11 Passive Income Ideas (And What I Learned From Trying Them)

When you search for ‘passive income ideas‘ online, you’re bombarded with endless listicles promising quick and easy riches:

• ’50 Passive Income Strategies to Make You a Millionaire!’
• ‘100 Ways to Earn Money While You Sleep!’

But let’s get real for a moment. As someone who’s actually tried many of these so-called ‘passive’ income strategies, I can tell you that many are anything BUT passive – and some aren’t even profitable.

Today, I want to give you my honest take on passive income ideas.

This is my realistic perspective as an average person with a medium-sized online audience, who has had a bit of success but also many failures (as opposed to a ‘mega influencer’ with an audience in the hundreds of thousands).

I’ll share what I’ve learned from my own successes and failures, and which strategies are actually worth your time and effort.

1. Creating an Online Course

You’ve probably heard that online courses are a goldmine of passive income.

Well, let me tell you about my personal experience in course creation – it’s been anything but passive so far (in fact, the journey is far from being over).

I’m currently in the process of creating my first online course, and here’s what I’ve learned:

1. It’s time-consuming: I’ve spent countless hours planning the curriculum, writing scripts, and recording videos. And I’m not even done yet!
2. Tech challenges are real: From choosing the right platform to figuring out video editing software, there’s a steep learning curve.
3. Marketing is crucial: Building it doesn’t mean they’ll come. I’m realizing I’ll need to put significant effort into marketing the course once it’s ready.
4. Imposter syndrome is a constant companion: There’s always that nagging voice asking, ‘Who am I to teach this?’
5. It’s an upfront investment: Between equipment, software subscriptions, and potentially hiring help, costs can add up before you make a single sale.

Don’t get me wrong – I still believe in the potential of online courses. But if you’re considering this path, be prepared for a LOT of front-loaded work.

The ‘passive’ part only comes after you’ve put in the hours to create, launch, and market your course effectively (and I mean HOURS).

And what’s more, unless you’re an influencer with hundreds of thousands of followers, you’re probably not going to get rich from an online course.

My course isn’t launched yet, so I can’t tell you about that mythical pot of gold at the end of the rainbow.

But I CAN tell you that the journey is way more challenging and time-intensive than most ‘passive income’ lists let on (and be skeptical of anyone who suggests you can just whip up a course in one day with AI. You can, but it will probably suck).

If you’re passionate about your topic and ready for the work, go for it. Just don’t expect online courses to be a get-rich-quick scheme.

2. Affiliate Marketing

Ah, affiliate marketing – the darling of passive income gurus everywhere. Just recommend products you love and watch the commissions roll in!’ they say.

Well, I’ve been down this road, and let me tell you, it’s not all effortless income.

Don’t get me wrong – I’ve had months where I’ve pulled in several thousand dollars from affiliate marketing (in fact, my largest ever single commission was in the five-figures).

But before you start picturing yourself chilling on a Thai beach while your affiliate links do all the work, let’s talk about the reality.

First off, creating good quality affiliate content is time-consuming. We’re not talking about slapping a few links into your existing blog posts.

To do this right, you need to create in-depth reviews, comparison articles, and buyer’s guides. Each piece can take hours, if not days, to research, write, and optimize (personally, I find writing commercial content incredibly tedious and don’t do it often enough).

Yes, AI can help you create content, but Google is becoming wise to crappy regurgitated affiliate content. Now, it has to be original and unique.

You can’t just rip off what’s ranking on the front page. Instead, you need to add value with genuine first-hand experience (which means actually buying and testing products yourself).

Then there’s the constant balancing act of maintaining your audience’s trust. Every time you post an affiliate link, you’re essentially making a recommendation.

Do it too often or with the wrong products, and you risk coming across as biased or, worse, just plain sleazy. It’s a fast track to losing the audience you’ve worked so hard to build.

And let’s talk about that ‘ick’ factor. There’s always that nagging feeling in the back of your mind:

‘Am I really helping my audience, or am I just trying to make a buck?’ It’s a moral tightrope that can be exhausting to walk.

You might be thinking, ‘But surely all that work is worth it for those juicy commissions, right?’ Well, not always.

Many affiliate programs offer surprisingly low payouts. You might be busting your butt to make a sale, only to earn a measly few bucks in commission.

Here’s one I made the other day. Not exactly life-changing money, eh?

