In our blog about how to make passive income streams we explain the whole methodology behind passive income streams. In that blog, one small section is about the types of passive income ideas. There are multiple ways of passive income streams, but we will explain the most effective ones. We do not write about nonsense. We will not waste our time on earning 5 dollars a hour extra. Instead, we are in search of truly effective passive income ideas that generates significant profits with minimum efforts. So, focus and learn about 7 really effective passive income ideas that actually work!
If you want to work on passive income, you will also need to set goals. Without goals, you will not be able to make passive income. It is like a project, and you need to plan it. In our article about how to achieve goals in 9 steps, we will learn you how to make all your goals become a reality. And it is not that hard as you might think.
7 effective passive income ideas
In this article you will learn about 7 effective passive income ideas that can change your life if you are willing to work for it. This list of passive income ideas does not include all ideas. Instead we have made a selection of 7 truly good passive income ideas that actually work. Nonetheless, you should stay creative in finding other opportunities for passive income. By learning from the below 7 ideas for passive income, you will get better understanding of how the process works. Once you learn the process, you can apply it on other emerging income opportunities as well.
Passive income ideas are one of the components of our Happy Investors Mindset. We believe that happiness can be achieved when people have more financial freedom. This freedom can be used to buy time. And this time can be used to invest in valuable activities such as spending time with your family or pursuing your dreams.
#1 An automated business
The best way to earn more money is to be self-employed. Be careful, we do not say this is the easiest road. Working as an employee is safe, more easier and convenient. But how do you increase your income? You can’t easily get a promotion (every year), nor can I you ask for a raise every year. But if you start your own business, you can leverage your skills into profit making activities. But how can my business be a form of passive income stream? That is, first you need to work long and hard to build the foundation of your own business. It is very crucial that you start with automation in mind. So when you design your organization, you must keep in mind that the end-goal is to get it automated.
There are several ways to do this. Most important is that the business can live without you. Do not become the bottleneck of your own business. I mean, not in skills nor in decision making. Ensure that your business is fully automated in processes, people and most importantly design. You will have to setup and monitor via KPI’s / key figures, and the rest must be taken care off by your employees. If you going to do all by yourself, you will undoubtedly earn more money with the same business. However, you will also need to work 60 instead of 10 hours.
If you are interested in building an automated business, you should definitely learn from the master which teaches his lessons in his book called the 4-hours work week. Also, you can learn from our free business knowledge.
#2 Drop shipment as passive income idea
Drop shipment is a way to create a passive income stream via selling products. The idea is that you start your own web shop, and you offer products to your customers. But instead of holding stock, you make sure someone else holds the stock. Here is how it works: A customer visits your website. This customers buy product X on your website, and you will receive the order. Every night you spend 30 minutes to check the orders that you have received. You see that product X, Y and Z have been sold to customers. Then you login into your drop shipment partner.
The drop shipment partner is a company that holds stock of the products that you are selling. For instance this can be a wholesaler. On their website you will order Product X, Y and Z and deliver them directly to the customers who have ordered them. Total working hours: 30 minutes. Revenue: % margin on product X, Y, and Z.
Obviously there are a few interesting advantages of starting a drop shipment web shop. For instance, you do not need to hold stock yourself. This enables you to start a small business with only 100 dollars. Secondly, you do not need to pack and ship orders yourself. This is all being done by your drop shipment partner.
Strategy drop shipment for passive income
So, if it is that easy, why doesn’t everyone does it? That is, because if you are basically a re-seller then your own value is the traffic you generate on your own web shop and try to converse them into customers. The amount of margin you get on your sales is lower than when you hold your own stock. Thus you need a lot of orders to make an interesting amount of revenue. This is applicable when you are in a competitive market such as books or FMCG. But luckily there is another way, a more profitable way.
The best advice to start a drop shipment web shop is to specialize yourself into a very specific niche. A niche is a small market segment that has specific needs. These specific needs are hard to be met by big companies because of i.e. complexity, and thus there is scarcity for these kind of goods. Scarcity means opportunities. It means that there is more value in it. People in a niche are willing to pay more for a product, and this allows you to ask a higher percentage of margin.
Build your passive income idea via a drop shipment website in a specific niche. Even if this means that you will need to create your own product for that niche.
#3 Build a Blog channel and apply Affiliate Marketing
A blog channel or also known as content platform is an excellent way to start building a passive income. The principle is as followed: you have a blog with relevant content. Visitors find your content via search engines, in search for answers. You offer valuable insights via these blogs. The more visitors you get, the more of those visitors can be conversed to a cash flow. This can be done via Affiliate Marketing. The essence is that you offer customers solutions by presenting products or solutions of third parties. You do this via linking to the third party. When visitors click on that link, and buy a product at the website of the third party, you will receive a commission. It is also possible to show display commercials on your website. This can be done via Affiliate networks or via Google Adsense.
