What is passive income?
Passive income, by definition, is earning money through a partnership, business, or rental property in which you are not actively involved.
However, the definition has evolved over the years to include money earned online that requires little or no effort.
For example, dividends and interest (portfolio income) are considered passive income.
It is also possible to consider applications such as Bricks.co which helps you get started in real estate investment by allowing you to buy shares in a rental property that you like.
In its broadest definition, passive income could also be something like income from affiliate marketing earned through this blog - although I put in a lot of work at the beginning, I no longer need to do anything to earn this money.
The 4-hour week by Tim Ferriss propelled this idea into the mainstream, and Smart Passive Income by Pat Flynn strengthened it even more.
What are the best passive income ideas?
Today, when many think of passive income, they think of digital entrepreneurship: selling digital products, affiliate marketing, online courses, Google AdSense, selling e-books, etc.
There are also traditional routes to passive income, like real estate investment firms, licenses, and stock market dividends.
We're going to cover both in this guide.
Here are my top passive income ideas and strategies to try this year.
1. Start a blog (or online business) the right way.
I'm starting this guide with blogging as a passive income strategy because I believe from experience that it's the #1 way to earn passive income.
This is the most passive type of online business, as revenue comes from three passive income streams:
- Affiliate earnings : commissions that I earn when readers click on one of my affiliate links and buy a product from a company.
- Advertising revenue : Mediavine ads that are paid monthly.
- Digital product sales : paid products that are downloaded and do not require shipping.
So how do you get started?
When you are considering create a blog, you may be tempted to choose one of your passions and start writing content.
However, modern blogging doesn't have to be just about writing, it's about running your blog like a business.
Let me explain.
To make full-time passive income from blogging, you need to mentally transition from being a simple blogger to being a business owner.
This psychological change allows you to see things from a different perspective: you're not blogging as a hobby, but you're creating systems to turn your blog into an online business.
First of all, you need to understand the right ways to monetize a blog depending on its life cycle and age.
You can read all of my detailed strategies in my ultimate guide of over 15,000 words. on creating a profitable blog.
Why do bloggers fail?
No less than 95% of bloggers fail.
Many “experts” say that bloggers fail because they're not passionate enough or they can't stay consistent in their writing.
That is not the case.
The truth is that 95% of bloggers fail because they can't make their business profitable.
I am passionate about a lot of things - travel, soccer, personal development - but if I were to write about these topics for years and never earn a cent, I would give up 100%.
So how do you create a profitable blog?
Choose your blog niche with revenue in mind.
Most bloggers start with a passion in mind, write passionately for years, but don't know how to go from blogger to profitable blogger. Revenues are put on the back burner to be found “one day”.
On the contrary, it should be planned from day one.
What is the role of this factor in choosing the niche?
Take this example.
Let's say you're passionate about teaching and creating a blog about productivity and time management for students.
You have just chosen your niche site idea based on your passions rather than earning potential.
A university audience is not the most lucrative. When I was in college, I was lucky enough to have over $100 in my bank account. I was more interested in buying beer than in a digital product from a blogger.
However, if you change your niche slightly, you can reach a much more lucrative audience.
Instead of advice for students, how about focusing on learning management systems and advice for universities themselves?
Here, instead of selling to students, you sell to professors and administrators and you could make money through:
- Affiliate marketing: write about the best learning management systems or video conferencing software.
- Tip: sell your time as an eLearning expert.
With both approaches, the content is similar, but an audience has a lot more money to spend on the solutions you solve.
Keyword research
The next step is to determine if people are looking for what you're writing about.
Your niche needs market demand, and this is discovered through keyword research.
Ahrefs is a great tool for carrying out your keyword research.
With their keyword research tool, you can search for different keyword ideas and see how many times people Google them each month.
You can also show the difficulty of the keywords.
This score indicates the relative competition for this keyword on a scale of 0 to 100. Try to find keywords with a difficulty score under 50.
Overall, here are the main measures to follow to study market demand and the viability of your blog niche:
- Monthly searches for the keyword should be greater than 1,000.
- The keyword difficulty should be under 50.
- The results of the first page of the search engine should contain a website with a domain ranking (DR) of less than 50.
- The top five search engine results should have changed slightly in the last six months.
Build relationships with other bloggers.
After choosing the niche for your blog, launched your blog with Bluehost and WordPress, the biggest thing you can do is focus on relationships with the real world.
Create your first five blog posts and stop writing.
Instead, focus on building real relationships with other bloggers to get backlinks and guest posting opportunities. You can read My complete guide to the importance of guest blogging and how it helps strengthen your domain authority.
