19 Legitimate Passive Income Ideas to Make Money While You Sleep

Passive income is thought to be one of those holy grails in the personal finance world, in that you might think it’s this unattainable source of unlimited wealth. Well, both of those things are untrue. Anyone can earn passive income, and the only thing limiting you is the amount of energy and/or money you’re able to invest over time.

What is passive income?

Passive income is money you earn in the background. It’s money you aren’t currently and actively working to earn.

On the other hand, your current 9-5 job pays you X number of dollars for X amount of work. You have to go to work every day and perform a number of tasks to get said money. You might get some paid time off, but if you just stopped showing up and performing your job, no more money.

Your 9-5 job is trading your time for money.

Why Earn Passive Income?

Because you generate passive income in the background, you can spend your time and energy on other income earning options. You can set one source in motion and focus on another. This is how you build wealth.

Passive income also protects you if something happens to your main income source. It’s diversifying your income so you’re never completely reliant on one source.

You can’t start earning passive income without one or both of these. If you’ve found some magic unicorn passive income idea that doesn’t require one of these (must be legit), you’ve gotta tell us. You’ll make a lot of people really happy with that kind of information.

I have 19 passive income ideas in this article, and I’ll be dividing them into those two categories above.

Okay, ready to go?

Let’s do it.

Passive Income Ideas That Requires Some Upfront Cash

1. Open a High-Yield Savings Account

High-yield savings accounts are probably going to earn you more than what your bank currently offers, and you usually find these better rates at online banks. That’s because they don’t have the same overhead (branches, tellers, etc.) and can then pass the savings on to customers.

Rather than earning maybe 0.03% back at your current bank, a high-yield account can typically earn you 2% back or more. It’s a small amount, but the interest you earn is passive income.

2. Open a Money Market Account

Money market accounts are really similar to savings accounts, except for a few things:

• Money market accounts often allow you to write checks and access funds via ATMs
• They typically require a higher initial balance
• Your money is invested in financial markets, then earning you more interest

Money market accounts are a good source of passive income if you’re able to let your money sit and grow for an extended period of time. Maybe you want to save up for a down payment on a house? A money market account would be good for that.

Both banks and many investment brokerages have money market accounts, and it’s best to find one that’s FDIC insured.

3. Start Micro Investing

Micro investing has become really popular in the past couple of years because it removes some of the barriers that come with traditional investing. If you’re not familiar, micro investing is:

• Investing with small amounts of money, even spare change
• It’s usually done via an app, like Stash or Acorns

It’s a great way to become familiar with investing, but know that micro investing means micro returns. You’re not going to retire off of spare change, but those small amounts do add up.

If you’re interested, here are some articles to check out:

• Acorns 2024 Review
• Stash Review 2024︱Worthwhile Investing App or Waste of Time?
• Is Micro Investing Worth it?

4. Invest With an Online Brokerage

For larger returns, you’ll need to invest more money. And, many online brokerages come with low fees, a number of asset classes, and tools to help you get the most out of your investment.

Online brokerages like Charles Schwab, Vanguard, and Fidelity offer:

• Stocks
• ETFs
• Bonds
• IRAs

Depending on what investment vehicle you choose, you either earn passive income via dividends (what companies pay shareholders when they turn a profit) or interest (compound interest is a powerful way to build wealth).

5. Refinance your house

This probably sounds strange at first, but hear me out…

Depending on when you purchased your house, you might be able to find a much better rate if you refinance. The money you save is money in your pocket to put towards other passive income ideas.

Here’s an example taking a $150,000 mortgage at a term of 15 years:

• At a rate of 6%, you pay $77,841.34 in interest
• At a rate of 4.5%, you pay $56,548.19 in interest

That’s $20,000+ that you would have paid if you stuck with your original rate. Refinancing put that money back in your pocket, or the bank.

6. Buy an Investment Property

This is probably going to take a hefty upfront investment, but rental properties can increase your cash flow with pretty minimal work, especially if you outsource a lot of the work to a property management company.

You will need a bit of a financial safety net for repairs, taxes, and if the property isn’t rented. But, you can leverage your earnings to invest in more properties, then increasing your passive income even more.

7. Invest in a REIT

Real estate investment trusts (REITs) are how average people invest in commercial real estate. You put in an upfront investment, which can be as little as $500 with a company like Fundrise, and once the project is funded and turning a profit, you get a return.

Since 2014, Fundrise investors have seen returns of 8-12%. Remember, there’s no guarantee on that, but those are pretty good rates considering what $500 in a savings account would yield.

