept by researching trends, looking deeper into the metaverse, and consulting with experts before diving in.

How you can get started with passive income

If you are an entrepreneur passionate about creating or investing, finding a passive income opportunity to boost your personal finance might be your natural next venture.

There are several options to turn to, and now that you've got a comprehensive list, it's time to do a little more research on your own based on which options stand out to you.

No matter which road you choose, remember that passive income will require some upfront costs, time, and effort. However, if you dedicate yourself to the right opportunity and set it up with a streamlined system, the following passive income payouts could be very well worth your time.

To learn more about investments, income, cryptocurrency, and more, visit Entrepreneur for additional professional resources.

R.L. Adams

Entrepreneur, software engineer, author, blogger and founder of WanderlustWorker.com

Robert Adams is a writer, blogger, serial entrepreneur, software engineer and best-selling author of dozens of technology, SEO, online marketing and self-development books, audiobooks and courses.

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