Passive Income Ideas to Make Money While You Sleep

Of all types of income, passive income is by far my favorite. Passive income allows you to earn money without any extra effort and you can pocket cash 24×7.

Instead of trading your time for a paycheck, figure out how to make money while you sleep. Millionaires know this secret and have multiple passive income sources working for them.

What is Passive Income?

Passive income is a way to use a system to generate a stream of money without having to trade your hours for a paycheck. Once set up, it should continue to make money with minimal effort… whether you are asleep or on vacation or working your day job.

To be clear, passive income streams usually do require either startup cash or effort to put it in place. They are not truly passive in the sense that no effort is needed.

If you don’t want to spend time setting up a passive income stream, then you’ll need to invest money. And vice versa, if you don’t have money, you’ll need to spend some time upfront creating an income stream.

The benefit of passive income is that, once it is set up, it should generate income by itself with minimal interaction needed. A classic example is investing in dividend stocks that pay out dividends on a regular basis. Or writing a book that can be sold continuously once you have published it.

Here is a list of some of our favorite passive income streams that you can use to make more money.

Passive Income Ideas

Invest in Dividend Stocks

There are two ways that investing in stocks can make you money. The first is when the share price of the stock goes up over time and you can sell it for a higher price than what you bought it for. The second is when the stock pays out dividends, which is when the company pays a portion of their earnings to their investors.

The nice thing about dividends is that you get paid just by owning shares of a stock. The more shares you own, the more you will get paid. Dividends can either be paid out when they are distributed or reinvested to compound your income over time.

A good place to start is with Dividend Aristocrats. These are stocks that have a solid track record of increasing their dividends for the past 25 years. They are generally very stable, blue-chip stocks that have 2% to 4% dividends.

There are also other high-yield stocks and funds that can pay out dividends between 6% and 10%. While some of these can be riskier than others, finding the right selection of high-yield dividend stocks can generate healthy passive income.

Here are five ways to start investing with only $1,000.

Invest in Real Estate Investment Trusts (REITs)

Similar to dividend stocks, REITs can pay out sizeable dividends on a regular basis. Real Estate Investment Trusts, or REITs, own or manage multiple real estate properties through a central company. They earn money through capital appreciation when buying and selling property, or by charging rent. Those profits are then distributed to investors as dividends.

Getting started with investing in an REIT is pretty simple. They can be purchased on the stock market through your favorite trading platform, like M1 Finance. Another option is to use a dedicated REIT platform like Fundrise.

In either case, you can buy shares of the REIT with as little as a couple hundred dollars. Over time, you’ll start to collect dividend payments that you can either reinvest or get paid out.

Peer-to-Peer (P2P) Lending

Peer-to-peer lending is when you provide a loan to an individual or business for a set interest rate. It can be a good way to put your money to work by lending it out to other people who need it. A benefit of P2P lending is that it is often possible to get a higher interest rate if you can accept some risk.

Be aware that lending money to individuals is inherently riskier than investing in companies or larger organizations. It is easier for an individual or small business to default on their loan and not be able to pay you back. By using a reputable P2P lending platform, you can benefit from the passive income while reducing your risk.

My favorite peer-to-peer lending platform is MyConstant. It currently pays out a generous 7% APY and is backed by crypto collateral to reduce the risk of lending to individuals.

Start a Blog or Website

A blog is a great way to earn extra income and can be passive once you invest the time and work to set it up. Blogs earn money by creating unique and valuable content and then building an audience. The blog can then be monetized through display ads, affiliate links, or selling products.

Some people may not consider a blog as truly passive income because you need to continue to create new content to grow your traffic. However, writing each blog post is an investment that can have considerable returns over time.

Let’s say you spend 4 hours writing a blog post and then another 2 hours promoting it on social media. Two weeks later, Google has picked it up for a few keywords and you start to get traffic to your post. From that point forward, any sales that you make from that post is all passive income.

Sure, you may have to spend some time and effort up front, but you can continue to profit from that one post for years to come.

Write a Book or Create a Course

Similar to a blog, you can create an asset that will continue to generate passive income once it is launched. A book is a good example where it can take months of effort up front but then will create royalties for years to come. Don’t want to go through the hassle of using a publisher? Self publish a Kindle ebook and get started selling copies of your book on Amazon.

If you are an expert in a certain field, you could create a course to teach others how to do something. If you know how to code, you can build a SaaS or mobile app, or online game. Or, record a video tutorial on a certain topic and sell it.

In all of these cases, you put in effort up front to create some type of asset. By creating a system to sell that asset, you’ll be able to create a passive income stream that will automatically make money.

Invest in Real Estate or Rent Out a Room

One sure bet is that everyone needs some place to live. Real estate rentals are a great way to earn passive income by collecting a check every month from your renters.

If you have an extra room and bathroom in your house, you could rent it out to make some cash. Having a separate entrance and living space will allow you to charge even more. Consider renovating a shed or barn to make a living space that can be rented out.