Oh, and remember how I mentioned ‘passive’ income? Well, affiliate marketing requires more ongoing maintenance than you might expect.

Prices change, products go out of stock, companies alter their affiliate terms – and guess who has to keep on top of all that? Yep, you do. It’s kind of like a never-ending whack-a-mole game to keep your content accurate and your links working properly.

And let’s not forget the technical side. To make any real money from affiliate marketing, you need traffic – and lots of it (and the right traffic, that’s likely to convert to sales).

That means you need to be good at SEO (or hire someone who is) to get your content ranking for valuable keywords. No traffic means no clicks, and no clicks means no commissions.

Is affiliate marketing impossible? No. Can it be profitable? Absolutely.

But it’s not the set-it-and-forget-it income stream it’s often portrayed as. To do affiliate marketing right and to do it ethically requires a significant investment of time, effort, and skill.

My advice? If you’re considering affiliate marketing, go in with your eyes wide open. Be prepared to put in the work, and always prioritize your audience’s needs over your commissions.

And be sure to diversify your income streams. Because with affiliate marketing, you never know when the next algorithm update or program change might bring it all crashing down.

3. Ads on Your Blog or YouTube Channel

At its peak, one of my blogs was pulling in around $3,000 a month from display ads.

Those were good times. That passive income stream covered my mortgage payment, bills, and monthly living costs for several years. Not too shabby for ‘passive’ income, right? I was living the dream…until the dream turned into a nightmare.

Here’s the harsh truth about monetizing with display ads:

1. It’s a numbers game: To make any significant money, you need serious traffic. I’m talking hundreds of thousands of pageviews a month. This isn’t a ‘build it and they will come’ scenario – you need to be good at SEO.
2. You’re at the mercy of algorithms: Remember that $3,000 a month I mentioned? Well, one Google algorithm update later, and it plummeted to around $200. Ouch.
3. User experience takes a hit: Let’s face it, most people hate ads. They slow down your site, they’re visually unappealing, and they can drive readers away. It’s a constant balancing act between monetization and user experience.
4. Content compromises: To get the traffic needed for meaningful ad revenue, I found myself targeting high-volume keywords that weren’t always aligned with my passion or expertise. It’s easy to lose your authentic voice chasing those pageviews.
5. Ad networks have strict requirements: Getting accepted into the more lucrative ad networks like Mediavine or Raptive isn’t easy. They have traffic thresholds and content standards that can be challenging to meet and maintain.
6. It’s not entirely passive: You need to continually produce content, promote your blog, and keep an eye on your ad placements and performance. It’s more ‘active’ than many people realize.

Don’t get me wrong – display ads can still be a viable income stream for bloggers and vloggers.

But it’s not the cash cow it’s often made out to be. If you’re considering this route, be prepared for hard work, ethical dilemmas about content creation, and a potentially bumpy ride.

If you’re passionate about blogging or YouTube, go for it. But don’t rely solely on display ads.

Diversify your income streams and focus on creating value for your readers first. That way, when (not if) the algorithms shift, you won’t see your entire income disappear overnight.

4. Selling Ebooks

Ebooks often top the lists of passive income ideas. Write it once, sell it forever. Sounds great, doesn’t it?

I’ve tinkered with ebooks (mainly as lead magnets) but never quite made the leap into the paid ebook pool. Here’s what’s been holding me back.

Let’s talk about pricing first. These days you can get a whole month of streaming entertainment for the price of a fancy coffee. So convincing someone to shell out more than a few bucks for an ebook is a tough sell.

This means you need to move a lot of units to see any significant return. We’re talking thousands here.

Now, you might be thinking, ‘I’ll just fire up ChatGPT and whip up an ebook over the weekend!’

OK but hang on. Creating a quality ebook that people actually want to buy? That’s time-consuming.

We’re talking weeks or even months of work. And no, having AI generate your ebook isn’t the shortcut you might hope for. At best, you’ll end up with something bland, boring and generic. At worst, it’ll be a jumbled mess that tanks your reputation.

Speaking of quality, there’s a perception issue with ebooks. Many people don’t attach high value to them. Maybe it’s because anyone can publish one, or perhaps it’s the lack of a physical product. Whatever the reason, it can make selling your ebook an uphill battle.

But let’s say you’ve created an amazing ebook. You’ve poured your heart and soul into it. Great! Now… how are you going to get it in front of people?