Go here to learn more: Fundrise Review: Commercial Real Estate Investing for All

8. Try Peer-To-Peer Lending

P2P lending as it’s often called is a way to crowdsource funds that people might not qualify for through a traditional lender. With a P2P lending company like Lending Club, you can fund a number of loans, like:

• Home buying
• Debt consolidation
• Home improvement
• Credit card refinancing
• Business loans
• Medical expenses
• Moving fees

The premise is actually pretty cool because it’s disrupting the current institution that many people with zero to bad credit can’t buy into.

But, what about the risk?

The annual default rate with Lending Club is around 6-7% annually, and Lending Club does assess the risk of each investment for you. It’s also suggested that you invest in a number of different loans to mitigate your risks.

9. Build a CD Ladder

A CD ladder is when you stagger several different CD so that they mature at different times. They’re definitely for the risk-averse, and the idea is that you keep your money pretty liquid while earning slightly more interest than you would with a savings account.

To build a CD ladder, here’s an example of what you would buy:

• 6-month CD at 2.00%
• 1-year CD at 2.50%
• 18-month CD at 2.75%

You buy one of each and when the first one matures, you buy another 18-month CD. In six months, the 1-year would mature and you’d use that for another 18-month CD. You have a ladder in which one of your CDs matures every six months.

If you’re okay with your money not being as liquid, you can stagger these out with a year in between each. Longer CDs earn higher interest rates, so that’s more passive income.

The downside is that you can find better returns with REITs, in the stock market, and even P2P lending. The upside is that it’s much less risky.

10. Get Cash Back for Shopping

Rakuten, formerly known as Ebates, is a company who pays you to shop as you normally would online. Sign up is free, and you go through their portal to shop at over 2,500 different online retailers. Rakuten gets a little commission for sending you to their partner stores, and they give you a little kickback as a thank you.

Rakuten pays you via check or Paypal, and there are no additional fees to use the site.

This is probably one of the easiest and most approachable passive income ideas on this list. That being said, you’re not getting any huge returns – you earn 1-4% back on your purchases. Still, that is something.

11. Earn Credit Card Rewards Points

Next to investing, this is one of my personal favorite passive income ideas. Let me tell you why…

I use credit cards to pay for as many expenses as I can (bills, groceries, gas, etc.), and then I earn 1-4x points for every dollar I spend, maybe also getting a big sign-on bonus if it’s a new card. Then, I use those rewards to pay for travel expenses.

Credit card rewards cards can also pay you cash back, in hotel rewards, etc. You can even use this in combination with a cashback shopping site like Rakuten.

Churning credit cards, travel hacking, and just earning rewards points is only worthwhile if you’re able to pay your credit card balance on time and in full every month. It’s not just bad for your credit score if you don’t, interest charges and late fees will more than negate any rewards you earn.

Passive Income Ideas That Require Some Upfront Time or Energy

12. Start a Blog

Bloggers earn money in a few different ways, and after a lot of work, some of that income can feel pretty passive. And, however passive that income might feel, blogging is not a get-rich-quick scheme… can’t say that enough.

It took me several months of blogging before I earned a few bucks, and then even longer before I was able to earn what really did feel like passive income (I actually don’t think there’s ever 100% passive income for bloggers).

For bloggers, passive-ish income can be:

• Display advertising. These are run through networks like Google Adsense, and you place the ads on your page and get paid based on impressions, clicks, or sales.
• Affiliate marketing. This is when you get a special link for a specific company or product to promote on your page. When someone clicks on the link and makes a purchase, you are paid for that conversion. It can feel passive because those posts can still generate income even though they were written weeks, months, or years ago. Michelle at Making Sense of Cents has an amazing affiliate marketing course if you’re a blogger and want to learn more. You can check out my review of it here.
• Course sales. For bloggers who become authorities on a specific topic, you can turn that knowledge into a course. That’s what I did with my Facebook Side Hustle Course and Facebook Ads for Bloggers. The bulk of the work is done in creating the course (and the years you spent beforehand learning about the topic), but it turns passive because you can sell the course indefinitely with pretty minimal work—more on earning passive income from course sales a little further down.

Each of these sources of income takes a time/energy investment before the cash starts rolling in. What I’ve found is that the more time and energy you put into your blog, the higher your ROI. It’s hard work, but now I can’t imagine life without M$M.

If you’re interested in adding this as a source of passive income (gonna take a minute) but need to start a blog first, Launch That Blog is a free service I’ve created to help you with the set-up and installation process of a WordPress blog.