This approach allowed me to get over 3,000 backlinks from over 500 domains in the first six months of my blog.
Also, don't forget that our goal is to create valuable relationships. That's why the DA of the website we want to see linked to us is also important.
By focusing less on copywriting and more on creating backlinks, you can build search engine authority and increase traffic to your website.
If you don't consider yourself a good writer, you can outsource all parts of the process, both for your own site and for publishing articles.
Others outsource their content strategy and the content creation process, finding writers who do the work.
Additionally, of those who outsource the creation of their content, 35% also outsource the distribution of their content, ensuring that their links are found everywhere on the Internet.
This shows that it is always possible to find experts who can better perform certain tasks while saving you time.
Monetize your website.
During the first three months of your new blog, focus primarily on developing your blog's domain authority.
Ultimately, to earn passive income with a website or blog, you need to take three main steps:
- Launch: Pick a lucrative niche, create your content, and launch your website.
- Develop: Create links to your website to increase your authority in search engines and get traffic.
- Monetize: Add affiliate links and ads to your website to monetize your traffic.
The first step in any blog trip is getting a domain name and WordPress hosting.
Let's move on to the following passive income ideas.
2. Investing.
Controlling personal finances is the key to increasing wealth.
I wasn't taught any of that at school.
In fact, I left college with student loans, a degree that I didn't know how to use, and virtually no savings.
And for years, I didn't have specific financial goals. I was simply trying to build an emergency fund on the money market and put the bare minimum into my retirement savings plan.
However, the success of this blog has resulted in a crash course on investing and creating wealth.
Here are a few tips if you want to earn passive income by investing.
Investing in real estate.
A popular form of generating passive income is real estate investing.
To do this, you can take advantage of real estate as a source of passive income and use these income-generating investments as a way to gain financial freedom with cash flow outside of your job.
Whether it's a real estate investment or even a real estate investment company (REIT), there are plenty of ways to make good returns.
Take for example Bricks.co, a solution that allows you to invest in real estate without the usual hassles that come with this process.
You don't even have to worry about maintenance and paperwork - they take care of everything.
All you need to do is buy shares of the property and let them take care of the rest.
These are some of the features offered by this platform:
- Consistent passive income so you can live the life you want. This can allow you to live the life you want and not have to worry about a traditional 9-to-5 job.
- Property appreciation: Another benefit of investing in rental homes is that the value of the property often increases over time. This can allow you to increase the return on your investment.
- Save time and energy: When you invest in rental properties, you can save a lot of time and energy. You won't have to worry about finding tenants, collecting rent, or dealing with all the other hassles of being a landlord.
- Tax benefits: Investing in rental housing can also provide you with great tax benefits. For example, you can deduct mortgage interest and property taxes from your income taxes.
- Diversify with real estate: Investing in rental housing can also help you diversify your investment portfolio. This is important because it can help protect you from any potential fall in the stock market.
- Flexible investment amounts: Another benefit of investing in rental properties is that you can start with a small or large investment amount. This flexibility makes it easy for you to get started, even if you don't have a lot of money to invest.
If you want to get started in real estate as a way to generate passive income, Bricks.co is certainly a great resource to consult.
Here are some tips for using real estate investment as a source of passive income:
- Do your research and invest in safe, thriving neighborhoods near where you live.
- Buy $100,000 to $150,000 worth of single-family homes and condos that are easy to rent.
- Look for and hire a property management company that will actively take care of most of the owner's duties.
- Put a 20% down payment instead of buying real estate with 100% cash. This allows you to buy additional properties more quickly and use rental income to increase your cash flow.
- Take your excess rental income and start paying off your mortgages withsnowball effect.
Index funds
Investing in index funds is one of the best buy and hold strategies for new investors. Index funds are a type of mutual fund without active management and with much lower expense ratios.
They also generally have a fairly low minimum investment of around $3,000.
Index funds can be a collection of investments in different companies that diversify your risk compared to individual stocks.
One of my favorite funds is the Vanguard Growth Index Fund Admiral Shares (VIGAX). It is composed of 33% of technology stocks, with its main stocks being the big winners this year, such as Amazon, Microsoft, Apple and Facebook.
If you had purchased VIGAX at the beginning of 2020, your investment would have increased by 12% (in August 2020). And if you had purchased VIGAX at the March 16, 2020 low, your passive investment would have increased by 55%.
You may also be interested in ETFS, which are exchange-traded funds, for various investment options, as well as mutual funds for greater diversity.
