Types Of Passive Income

Adding a passive income to your life can generate more income, gives you more flexibility in your choices, and can give you the ease of mind when things go tough. It can be a side hustle or a full-time income.

However, the word passive income has been misunderstood as what it really means, and people forget the hard work and dedication that went into it when starting. Let’s see what passive income really means.

What Is Passive Income?

There are several passive income definitions, but let me do my best to define them.

Passive income is earning money repeatedly for work that was done once upfront. So, in short, you do work once and earn money because of that work over and over in the future.

With passive income, we don’t trade time continuously to earn money, but we do all the work required once at the beginning.

For example; if you write a book and put it on Amazon, the writing of the book took time and hard work, but after it is finished, you keep generating income for years after that with no additional work that is done.

REMEMBER – spending time on a continuous basis to earn money is NOT passive income. like a job.

Three Types Of Passive Income

Generally, there are three ways to generate passive income

  1. Investing – This is when you invest your money to generate more money. This type of passive income is not available to everyone because, in order to have a meaningful return, you need to invest a large amount of money.

Examples of this type of passive income are, investing in stocks, real estate, lending with interest, and others.

  • 2. Asset Building – This type of passive income requires the investment of time upfront to build an asset that will sell in the future. In this article, we are going to focus on this type of passive income.

Examples of asset building are creating digital products like a blog, e-book, affiliate marketing, and others.

  • 3. Asset Sharing – This type of income requires you to have an existing asset that you are willing to share for money. In simple words, it means renting your asset.

Examples of this would be renting your house, renting your car, and others.

10 Online Passive Income Ideas

If you looking to start generating an extra income or replace your current income by starting passive income, let’s see some passive income ideas that are easy, and quick to start.

1. Affiliate Marketing

Affiliate Marketing

Affiliate marketing is promoting other people’s products for a commission. All you have to do is, join affiliate programs, and after you are accepted, promote. Every time a product is sold, you get a commission.

Affiliate marketing is unique for the following reasons;

  • You don’t have to have your own product or outsource products
  • You don’t deal with customer service
  • You don’t deal with shipping and returns
  • You don’t deal with payments and refund
  • It is quick and easy to start

All you have to do is, forward potential customers to a website where they can purchase the product. For you as an affiliate, provide information about the product you are promoting.

In order to make money with affiliate marketing, you are expected to choose the best affiliate programs in the market. Those are programs with;

  • Good products to help people
  • Good customer service and support
  • Products with a sales record
Start Affiliate Marketing

2. Creating A Course

If you know about something, it is a good idea to create a course about it. The project takes a long time and a big effort, but once you are done, you can put it online and it will generate continuous income for you.

You can create courses on platforms like WordPress or clickfunnels, after you complete them, you can publish them on Udemy, then relax once the money rolls in.

With creating courses, you have three options;

  1. Sell courses
  2. Offer part of the course for free, then charge if people want the rest of the course
  3. Offer the whole course free, and add affiliate links to make money with affiliate marketing
Create A Course

3. Write An e-book

Ebook

This is similar to creating a course that I talked about above, but this time, instead of creating a course, write an e-book.

You have to be an expert in something to write a book about it.

Usually, e-books are shorter than regular books. It can be anywhere between 10-50 pages. E-books must be packed with value in order to make money with it.

If you have the content ready to go, you can easily create your e-book on Canva, then publish it on Amazon.

4. Start A Youtube Channel

Youtube Channel

Starting A Youtube channel is free and quick. Once you start, there are two types of income you can generate.

Youtube Partner Program – That is when you have at least 1,000 subscribers and 4,000 public watch hours. Youtube gives you part of its ad revenue because your videos help generate those ads. You should not depend on this type of passive income because, in order for you to have a considerable amount, you have to have millions of views.

Affiliate Marketing – On your Youtube videos you can place your affiliate links for those who are interested to buy the product you are talking about in your videos. I talked about affiliate marketing above.

In short, Youtube is your marketing platform, you can market your affiliate products, your courses, or your e-books.

If you don’t want to be on camera, you can start a Youtube channel without showing your face, see how you can do it.

Brand Yourself

5. Create An App

Mobile App

Creating an app is a great source of passive income. Create the app once, and it will be downloaded and bought by people for many years to come.