Earn passive income via writing blogs
Another way to earn money via blogs is to write sponsored articles. Companies are willing to pay money for link building and brand awareness. One way to achieve this, is to pay bloggers to write an article about their products and make it posted on the bloggers website. When you have more than 10.000+ monthly visitors per month, you can easily earn up to 150+ dollars per article. You can make this easily passive by hiring a freelance blogger. Perhaps you know someone who likes to write blogs as a side job. You give them i.e. 75 dollars for the whole process: from acquisition to publishing. You don’t have to do anything for this.
Do not forget that building a content platform is a time consuming activity in the early years. In 3 or 4 years, when spending 10 hours a week on a blog with pure focus, you can achieve 10.000+ monthly visitors per month. Of course, you have to be creative. I.e. ask your friends to write just one article that is relevant to your blog platform. Also, approach companies to write articles that they can publish for free on your website. And write some blogs yourself occasionally. By working smart, you can get a lot of content with less effort.
How much money can I earn with a blog?
The answer depends on the type of blog you have, and more importantly the amount of monthly visitors. The most money can be earned by focusing on a niche. And in general money-related websites earn the highest amount of money per click. If you have a passion for sports, then find your niche in it. An example is: you like soccer. And you especially love to follow the Premier League in the United Kingdom. Then, focus your blog on purely the Premier League. Or even better, on goalkeepers within the Premier League. This might not be the best example, but the message is to find your niche.
Monthly visitors are the most important driver for revenue on blogs. The more monthly visitors you have, the more money you can earn. Money can be earned via Affiliate Marketing, via Google Adsense, via partnerships, via Display marketing or any other type, and via sponsored content.
You should realize that having a blog can give you financial freedom, due the amount of money you can earn with blogging.
Example on how to make money with blogging
One example: You have 10.000+ monthly visitors per month. Regardless of the niche you are in, it is safe to assume that you can earn up to 500 dollar per month on Affiliate Marketing. It is also safe to assume you could easily write 5 blogs a month for 150+ dollars per article. That is another 750 dollar. Google Adsense will give you another 50 dollars a month. And if you are lucky you have a special content marketing deal with a third party for 500 dollar a month. In total: 1500 dollar a month with minimum time is possible. In this situation, you might work 2 – 5 hours a week to earn 1500 dollar a month. And please note that this example is on the safe side. If you are really good at it, you can earn 10.000+ dollars a month via Affiliate Marketing alone!
The above sounds very promising, and that is why we present a blog platform as a passive income idea. However, you should not forget that it takes a few years of hard work to achieve the above passive income. The great lesson is to keep working hard and consistently for many years. Once the business is grown, you can turn it into a passive income stream.
#4 Start a Youtube channel and share valuable video content
How is a Youtube channel a passive income idea? Well, that is quiet simple actually. When you make an account on Youtube, you can start publishing videos. Youtube (Google) is automatically placing advertisements on your video. And in return you get paid by the amount of views per video. Is it that easy? Well not really…
To turn your Youtube channel into a revenue stream, you will have to get a lot of views. Videos that get millions of views, will return an interesting amount of money. But to get a million views, or even a thousand views, is difficult. And it is getting more difficult with the ever increasing amount of videos that are posted on Youtube.
So how can I earn a lot of money with Youtube videos? The key answer is to share valuable video content for a specific niche. The content, that is the information you are offering, is crucial to build a channel with subscribers. The more subscribers you get, the more views you will receive on your videos. Also, the more views your video has, the more it will be viewed by non-subscribers. So it is an upwards spiral of opportunity.
Youtube strategy for passive income
After a few years of hard work your Youtube channel become an interesting passive income stream that will deliver monthly cash flow into your bank account. Depending on your passion and knowledge, you should focus on a specific niche. Offer this niche value by creating unique video content with relevant information. Add value by solving problems. The more value you offer, the more followers you get. And if you are truly a master at this, you can earn millions within a few years. There are many examples of this on Youtube, but those are the special few.
One last step can occur when your Youtube channel has a lot of subscribers and a growing revenue stream. At this point, you might decide to invest a part of this income into outsourcing the video making. In this way, you can make more professional videos and it won’t cost you any time at all! This is the ultimate stage of the passive income idea via Youtube: outsourcing your video making and yet earn a lot of money due your subscribers base. The Youtube strategy is one of the passive income ideas that really work as proven in the real world.
#5 Start an Influencer Channel about your passion
Above we have discussed blogging and a Youtube channel as two potential passive income ideas. Another passive income idea that is strongly related to these is an Influencer channel. By starting your own Influencer channel you can combine the strength of blogging and a Youtube channel, but also extend the business to Instagram or other growing Social Media channels.
But why do we consider an Influencer channel as a passive income idea? Well, think about the following question: do you consider posting one picture a day as hard work? How much time will this cost you? Maybe five minutes. However, when you have a serious Influencer channel that is only active on Instagram, then you can easily charge money for a picture.
