No longer just a weekend passion project, side hustles have become a way of life for many. In fact, according to MarketWatch more than half of Americans have a side hustle these days and many are also looking for ways to earn passive income without having to put in too much extra effort.
One of the main reasons people tend to gravitate toward side hustles is the freedom they offer; the opportunity to be your own boss and choose your own business path is just too good to pass up. And in many cases, individuals can create passive income without having to really hustle all that hard.
Related: 7 Internet Based Business Ideas From Home
What is a passive income side hustle?
Side hustles, broadly defined, can be just about anything you do in addition to your full-time job or primary revenue stream — like ride-share driving, tutoring, dog-sitting and more. Having a side hustle doesn’t necessarily mean you’re earning passive income, however. For instance, driving for Uber or Lyft or delivering for DoorDash can earn you supplemental income, but those types of gigs are relatively active. Passive income, on the other hand, comes from enterprises that generate income for you even when you’re not fully engaged. It’s the concept of literally making money when you sleep.
If you’re renting a property, for example, earning interest on investments or getting a kick-back from affiliate marketing, those income streams would be considered passive. Below are some of the best passive streams of income that make great side businesses.
Passive income side hustles
Online course creation
These days, thanks to online classes and massive open online courses (MOOCs), it’s easier than ever — and more affordable — to upskill, advance your education or jump to a completely new career path. This means it’s also easier to earn supplemental income as an educator.
If you have technical expertise in a certain field, consider building and selling an online course. It can be time-consuming initially as you record lectures, design lesson plans, build rubrics and assessment criteria, but in many cases the courses will run themselves once they’re live — which is where revenue opportunities arise.
You can sell access to your course if you have a large network for promotion, or you can partner with MOOC providers like Coursera, Udemy and Skillshare. Typically, the more people who sign up for your course, the more money you’ll earn (if you’re successful, you can earn between $1,000 and $10,000 each month, according to LearnWorlds).
Related: How One Entrepreneur Made Seven Figures Selling an Online Course
Ecommerce
The ecommerce market is booming. In fact, according to Shopify, global ecommerce sales are expected to hit $6.3 trillion in 2024. And while companies like Amazon dominate the market, there are ways for individuals to earn money via ecommerce, especially if you’re willing to sell a niche product.
For instance, if you have a full-time job as an artist or graphic designer, you could open an online shop — or use a platform like Etsy — to sell your work.
Alternatively, if you don’t want to create products or be responsible for fulfillment, you could consider dropshipping, a strategy whereby you create an online store, sell products and then contract with another provider to handle shipping logistics. In this scenario, you are only responsible for selling goods — though you’ll need to establish a pricing model where you earn money on top of your contracting costs.
How much you’ll earn in ecommerce can vary widely based on your network, digital marketing skills and the specific products you’re selling, but some ecommerce stores have seen six and seven figures in revenue in their first year.
Mobile app development
Although apps are often developed by programmers at large tech companies, that isn’t always the case. For instance, the viral smartphone game Wordle was developed by an individual — Josh Wardle — who created the game with his partner and sold it to The New York Times for more than a million dollars.
Your app might not fetch seven figures, but if you’re already a skilled developer, you could make serious passive income after you’ve created the product. In-app purchases, direct sales, subscriptions and advertisements allow developers to monetize their apps long after they’ve built them.
The revenue a mobile app generates will vary; some developers bring in less than $1,000 in monthly revenue, while others easily clear six figures.
Related: This Graduate Student Started a Side Hustle to Help Pay Tuition. It Earned Over $115,000 Last Year — More Than His Full-Time Job.
Content creation
Today, content marketing is a fast-growing industry and can lead to income streams in various ways. For instance, if you’re a writer with a blog that generates significant traffic, you could start an affiliate marketing side hustle by linking to products or creating reviews with your content and getting a percentage of the sales. You can do this by partnering with Amazon and other online retailers.
Moreover, today the demand for quality content is high, and if you’re capable of producing it you’ll be well-positioned to monetize your writing or other creative endeavors. You can do this by charging subscribers access to your blog via sites like Medium or Substack.