Another thing to consider when you buy a house is if it makes sense to purchase a multi-family home. By buying a duplex or triplex, you could still live in one of the units while renting out the other two. This could potentially allow you to cover your entire monthly mortgage by having other renters.

For those of us that have a single family home, you can save up to purchase an investment property. This could be a house or condo in an area where lots of people are looking to live. Another option is to position it as a short-term vacation rental in areas where people are vacationing. Think near beaches, lakes, ski mountains, parks, and other attractions, like on VRBO.

Rent Out Storage Space

Have some extra space in your garage, basement, or shed? If it really isn’t suitable to be used as a living space, consider renting it out for storage.

Some people have too much stuff and not enough space to store it all in their home. You can help them out by providing a safe storage space at a reasonable price. By being more convenient to get to than commercial storage units, you can be a more attractive option.

Especially if you live in a city, consider renting out your storage space if you don’t need it all yourself.

Buy Royalties

If you’re not aware, intellectual property is an asset that is protected like other forms of personal property. This means that you can charge a royalty fee every time someone uses your intellectual property.

A good example is music. When the artist writes a new song, they own that work and can charge a royalty every time it is played or used in a video. For the artist, this is a great form of passive income because, once they have created it, they don’t need to do anything further to collect royalty checks.

If you are not very artistic, there are sites like Royalty Exchange that allow you to buy the rights to music. Depending on how popular the music is, you can earn consistent passive income by owning the rights to those royalties.

License a Product

Another way to earn passive income is to build a product or brand and then license the rights to other companies. Let’s say you invented a new widget to solve people’s problems. To make money off of it, you would need to start a company, market the widget, sell it, build it, and ship it to customers. This is often something an inventor does not want to do.

The alternative is to license your patent and product to another existing company. By doing this, you will earn a set fee for your invention without needing to go through the hassle of selling it yourself. Licensing deals can be set up to pay you a percentage every time the product is sold or as a flat up-front fee for the technology.

Beside physical products, other forms of digital and intellectual property can be licensed using this format. Some of the most popular songs on the radio were actually written by someone else in exchange for a share of the profits. If you built a web or mobile app, you could license it out to other companies to white label it as their own.

Buy a Storage Unit

Commercial storage units can be a powerful way to generate passive income. Depending on the size, they can be a pricey investment upfront but will create a stable monthly income stream from the renters.

Let’s say you buy a commercial storage unit that has only 20 storage units. If you rent each unit out for $100 per month, you can earn $2,000 per month or $24,000 per year.

Once you have renters, there is minimal upkeep required other than heating & cooling, and the occasional customer request.

Buy a Laundromat

Laundromats are similar to storage units in the fact that they can be run hands-off and be a passive income stream. There is generally a significant startup cost to buy the washing machines and dryers, or to buy an established laundromat.

Once it is set up, however, it can be completely automated with the right equipment. In many cases, a laundromat does not require someone onsite at all times. Besides periodic maintenance, it will continue to generate cash with limited interaction from you.

Own Vending Machines

While vending machines may be getting phased out in certain areas, there are still plenty of companies and locations that need vending machines. By owning a few vending machines, you can collect the a portion of the sales every time someone buys from it.

Be aware that running a successful vending machine business does require stocking them regularly and picking up the cash. An empty vending machine won’t make sales.

To make it a truly passive investment, you’ll need to partner with someone else to stock them. As long as you know your costs, you can make a profit while not having to do the work yourself.

Purchase a Delivery Route

A delivery route is similar to stocking vending machines but usually delivers breads, snacks, desserts, or other food items. Companies, schools, and restaurants all need these types of food delivered on a regular basis. All you have to do is do it for them.

The nice thing about purchasing rights to a delivery route is that it is protected territory just for you. You are guaranteed a certain number of stops each week, plus the opportunity to expand. A good example of this are the Pepperidge Farm Routes that can be bought.

You will need a delivery truck and at least one person able to drive the route to make the deliveries. Do it yourself if you want a side gig, or look to outsource to someone else for passive income.

Automate Your Business

If you own and operate a small business, you’ll probably agree that it is anything but passive income. It requires you to do the marketing, fulfill the sales, and follow up with customers.

As a business owner, there may be an opportunity to step back from managing all the daily operations. The key is to let someone else take care of the details for you. To create true passive income, your goal should be to oversee the high level operations only. You shouldn’t have to manage every aspect of the business.

To do this, learn to set up automated systems and processes that other people can do for you. Outsource as much as you can and be willing to let go of needing to be in control at all times. By trusting other people, you can reduce your stress and earn money by doing less.

For example, if you have a digital marketing business, create a system where other people can help you. Find a virtual assistant to find leads and create proposals. Use your website to funnel customer requests automatically to the right support person. Hire other people to do the work for you, or partner with another digital marketing company to fulfill the work.

Automating your business will allow you to step away without worrying about it and create a true passive income stream.