If you’re not already an established author, you’re facing a visibility challenge. You either need to have solid SEO skills to drive traffic to your own site, or you need to navigate platforms like Amazon Kindle Direct Publishing.

From my experience creating free ebooks as lead magnets, I can tell you that even when you’re giving them away, getting people to download and actually read them is a challenge. Now imagine trying to get people to pay for them!

Ebooks can be a great tool for building authority and growing your email list. But as a significant source of passive income? I’m skeptical. The return on investment, both in terms of time and potential earnings, just hasn’t seemed worth it to me so far.

5. Renting Out Your Property

Rental income can be lucrative, for sure. But passive? Not so much. Here are some of the realities I’ve faced in my attempts to rent out my own property.

First, maintenance. Unless you’re handy with a toolbox and have endless free time, you’re looking at either spending your weekends fixing leaky taps and unclogging toilets, or hiring a property manager to do it for you.

And let me tell you, good property managers don’t come cheap. There goes a chunk of your ‘passive’ income.

Then there’s the financial side. I bought my property with a mortgage, as many aspiring landlords do. But with current interest rates, making a profit isn’t as easy as you might think.

By the time you factor in the mortgage payment, property taxes, insurance, management fees, and unpredictable maintenance costs, your margins can get pretty thin, pretty fast.

Now, let’s talk about actually finding renters. If you’re thinking short-term rentals like Airbnb might be the way to go, take a pause and do your research. Airbnb and similar platforms are taking bigger and bigger cuts these days.

Not to mention, many local governments, such as in Barcelona, are cracking down on short-term rentals, requiring special licenses that can be hard to get. It’s no longer quite as simple as just listing your place and watching the bookings flood in.

Long-term rentals aren’t necessarily easier. You need to market your property, screen potential tenants (unless you want to risk renting to someone who might trash your place or skip out on rent), and deal with the legalities of leases.

And heaven forbid you end up with a problematic tenant – evictions are a whole other can of worms I hope I never have to open.

It depends on tenancy laws in whatever country you’re in, but a friend of mine in Madeira had tenants living illegally without paying rent for an entire 12 years, before she was able to finally evict them. Ouch!

So is rental property a terrible investment? Not necessarily. In the right market, with the right property, and with a lot of patience, it can be profitable. But passive? Let’s just say I’ve had to adjust my expectations on that front.

My advice? If you’re considering getting into the landlord game, be prepared for the work involved, both in terms of time and money.

Make sure you understand your local rental laws and regulations. And be sure to have a hefty emergency fund in place – because when something goes wrong with your rental property, it’s usually expensive.

Rental property can be a great way to build long-term wealth, but if you’re looking for truly passive income, you might want to look elsewhere.

6. Paid Membership Communities

Paid membership communities are often touted as the holy grail of passive income in the digital world.

The pitch is enticing: ‘Build it once, and members will pay you monthly forever!’ But as someone who’s explored this option and even invested in a specialized coaching programs to learn the ropes, I can tell you that the reality is far from passive.

First, the elephant in the room: monthly payments. They sound great in theory, right? Recurring revenue, predictable income, all that good stuff.

But unless you’re charging premium rates (which comes with its own set of challenges), those monthly payments are often pretty low. We’re talking coffee money, not mortgage money.

‘No problem,’ you might think, ‘I’ll just get a ton of members!’ Getting a huge amount of people to join your community requires constant marketing, outreach, and often, a fair bit of luck.

And even if you do manage to build a sizeable community, keeping them engaged and subscribed is a whole other challenge.

Now, let’s address the ‘passive’ part of this income stream. Spoiler alert: it’s not. Running a membership community is like having a part-time job that you can never clock out from.

You need to constantly create new content to keep your members engaged and feeling like they’re getting value for their money. And we’re not talking about throwing together a quick blog post once a month.

We’re talking about creating in-depth resources, hosting live Q&A sessions, responding to member questions, and maybe even providing one-on-one support.

Oh, and did I mention the tech side of things? Setting up and maintaining the infrastructure for a membership site isn’t easy. There’s always something that needs your attention, such as managing payment processors or troubleshooting login issues,

Membership communities can be rewarding, both financially and personally. When done right, they can provide real value to your members and create a sense of belonging that keeps people coming back month after month.