How to earn money as an Influencer
With an Instagram account you can earn a lot of money as an Influencer. Companies are willing to pay serious money for advertisement via Influencers on Social Media. That is because companies want to connect their brand to certain Influencers whom reflect their brand values. Let us assume that you have 10.000 active followers on Instagram. On each post you get only around 1000 likes, and each post has 8000 views. What value do you think you can offer companies?
With the above statistics you could easily charge 150 dollar per post. And that is only a post on Instagram. Now imagine that you can combine your blog platform with video’s and Instagram pictures. There is serious money to be made in this business! Instagrammers with more then 50.000 followers are earning a monthly average income with only a few posts per week. It is truly incredible.
However, it takes a lot of time, energy and focus to build a successful Influencer channel. It is just the same as building a blog platform and building a Youtube channel. The best strategy is to combine them, so that you can offer companies a multi-channel approach. Again our advice is to pick a niche and stay within your lane (your strengths and passion).
Eventually, when you have a lot of followers, you can make the income idea passive. An Influencer channel can be made passive by outsourcing the content writing, by outsourcing all contact with companies (like having an assistance), and so on. The only thing that remains if you have a personal brand, is that you must make a few pictures a week of yourself. Estimated time per week: 30 minutes. But the estimated time to achieve this stage can be vary from one to ten years. Nevertheless, always remind yourself that with consistent focus and effort it is possible.
#6 Invest in Stocks for passive income
Stock investing is a easy accessible form of passive income idea. This is one of the only passive income ideas that do not have to require a lot of time and money to start with. In fact, you can start investing at any age, with any amount of money and with any level of financial education.
That having said, do realize that the above factors will impact the amount of your success within stock investing. I.e. someone who is very young has more time to let annual compound interest work for himself than someone who is around the age of 60. Also, someone with a lot of money can choose for safe investments with a low percentage of return against low risk. This is very different than a person who wants to earn a lot of money, while he has only 1000 euro’s to invest. This person must takes a very risky investment, that will result in 99,9% chance of losing all his money against 0,01% of making a million. And finally, the amount of financial education will strongly impact your success on the stock market.
If you want to learn more about stock investing, you should definitely read our article about how to do stock investing. For this chapter we will not go in depth about how to invest in stocks. Instead, we will only briefly explain the different kind of stocks and how it could become a passive income stream.
In essence, there are a few different type of stocks. We have growth stocks, dividend stocks, ETF’s, Index Funds, bonds and alternatives such as crypto’s, marijuana and gold. Yes, yes, we know bonds and alternatives are not stocks, but for the sake of simplicity we will share them under the same pillar in this specific article. More relevant: depending on the amount of risk you are willing to take, you select your type of (stock) investment.
For those who are in search for a truly passive income idea, can find their holy grail in ETF’s, dividend stocks, Index Funds or bonds. It is very easy to invest in these kind of investments. They can give you an annual return of around 3 – 6%, depending on your selection. The only thing you need for this is money, and one hour of time to buy the stocks.
Please be aware that the above is a very simple explanation of (stock) investing. In this article you can read all you have to know about stock investing.
#7 Invest in Real Estate
Real estate investment can be done in a passive and an active way. When you are actively involved in real estate investments, you are doing all the work. You will find the property, you will fix the deal, you will manage the tenants yourself, and so on. Investing in real estate can be very profitable, but it requires money, experience and some skills.
Active real estate investing is great. However, we are looking for passive real estate investment. The difference is that you won’t do all the work. The essence of passive real estate investing is to find rent-ready properties that will produce cash flow instantly after purchasing the property. To do so, you will need less money and experience for this. Nowadays it is easy to find rent-ready deals on the internet. Search for a property that doesn’t need to be fixed against high costs. A small investment like painting the house should be the maximum. Secondly, you will find a reliable tenant that will pay on time without the need to being managed. Thirdly, when you get bigger and maintain a few properties, then you can hire a portfolio manager. You will get less income, but it requires no management time as you have outsourced this to the portfolio manager.
Real estate investing is a profession on its own. In this article we will not discuss this in depth. If you want to learn more knowledge then you should read books about real estate investments. Also we have a great article about how to profit from real estate. If you want to choose real estate as your passive income idea, we strongly suggest to educate yourself.
Advice on passive income ideas
There are many passive income ideas that can work. Technology is advancing quick, and with some creativity you can design new business models for residual income. For all of the above mentioned passive income ideas counts the same: in the early stages of making passive income, you have to work hard. There is no easy shortcut, and all methods for earning more money implies work. However, this is not a negative thing. If it was easy, everyone would do it. Thus, take the opportunity to make your own passive income idea become reality. But before you continue, we strongly recommend to continue your learning journey by reading this article about how to make passive income streams. In this article you will learn how to turn a residual income into passive income.
Did you enjoyed this article? Do you think it is of value for others? Please share this article with your friends to help them, and leave a comment in the below to share your experiences and wisdom. Share your knowledge to improve the world!