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As inflation continues to skyrocket, more people are looking for ways to make extra income. But with only so much time to go around, there isn’t a lot of time left over from your nine to five that you can use to build your side hustle.
That’s why many people have turned to various methods of passive income. Read on for our top ideas for passive income, as well as some important information to help you get started.
The business passive income ideas worth considering in 2023.
Making money while sleeping is the ultimate win for any hands-off investor or business owner. Wanting to boost your business’s income without having to put in hours of extra labor is no longer considered a pipe dream once you are earning passive income.
High-yield savings accounts with attractive interest rates are suitable for retirement. Getting a cashback credit card can be a low-risk bonus for your short-term financial goals, but it won’t have the payouts of real passive income. Investment opportunities in cryptocurrency or alternative markets may bring significant returns but incur a lot of risks.
Here are 8 reliable passive income business ideas for you in 2023.
1. Real estate and property rentals.
Owning real estate is one of the most traditional and guaranteed ways to generate passive income. There are two ways you can approach this: commercial rentals or residential rentals.
Commercial rental properties are rented primarily to businesses, which means there is typically less tenant turnover. Additionally, commercial renting comes with special lease considerations and tax advantages that aren’t always available for residential properties.
Meanwhile, residential rental properties are rented primarily to families or individuals. Residential renting is popular because of its greater flexibility and potential for greater passive income.
Due to the high upfront investment, it is not as easy as just buying a house or land and isn’t an accessible option for most people. But, if you have the cash on hand, it is a tried and true way to earn passive income.
Once you have purchased a piece of real estate, you can turn it into a rental property and insert a tenant into it and earn income monthly or turn it into a vacation rental like an Airbnb, for example.
Many small businesses in real estate use platforms like Airbnb to access more renters and rental income. Whether you buy multiple properties across different neighborhoods or just rent your spare room, this model can be great for bringing in new streams of income.
Both options call for repair and maintenance requirements which can become significant time and money drains unless you hire a property manager, which will cut your income even further.
For a safer option, if you are interested in rental properties but aren’t ready for the high costs that come with them, you can start by renting out an extra bedroom in your house or purchasing a duplex and renting out one half of it while you live in the other.
If you prefer to avoid the overhead costs of owning physical and real estate when associated with rental properties and Airbnb but still want to get into the real estate market, there is an alternative option.
Real Estate Investment Trusts, known as REITs, or real estate crowdfunding platforms, like Fundrise or RealtyMogul, are companies that own, operate or finance income-generating real estate with the help of investors.
Similarly to mutual funds, REITs pool the capital collected from numerous investors, making it possible for individual investors to earn dividends from real estate investments without personally purchasing, managing, or financing any properties themselves.
3. Affiliate marketing and sales.
Affiliate sales are passive income generated when someone purchases after clicking on a link or using a referral code that you publish on your website, blog, video, or podcast. Typically, you will earn a flat commission rate or a percentage of their purchase total.
You can find affiliate links for just about any product or service. In other words, you could make passive income from product reviews to software evaluations. Affiliate programs are pretty competitive and require high-quality and consistent content production to be successful.
4. Selling products on Amazon.
There are various ways to make passive income on Amazon. With third-party Amazon sales, you can sell products without having to deal with the sales, shipping, or customers directly, and there are millions of Amazon customers that you can tap into.
With Amazon’s ecommerce marketplace, you can build a business, which takes upfront work, time, and commitment before it will generate passive income. Additionally, you can purchase an existing Amazon FBA business, which is a more straightforward method.
When purchasing an Amazon FBA business, most of the grunt work is already completed. If the seller has already established income-generating products, you just have to work on improving the FBA business to your liking.
Regarding ecommerce, there are other platforms like Etsy or eBay where you can generate short-term side hustle income or even build a full-fledged online business and online store.
It can eventually become a passive income stream if you decide to get into the dropshipping business. Dropshipping is a form of ecommerce in which you sell products on a platform, and they will do all of the heavy work, like creating the merchandise and shipping it out for you.
You need to create the brand, advertise it and build your customer base. Once all of that is set up and you have a consistent amount of new and returning customers, your dropshipping business will become passive income.
5. Digital products.
Selling digital products for passive income can range from ebooks, courses, and lesson plans to mobile apps and even NFTs.
The key to making this work out as passive income is by dedicating some time upfront to building each of these avenues once, and then you will be able to sell the same asset over and over again online.
6. Peer-to-peer lending.
Peer-to-peer lending is when you lend money to a third party, and they pay you back with interest. Various platforms host peer-to-peer lending, including options like Prosper.
This method of passive income comes with the small risk that the borrower can default on their loan, so it would be an excellent option to lend in small amounts in which you feel comfortable.
7. Vending machines.
Purchasing and installing a vending machine in your existing business or starting a new vending machine business in a designated location can be a lucrative form of bringing in extra money.
You will need a few thousand dollars to cover the initial purchase of the vending machine and supply the items to be sold.
Once that is set up, the upkeep only requires you to spend money restocking and servicing the vending machine. You have the option to outsource these tasks if you are willing to sacrifice profits.
8. Online courses.
If you possess a unique skill or talent, you can monetize it and create an online course. Some individuals develop online courses for a living and are collecting passive income as you read this.
This can be a great way to make money after the initial work is put in, mainly because the upfront costs are pretty low.
Assuming that the course you create is evergreen — meaning that it will remain relevant for some time — you will only need to make each course once. It then becomes an asset that you can repeatedly sell without any added labor on your end.
You can also combine this money-making method with free content on other platforms, including audiobooks, and Youtube channels, to drive traffic to your course and further enhance your personal finances.
What is passive income?
Passive income is earnings from various sources, including rental properties, dividend stocks on the stock market, limited partnerships, or other businesses in which the individual is not actively involved.
Like active income, where you must work to earn money, both are taxed by the government. Still, according to the Internal Revenue Service (IRS), these types of income are taxed differently.
Do you have to work for passive income?
What comes to mind when you hear the words “passive income”? For many, it is sitting on a beach, surrounded by palm trees, ready to hop into your private jet within a minute’s notice and make money around the clock.
That’s not entirely wrong. Passive income generates cash flow without having to trade your time — but do not get deceived into thinking that it is some type of get-rich-quick scheme to build wealth and earn financial freedom overnight.
You must spend considerable time, upfront work, and sometimes even money before generating a source of passive income sizable enough to quit your full-time job.
For example, an artist collecting royalties on a song is considered passive income. However, they still had to write, record, and release the soundtrack before they could earn any money from the revenue stream.
Additionally, for the business model to stay profitable, artists must focus on social media efforts and sponsorship deals to continue bringing in extra cash.
The bottom line.
There are many passive income business ideas out there. All you need to do is put aside the pipe dream of thinking that passive income happens overnight and you will make money while sleeping.
The reality is before any business can become passive, a substantial amount of work, money, time, and effort goes into it initially. Once you have chosen the passive income ideas that work for you and dedicate yourself, there is no ceiling on how much money you can make. If you have a business idea, we have the tools you need to help you get started.