Stocks
The actions, or shares of ownership in a company, have a higher risk/reward ratio than index funds because you are buying shares in only one company (not a set of holdings).
While they're riskier than index funds and bonds, they should also be a part of your passive income portfolio.
Most financial advisors tell you to manage risk by holding a percentage of shares in your portfolio equal to 100 minus your age.
For example, if you are 30 years old, you should hold 70% in dividend securities/shares and 30% in bonds and safe assets.
If you have an emergency fund and can bear more risks, see if you can increase that percentage.
Cryptocurrency
With the various crypto exchanges and trading platforms available, investing in crypto is easier than ever.
These types of passive income are quite volatile and have levels of risk, but if you're looking for the long term, keeping these assets can allow you to get a great return on your investment passively.
Other forms of investment
You can also introduce automation in your passive income generation thanks to Robo-advisors. These AI-based platforms balance your portfolio and manage risks for you.
Certificates of deposit (CDs) are also a good opportunity for those looking for a safe and low-risk residual income. The fact that interest rates on CDs are stuck, regardless of interest rate volatility, makes them more attractive.
Although not very widespread, the use of loan club brokerage offers excellent investment opportunities.
Short-term commercial loans, peer-to-peer lending sites, and social media trading platforms are worth looking into.
Here, you might be able to help borrowers with the money you have.
In exchange, they make your dreams of passive income as a lender a reality.
When it comes to investing, always think about which financial institution you should go to in your state.
For example, you should always keep the Internal Revenue Service (IRS) in mind before making any type of investment.
3. Start an online course.
Over the past five years, we have seen a major change in the digitalization of education. And with social distancing and the rise of online learning, now is the perfect time to create and sell online courses.
This passive income idea follows the same principles of launch, growth, and monetization as above, but will rely on online courses as the main monetization strategy.
If you have deep knowledge to share, people will listen and pay for your expertise.
And you don't need a doctorate to start your online course — you just need to have solid knowledge about a subject that interests you.
Additionally, students are even using tools to help with academic work and homework, so online courses aren't limited to video courses.
Courses may also include worksheets, assignments, guides, and written tutorials. The possibilities are endless.
The first question to ask yourself is, “What problem does my course solve?”
The second question is, “Will people spend money on my solution?”
If so, you are on the right track.
The online course platform you choose should allow you to manage the entire educational process. It should also integrate with other solutions like MailChimp and Google Analytics.
There are great platforms like Teachable, Podia, Ruzuku, and many more.
In short, the online course platform that I recommend is Thinkific.
Scheduling your online course.
First, you need to prepare your course outline and content. How will your course transform your audience once they've taken it?
After planning your plan, break it up into 10-minute video segments that you can create.
Before you start creating a course, it's a good idea to pre-sell it to your audience.
Measure their interest, send them to a pre-sale landing page, and see if they click the buy button.
While asking your readers if they are ready to buy the course can be a measure of interest, nothing is more accurate than actually monitoring presales.
The price of your course is also an important decision at launch. Premium courses sell for between 499 and 1,999 dollars. Your price will depend on the needs of your audience and the degree of depth of content.
A good baseline is to aim for $199 to $499 to get started.
To launch your online course, start with Thinkific, get your video equipment, a screen sharing software, a microphone, editing software, and a shooting location.
Once the photos are taken, edited, and uploaded, it's time to promote your course.
Be sure to integrate your welcome email series into your online course offering and present it on your blog. You can also share your course on social networks, create a affiliate program for your course and test paid social advertising.
When to launch: 6 months after launching your blog, within six months, you should have enough traffic and an email list large enough to go from high-end consulting sales of $2,000 to $3,000 to an online course of $199 to $499.
You are one step closer to passive income.
Let's move on to the next passive income idea.
4. Affiliate marketing.
Again, this passive income idea depends on following the steps above to create a successful blog. When planning your content strategy, think about high paying affiliate programs that you could be a part of.
There are tons of affiliate programs in virtually every niche — the key is finding the best programs that pay the most.
Affiliate marketing is a numbers game.
Take this exercise as an example.
- Let's say you're ranked for “the best sandals for men” and your item gets 1,000 visitors.
- Of these 1,000 visitors, 20% click on one of your affiliate links (200).
- Of the remaining 200, 2% decide to buy a pair of sandals (4).
- Sandals cost $50 each and your affiliate program commission is 7%. ($200* 7%)
- You make 14 dollars.
Not much at all when you think about it.
Instead, take this example.
- You rank for “the best treadmills for runners” and get 1,000 visitors for your article.