The only thing you have to pay is $2.95 for hosting services through Bluehost. Seriously, that’s it. My team takes care of the rest.

13. Rent Out a Room in Your House

If you live in a big city or tourist destination, listing a room or your entire house on Airbnb can be a nice source of passive income – you already have your home and are paying for it, this is just extra cash.

The time investment here is going through the process of listing your room or house and making sure it’s clean and ready for visitors. Fortunately, Airbnb manages the reservation and payment process for you.

14. Rent Out Your Car

Similar to Airbnb, you already have a car, why not earn a little something back for it. That’s where Turo comes in. It’s an online marketplace that connects renters with car owners.

Turo prescreens renters and offers up to $1 million in liability insurance and coverage in the event of theft or physical damage. You get paid 65-85% of the trip price, and they have a Carculator to give you an estimate of what you can earn with your car.

A lot of people earn passive income through Turo to offset their car payments.

15. Start a Youtube Channel

My wife recently started a Youtube channel where she shares budget-friendly home decorating tips… our house is beautiful, and I don’t understand how she does it. She’s having a lot of fun, and I love watching her channel grow.

She’s learning a lot as she goes, but the biggest lesson is that it takes a lot of upfront work. Those high earning YouTubers didn’t start earning millions overnight. It took years, and it started slow as blogging does.

YouTubers make money through:

• Advertising
• Sponsorships
• Selling branded merchandise
• Fan donations

It can feel passive eventually, but the upfront time and energy investment are pretty high.

16. Create an Online Course to Sell

My online course sales are one of my largest sources of passive income. The best part is that I genuinely love teaching people how to do things that will actually help them, like how to run a profitable side hustle or bring more traffic to their blogs.

But, I never would have been able to teach those lessons if it weren’t for a few years of learning and implementing that knowledge. That time and energy investment made me an expert on those topics and able to teach others what I know.

So, if there is something you already excel in, creating an online course is a really great source of passive income.

Here are a few tips for creating your course:

• Your course should be about a topic you know well and feel strongly about
• Make sure it’s an in-demand topic, which you can test
• Price it well
• Add a coaching component
• Start using Facebook ads to sell your course
• Add layers to promote your course even more

17. Start an E-Commerce Site

The three most common types of e-commerce sites are for:

• Dropshipping
• Selling your own products
• Selling someone else’s products

Setting up a dropshipping site through Shopify is probably the most passive way in the beginning, but you’ll probably earn the least this way.

The other two options have higher margins, but it can also take some financial capital in the beginning.

Why would you start an e-commerce site?

If you feel strongly about a product or idea and see a need in the market, then you can earn good money through some hard work and solid marketing skills. Online stores also lack the kind of overhead you’d see with a brick and mortar, which means it takes you less time to turn a profit and you get to keep more of it.

An e-commerce site can become passive once you have everything set up and running. It also helps to outsource some of the tasks like filling and shipping orders, payment systems, website management, etc.

18. Sell Stock Photos

Stock photo websites like Shutterstock and DepositPhotos take your photos and then pay you money when someone uses them. Depending on the site, here’s how that works:

• You are paid when someone buys access to your photo
• Or, you are paid when someone buys a subscription to the site and uses your photo

Obviously, these need to be high-quality photos, but that doesn’t mean you have to be a professional. I know a few amazing photographers who have absolutely zero professional training.

The time component here is that you’ll need to take the photos and process them before they’re ready.

19. Write an E-Book

Self-publishing is how newbie authors start without going through the whole process of pitching a book to publishers, working with editors, etc. The barrier to entry is really low, and the profits can be pretty high if you know how to market your book well.

And if it isn’t obvious, the time component here is that you have to actually write a book that people will want to read.

Amazon Kindle Direct Publishing platform is what a lot of self-published authors use right now, and here’s a really great article about self-publishing.

My Final Word on Earning Passive Income

I want the biggest takeaway from this to be that there are a ton of legitimate passive income ideas that anyone can try. They all take some kind of investment, and often you get out of it what you put in.

Take blogging. You can earn enough to quit your day job, but you can only do that if you’re willing to work at it for a while with no obvious financial gains.

Even investing, to earn more back, you have to invest more. You have to research and find the right funds. And, you should never believe outrageous claims about bogus returns.

You can also do a number of these ideas at the same time, but it helps if you start one, get a feel for it, and then add another. Often, you can start turning the wheel for a larger source of passive income with the funds you’re earning from a smaller one.