7. Dividend Stocks

Dividend stocks are often hailed as the passive income investor’s best friend. And while there are many benefits to this method of generating passive income, it comes with several caveats too.

For starters, to generate any meaningful income from dividends, you need a substantial amount of capital.

We’re talking hundreds of thousands of dollars invested. Unless you’re starting with a hefty nest egg, it’s going to take years of consistent investing before you see any significant returns.

Then there’s the volatility of the stock market. Sure, dividend-paying stocks are often touted as more stable, but they’re not immune to market fluctuations.

A company that’s paying great dividends today might slash them tomorrow if their financial situation changes. And let’s not forget about the potential for the stock price itself to drop, potentially wiping out any gains from dividends.

Diversification is key in any investment strategy, but it’s particularly important with dividend stocks. Putting all your eggs in one high-yield dividend basket is risky.

This means you’ll need to research and manage a portfolio of stocks, which takes time and expertise – not exactly ‘passive’.

There’s also the matter of taxes. The taxation of dividends varies widely depending on the country and the specific situation. In some cases, returns on dividends might be taxed as capital gains, while in others, they might have their own specific tax treatment.

Some countries even offer tax advantages for dividend income. But regardless of the specific tax treatment, don’t forget that taxes will likely take a bite out of your returns, and understanding the tax implications in your specific jurisdiction is crucial.

And if you’re reinvesting those dividends (which is often recommended for long-term growth), you’re still paying taxes on money that you’re not actually pocketing.

You might be thinking, ‘Why not just invest in dividend-focused index funds or ETFs?’ And you’d have a fair point – it’s a strategy I’ve used myself with accumulating (non-distributing) index funds.

This approach can help mitigate some of the risks and reduce the active management required. But it also typically comes with lower yields than you might get from carefully selected individual dividend stocks.

Yes, dividend investing can be a viable strategy for generating income, especially for those nearing or in retirement.

But it’s not the hands-off, guaranteed income stream it’s often made out to be. Dividend investing requires careful planning, ongoing management, and a stomach for market ups and downs.

So if you’re considering dividend investing, do your homework. Understand the risks involved, be prepared for market volatility, and don’t expect to get rich quick.

And most importantly, remember that like any investment strategy, past performance doesn’t guarantee future results. The stock market can be fickle, and even the most reliable dividend payers can fall on hard times.

8. Renting Out Equipment

When gyms shuttered during the pandemic, I saw an opportunity: rent out some of my personal exercise equipment for people to use in their homes.

I did this on a very small scale, so it was easy. But I can also see potential for it to get complicated fast.

The equipment rental game isn’t limited to dumbbells and treadmills. Here are a few other types of equipment I’d consider renting out:

• Podcasting or Video Studio Equipment: With the boom in content creation, there’s a growing demand for high-quality audio and video gear.
• Standing Desks: As more people work from home, standing desks are often sought after but come with a hefty price tag. Renting could be a great way for people to try before they buy.
• Gardening and DIY Equipment: From lawnmowers and hedge trimmers to power tools and ladders, there’s a market for renting out items that people need occasionally but don’t want to buy and store themselves.
• Specialist Cooking Items: Think ice cream makers, bread machines, or even high-end espresso makers. These are perfect rental candidates – items people want to try but may not use frequently enough to justify purchasing..

But of course, you need to own the stuff before you can rent it out. You should also consider taking out an insurance policy if you’re renting out potentially dangerous items like DIY equipment.

Is renting out equipment worth it? It can be, if you’re prepared for the reality. If you’ve got idle gear and a willingness to put in the work, why not give it a try?

9. Renting Out Storage Space

If you’ve got an empty garage or spare room, you might want to consider renting it out to others in need of storage space. Let’s unpack this passive income idea.

First, you’ll need to clear out your space, clean it up nicely, and possibly invest in some shelving or security measures.

Remember, you’re competing with slick storage facilities that offer climate control and 24/7 access. Your grimy attic might need more than just a fresh coat of paint to attract paying customers.

Next, let’s look at the logistics. You might think it’s as simple as handing over a key and watching the money roll in. Actually, no…

You’ll need contracts – the kind that protect you when someone decides to store their vintage wine collection in your non-temperature-controlled garage.

And insurance? Yeah, you’ll want that too. You don’t want to risk your profits (and sanity) by being sued over water-damaged furniture.

