Not all streams of passive income are created equal. Some require more work upfront, but can pay you out for months or years after. Other streams of passive income are less of a time commitment.
Here are four ways to generate passive income, according to people who have done it and made hundreds and even thousands of dollars a year.
Difficulty level: Medium
Nearly half of all Airbnb hosts make more than $500 per month, according to lending platform Earnest.
Earning passive income from real estate doesn't have to mean you buy or own an entire property you can rent out, though, Kevin Ha, founder of Financial Panther told Grow in July: "I used to rent out a room in my house on Airbnb because I had a spare bedroom." During 2019, that brought in anywhere from $430 to $2,143 per month, according to the side hustle income reports on Ha's site.
Renting out your car is another way to earn passive income. Apps like Turo, HyreCar, and Getaround are all platforms that facilitate the process. HyreCar, for example, says renters can make up to $9,000 per year by renting out their cars to ride-sharing drivers.
Difficulty level: Easy
Parking your money in a high-yield savings account rather than a traditional savings account is "very simple: Anyone can do it," Dr. Shaan Patel, the CEO and founder of Prep Expert SAT & ACT Courses, told Grow in June.
The national average interest rate for savings accounts is just 0.06%, according to August data from Bankrate. Compare that with high-yield savings accounts, which have annual percentage yields of up to 0.64% right now, according to DepositAccounts.com.
Jen Glantz, the founder and CEO of the business Bridesmaid for Hire, puts her extra cash in a high-yield savings account that generates monthly passive income of about $50, she told Grow earlier this month. "Moving your money to a high-yield savings account is a simple way to generate cash every single month just by letting your money sit still in that account," she said.
Difficulty level: Medium
Investing in dividend-paying stocks can "give shareholders the opportunity for passive income in addition to potential stock-price growth," Winnie Sun, co-founder of Sun Group Wealth Partners in Irvine, California, told Grow last month.
A dividend is a periodic payout of earnings that some companies and funds share with investors just for being a shareholder. As of June 2021, aggregate dividend payments for components of the S&P 500 were at $57.87 per share for the year, according to S&P Global.
Video by Courtney Stith
Patel dedicates a portion of his stock portfolio to dividend-paying stocks to earn passive income: "A lot of stocks pay 2, 3, 4, or even 5% dividends," he said.
Bob Lai, a 39-year-old living in Vancouver, British Columbia, uses a dividend investment strategy to earn passive income too. "So far in 2021 we've been averaging just over $2,500 per month," in dividend income, he says.
But this strategy comes with risks. Experts suggest keeping the bulk of your portfolio in low-cost, well-diversified assets including index funds and ETFs, and incorporating dividend-paying stocks through mutual funds or exchange-traded funds rather than individual stock picking. Owning individual stocks leaves your portfolio more vulnerable to the ups and downs of the stock market.
Difficulty level: Hard
Online learning has become more mainstream during the Covid-19 pandemic, and lockdown prompted many people to reassess their careers. Now, many are using online courses to acquire new skills.
Patel's company publishes standardized test preparation videos on YouTube that bring in millions of views. By activating the ads on these videos, Prep Expert earns royalties. On average, a YouTube publisher can receive $3 to $5 per 1,000 views, according to Influencer Marketing Hub.
In 2017, Glantz started creating and selling her own online courses. Now she earns around $1,000 a month in passive income off of 10 workshops on topics like social media, marketing, and public speaking.
To get started, Glantz suggests you "create your own list of skills, determine who your target audience would be based on who you believe would need to learn that skill you're great at, create the course using a website like Thinkific or Teachable, and then share it with your audience."
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