- Of these 1,000 visitors, 20% click on one of your affiliate links (200).
- Of the remaining 200, 2% decide to buy a pair of sandals (4).
- Treadmills cost $1,499 each and your commission is 12%.
- This time you win $719.
Much more valuable, right? In fact, it's 51x more valuable than the first example.
That's where affiliate marketing research comes in. When selecting your website niche, look for affiliate programs that offer high commission rates so you can monetize your traffic more quickly.
You can also add affiliate links to different types of content - blog posts, emails, YouTube descriptions, video overlays, etc.
In my experience, affiliate links work best when embedded in affiliate website reviews (where you write an insightful and useful analysis of a particular product).
You should add them to in-depth product tutorials. Plus, they fit well into a series of automated welcome emails.
When to get started: While you can and should add affiliate links to your blog content at any time when appropriate, you shouldn't expect to make a lot of money from affiliate marketing until your blog is at least 6 months old.
After high-end consulting and selling your online courses, affiliate marketing should dictate your content strategy.
Now that we've covered ways to generate passive income streams with digital businesses, let's move on to traditional passive income channels like rental properties and investments.
5. Create your own podcast
There are several applications that you can use to create, publish, and host your own podcast.
Once you've created a podcast, this business model involves going to talk to businesses that match your show's audience.
For example, if you're doing a podcast about travel or food, contact tourist offices or hotels to have them advertise on your show.
Over time, podcasting can become a passive source of income where you can monetize your audience.
The steps to follow to launch a parallel podcasting business are as follows:
Choosing a topic for your podcast
You can focus your podcast on a particular niche or topic, but you're more likely to succeed if you choose a general interest.
From how to have fun with friends to interviews with successful people in a variety of fields, the possibilities are endless.
Make sure that what you choose is something you are passionate about and want to talk about.
Create your own podcast website
Choose a name for your podcast and create a website around it.
You can use a free platform like WordPress or Squarespace to create a site relatively easily, but if you don't have the skills, you can also hire someone else to do it for you.
One of the main benefits of having your own site is being able to refer people who may be interested in what you are talking about to it, so that they can find out more.
This allows for increased traffic and potential revenue over time.
Choose a hosting platform for your podcast.
Decide if you want to host your own podcast or use an external site like Anchor or Soundcloud.
It is generally better to use the services provided by these sites, as they are easier and more profitable than setting up everything yourself.
Make sure that the service you choose is compatible with the website you created earlier.
Record and create your own podcast episodes
When it comes to recording an episode, you can take 2 main routes. For newbies who want to save a bit of money, you can opt for free options like iPhone voice memos.
If you want to get a more professional sound, you can use paid software like Adobe Audition.
When creating your own podcast episode, it's important to focus on quality over quantity. If you don't have much experience recording audio, be sure to take all necessary steps to ensure that your recording session goes as smoothly as possible.
You will need to ensure that the audio for each episode is edited and fine-tuned prior to publication.
This can help attract and keep more listeners to your show over time.
You can even use stock photos to create a unique and effective cover image for each episode.
Start a mailing list
Having a mailing list is one of the most important steps for anyone who wants to start a podcast.
It's not necessary in any way, but it's much easier to keep listeners interested and find out more about them - something advertisers love.
A free service like Mailchimp can be used to easily create an email campaign for your listeners.
You can also take the opportunity to experiment with the different types of content you produce and how they influence subscriber retention.
Adding things like short surveys or polls is a good way to do this.
Share your podcast on various platforms
After you publish an episode, be sure to share it on social media like Facebook, Twitter, and Instagram.
This can help grow your audience quickly and allow you to connect with potential new listeners.
Promoting your podcast on social media can also be a great way to generate advertising revenue, but it's a strategic move.
If you're not sure where to go, consider starting an email campaign around the time you publish an episode and promote it.
This will help create a more engaged and involved audience, and it's a great way to retain listeners and grow your own audience.
6. Using a high yield savings account
The right high-yield savings account will give you extra cash simply because you have a positive balance in your account.
Realizing capital gains on your bank account is an excellent passive activity to consider.
Additionally, some credit card companies offer incentives when you sign up for their cards, so it's helpful to do your research well.
7. Create a YouTube channel
While many consider starting a blog to be the easiest way to make money online, many others take the time to learn How to start their YouTube channel and possibly combine the two.
If you are not too shy and want to create your content for users, this may be the right option for you.
While it takes time to grow your audience, if you can become an influencer in your niche, you'll increase the number of people who follow you and advertisers will likely want to work with you.