Before renting out space in your home, you should also consider these often-overlooked financial and legal issues:

• Mortgage terms: Many residential mortgages restrict using your property for business. Check with your lender first. You might need permission or even a different type of mortgage.
• Capital gains tax: Renting part of your home could affect your primary residence tax benefits when selling. The rented portion might be subject to capital gains tax, depending on your local laws.
• Homeowner’s insurance: Standard homeowner’s policies may not cover business use. You might need to update your coverage.
• Shared ownership: If you’re in a condo or co-op, check your bylaws for restrictions on subletting or business use.

These factors don’t necessarily rule out renting your space, but you really ought to consider them. Speak to your mortgage provider, a tax professional, and possibly a legal advisor before proceeding.

On the bright side, unlike renting out equipment, you’re not dealing with constant wear and tear or giving people tutorials on how to use complex machinery.

And once set up, renting out your space can provide a steadier income stream than some other rental gigs, like equipment.

10. Peer-to-Peer Lending

Peer-to-peer lending is a simple concept: you lend your money to individuals or businesses through an online platform, and they pay you back with interest.

It typically offers higher returns than a savings account, the allure of ‘passive’ income, plus the warm fuzzy feeling of helping others.

But first off, peer-to-peer lending isn’t entirely passive. You’ll still need to research various borrowers, diversify to spread risk, and keep track of repayments.

Returns can be attractive, often ranging from 5% to 12% annually. But remember, these numbers don’t account for defaults or the platform’s fees.

Your actual returns might be lower (plus don’t forget about potential taxes on your interest earned). And the risk is real. If a borrower defaults, you could lose your investment.

Peer-to-peer lending is an interesting passive income idea, but it’s important to be cautious. Don’t invest money you can’t afford to lose, and consider starting small to get a feel for how it works.

11. Dropshipping

You’ve probably seen the ads: ‘Start your own online store with no inventory!’ That’s the promise of dropshipping, a retail model where you sell products without ever touching them.

Here’s how it works: You set up an online store, list products from wholesalers, and when a customer buys, the wholesaler ships the product directly to them.

You pocket the difference between your retail price and the wholesale cost. No need for storage space, no upfront inventory costs.

But consider this: You’re entering a crowded marketplace. With such low barriers to entry, everyone and their dog is trying out dropshipping. Standing out requires either a unique niche or stellar marketing skills – often both.

Customer service can be a nightmare. Late deliveries? Product quality issues? Guess who’s on the front line dealing with angry customers? That’s right, you. And resolving issues when you don’t control the inventory or shipping can be… challenging, to say the least.

Profit margins in dropshipping are often razor-thin. To compete, you might find yourself in a race to the bottom on pricing. Plus, you’re at the mercy of your suppliers. If they raise prices or run out of stock, your business takes the hit.

Can dropshipping work? For sure. Some people have built successful businesses this way. But ‘passive’? Nope. It requires your constant attention to product selection, website maintenance, customer service, and marketing.

If you’re still intrigued, start small. Test the waters with a few products before going all in.

In dropshipping, your success often hinges more on your marketing savvy than your product selection. It’s less about being a retailer and more about being a skilled digital marketer who happens to sell products.

Next Steps: Facing the Reality of Most Passive Income Ideas

After spending four years experimenting with various ‘passive’ income strategies, one thing has become clear to me – truly passive income is extremely rare.

Before pursuing any of these ideas, I’d advise you to carefully analyze your personal situation.

Consider your skills, available time, financial resources, and risk tolerance. What works for one person may not be suitable for another, depending on circumstances and goals.

Remember, most of these strategies require significant upfront work. Be prepared to invest time and effort before seeing any returns, whether it’s creating digital products, setting up an online store, or preparing a space for rental. ‘Passive’ often means ‘eventually passive, if successful.’

So make sure you go in with realistic expectations. Stories of quick success do exist, but they’re uncommon. Most sustainable passive income streams are built gradually, with considerable trial and error.

And don’t rely on a single passive income source. Diversification is important. Start small, experiment with different approaches, and be prepared to change direction if something isn’t working.

The most successful ‘passive’ income ideas are those that align with your interests and lifestyle. Choose something you enjoy, as you’ll likely be actively involved with it for longer than you might expect.

The goal isn’t just to earn money with minimal effort but instead to create a sustainable income stream that doesn’t cause you undue stress. Choose wisely, and approach your passive income journey with both enthusiasm and realism.