To do this, you have to have the technical knowledge or ability because it is not easy.

Or you can hire someone to do it for you on Fiverr or codecanyon

Create Mobile App

6. Start DropShipping

Dropshipping is promoting someone else’s products for a margin.

Let me show you the steps;

  • Find a supplier who is willing to do dropshipping (usually, aliexpress)
  • Find a product you want to promote
  • Build your own website (e-commerce store)
  • Promote the product on your website for a price higher than what it costs on the supplier’s website
  • When someone buys the product on your website, order the same product on the supplier’s website and give your buyer’s mane and address
  • The supplier ships the product to your buyer directly

This way, you make a profit because your buyer buys the product for a price that is higher than what it costs on your supplier’s website. Now rinse and repeat.

Usually, people are concerned because they have to build a website. But, Shopify makes it really easy to build an e-commerce store, and it is created for those who don’t have technical skills.

See detailed article on dropshipping with Shopify

Build Your Online Store

7. Start Amazon FBA

Amazon FBA

Amazon FBA is selling your own products, or the products you outsource on Amazon.

Not to be confused with dropshipping, with dropshipping you promote someone else’s products at a price higher than what it really costs. The extra cost will be your profit.

Amazon FBADropshipping
Sell your own productPromote Someone else’s product
Hold inventoryNo inventory
Website is not requiredWebsite is required
Easy to sell on Amazon because it is a known siteHarder to sell
High investmentLow investment

With this form of business, you take care of marketing, outsourcing, and promoting, and Amazon takes care of all the logistics. It is a good idea to take a course before you start.

Learn Amazon FBA

8. Start A Blog

Blog

When it comes to passive income ideas, starting a blog, or purchasing a blog is a common and doable method.

This can be achieved by starting a blog or purchasing an existing blog.

A blog is a website where you write about something. Let’s say you are an expert or know something, you make a blog to write about your experience and knowledge.

The way you make money with this is, in your writing, to include affiliate products so you can generate commission when someone buys those products, or partner with Google to generate AdSense revenue, and that is when Google displays ads on your blog.

Making money with blogs takes time and effort, you have to write a lot and learn SEO so you can rank your articles on Google and get traffic.

9. Start Network Marketing

Network Marketing

Network marketing is also called multi-level marketing (MLM)

The idea behind it is;

  • Join a company by buying their products then start promoting them
  • Recruit other people who buy the products from you and they start recruiting others to do the same thing
  • And those others recruit other people

In this case, you get a small commission from all the sales that take place by people who you recruited, the people they recruited,…..etc.

This is a good way to generate passive income only if the people you recruited are active.

Russell Brunson from Clickfunnels has a good book about this and how to automate the whole process.

Not to be confused with affiliate marketing, there are big differences between MLM and affiliate marketing

Network MarketingAffiliate Marketing
Earning depends on how active the people you recruit areEarning depends on how active you are
You are required to buy the productYou are not required to buy the product
Learn More

10. Buy Stocks

Stocks

To do this, you have to do a lot of research first.

When you buy stocks, you are buying a small piece of a company that has a market value, and changes on a daily basis. So, you have to buy stock of companies that are expected their market value to go up.

You can do all this online, and it is highly recommended to have a coach or a financial advisor if you don’t know the market well.

There is a risk of losing your money if the market value of stocks you bought goes down.

To make a significant amount of money, it is required that you invest with big money.

Which Passive Income Is The Best To Start?

It is not that simple to answer this question because what is best for me might not be the best for you.

Knowing what is the best passive income idea depends on many factors like;

  • The amount of money you have to invest
  • How much time do you have to build your passive income
  • The size of the opportunity
  • Your knowledge in the area

You have to consider all these factors and choose what best fits you.

Me, I choose affiliate marketing because I like the business model.

Final Thought

Starting a passive income is a great way to have extra income aside from your existing income, or, to replace your existing income and retire sooner than planned.

While it is tempting to start several ways to generate passive income, it is highly recommended to start with one, then expand to more in the future.

What I listed above are the types of passive income that can be done online, and can be automated.

Do the work upfront, then if it is done right, it is just a matter of time to see income passively in the future.

From the list above, what is your favorite passive income idea?

Nabil Al-Baidhani
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