Nowadays, brand offers are also common on YouTube, especially when the number of subscribers starts to increase.
Starting your own YouTube channel and making it a success involves the following factors.
Moving towards a niche market on YouTube
The adage to “stay in your niche” is essential on YouTube.
However, let's say you try to stray from this path and record videos about cooking or political debate.
In this case, your audience may dry up quickly because people don't want to watch videos on the original topics other than yours.
The same goes for any topic on YouTube. You need to stick to it and build a subscriber base on this topic.
Video recording and editing
While video capture technology has made great strides, it's not enough to just show up and hit the record button. You need to work on your video plan and be very creative in what you do.
Besides having good filming equipment and editing software, the essence of creating YouTube video content is finding unique ideas that will increase views and capture people's attention.
Likewise, the recording equipment you use is nothing compared to how you use it and the story you want to tell.
Since people's attention spans are easily lost and very short, you should reduce the length of your videos as much as possible.
A good quality video is critical to making money with YouTube channels; however, if it's too long, people won't watch it or forget it.
If you start your video by saying “what it brings to the viewer,” you'll increase the chances that people will be interested and watching it from start to finish.
Video editing is also an essential part of having a good YouTube channel.
Have high quality and high added value content
You need to offer videos that are of the highest possible quality in terms of video resolution, sound quality, and most importantly, content.
There is an important factor called perceived value.
If you want your viewers to come back regularly, they should consider that the time they spend watching your content is valuable.
That means you need to spend time researching useful topics or finding new ideas before you start recording anything.
Creating a YouTube channel is a long-term commitment, not only because you need to keep uploading new videos, but also because you need to offer quality content to your viewers.
It may also change over time. It is therefore essential to stay the course to ensure the success of your channel.
Create engaging thumbnails
A good thumbnail is essential to get people's attention when they're browsing YouTube (or even Google) search results.
The right thumbnail helps potential viewers visualize what your video is about, so it stands out and gets more views than competing videos.
Also, being disruptive in the style of your thumbnail will force people to stop and pay attention.
Whether it's using big bold fonts to advertise video topics or flashy images that catch people's attention, you should keep in mind that having a thumbnail with a certain “catch” will increase the number of views of your video.
Attracting subscribers
Having a large number of subscribers is essential for more people to watch your videos and to increase your revenue, whether through YouTube or other products that you sell through links in your description.
However, there are a few things you can do to make it easier for Internet users to subscribe while maintaining a solid base of Internet users.
If you have a lot of videos under your belt, set up a tagging system where all videos link to the same channel.
That way, if a video becomes popular, you can easily add links to other popular videos, so more people subscribe.
It would be useful to create subscription incentives, for example by organizing weekly contests where you give away an item related to your channel.
It could be a product or service that only people who sign up can win, or simply an item that's integrated into one of your video games (if that's your niche).
Just encouraging users to subscribe to your videos to be notified when new videos are released always works, but a better incentive will lead to better results.
Regardless, creating unique and engaging incentives can help you maintain a subscriber base while keeping viewers coming back.
Summary.
To earn passive income, you need to work hard now to improve your cash flow later.
It's a 2-step approach:
- Create a digital business to increase your cash flow.
- Take your excess passive income from your main business and invest it to create more passive income.
Many people ask: Can you create passive income without money?
Yes, you can start a business with no money. It will require more effort, but it is still possible. Take a look at the people who are earning money on Amazon FBA for only $39.99/month.
This is the path to passive income that I have taken:
- Create a blog and sell high-end consulting services.
- Initially, focus exclusively on developing your blog's domain authority (DA) by publishing guest posts and creating links.
- Start adding affiliate links to your site.
- Once your email list has reached a sufficient level, sell an online product or course to your audience.
- Once you've reached 50,000 visitors per month, start placing ads and sponsored content on your site.
- Go from an 80:20 ratio between advice and passive income to a 50:50, 20:80, and finally to 100% passive income.
- Take that passive income and invest it in stocks, index funds, and real estate.
And remember: no time will ever be perfect to start.
So start now.
Your journey to generating passive income doesn't start until you take the first step.
Whether you're a seasoned investor building a rental income or a teenager growing your YouTube channel, you can make money online and build a passive income.
At the end of the day, there is no magic bullet to get rich. While passive income is possible, it takes hard work, smart strategies, and determination to get there.
Other recommended reading: To continue your path to passive income, check out my ultimate guides on How to start a blog, the best affiliate programs, and the best online business ideas at low prices to start this year.