Creating quality content takes a significant amount of time, but depending on how much you produce, your revenue will fluctuate. Many experienced affiliate marketers and bloggers bring in well over $1,000 monthly.
Related: How New Businesses Can Create a Content Marketing Strategy
Selling printables and print-on-demand assets
If you’re a digital artist with a knack for creating attractive templates and other designs, uploading your products (typically called “printables”) to a site like Etsy — where customers can pay to download them — can be an excellent side hustle for passive income. The best part? You only have to create the design once, but you’ll earn money each time someone downloads the file.
You can employ a similar strategy with print-on-demand products like shirts, mugs and more. By creating designs and allowing customers to choose the product on which they want it printed, you don’t have to hold inventory. Instead, you can work with a contractor to get the product created and shipped only after it’s been ordered.
The revenue generated from selling digital products varies, but some experienced designers are earning well over $100,000 annually.
Passive income ideas
Rent a property — or a room
If you have multiple properties or a spare bedroom in your home, renting those spaces can be a low-lift way to earn income. Property management can be time consuming, but depending on where you live, you can often earn more in rental payments than it costs you to pay the mortgage or hire a leasing agent.
If you have an entire house to rent, it may be worth having someone manage the property for you — meaning you can be completely hands off while the investment earns you cash. If you’re just renting a room or part of your home — “house hacking,” as it’s often called — you’ll need to be the kind of person who can handle having a roommate. Your total income from renting a room or property will largely depend on the market in which you live and the size of your mortgage.
Earn interest on investments
Investing money is a pillar of many people’s passive income strategy.You might, for example, consider placing your cash in a high-yield savings account, a low-risk investment that often does not carry fees and can net you 5% annually, depending on the account you choose.
Dividend investing is one of the most common ways of earning supplemental cash. Essentially, when you invest in a company’s stock, you will earn money on the investment depending on whether — and how much — the company grows. Typically, dividends are paid out quarterly. While yields vary, the average is between 2% and 5% and it requires very little upfront work.
Rent out a vehicle or parking space
If you have a spare vehicle or don’t drive often, you can earn money by making your car available on sites like Turo, the Airbnb of the car-rental market. If you live in a high-demand parking area (near a stadium, for instance), you can also make quick cash by renting out parking spaces on a long-term or short-term basis without too much effort. Your earnings will be determined by several factors including the type of car you own and how often you rent it, though some people earn more than $2,000 monthly.
Lend money on a peer-to-peer site
If you already have a good amount of liquid capital, you can earn interest on your money via peer-to-peer lending (P2P) — which is exactly what it sounds like. Essentially, using P2P sites like Lending Club, individuals can lend money to other people or businesses and charge interest on the loan. The lender (in this case, that’s you) can review loans borrowers are seeking and decide to fund them in full or in part. If you decide to fund the loan, you’ll receive monthly payments of principal and interest — which typically ranges from 6% to 36% — until the loan is fully paid out.
There is risk involved for lenders, but some P2P platforms perform credit checks or offer contingency funds if a borrower defaults. Rules and regulations vary by state and by lending platform, so you’ll need to do some research before launching a P2P side business.
How many income streams should you have?
In a study that looked at over almost 40 years of tax returns, the Internal Revenue Service (IRS) found that the typical millionaire has seven income streams — which include salary, interest on investment, rental profits and more — but that number, of course, varies.
There’s no finite number of passive income streams you can or should have, as long as you have the bandwidth to manage them all. That might mean you have one low-effort side hustle in addition to your full-time gig; it might mean you have five. Regardless, you’ll need to set financial targets as well as bandwidth and then determine to what extent you can add income streams from there.
Minimize your taxes on passive income
The downside of increasing your income is that, depending on how you earn money, your tax liability will be higher. You’re legally required to report any supplemental income to the IRS, which is typically taxed at the same rate as your full-time income. There are, however, a few passive income streams that will actually reduce your tax liability.
For instance, if you invest in tax-exempt municipal bonds, which are typically used by local governments to fund public works projects, the interest you earn on those bonds will not be taxed federally — and depending on the bond they can be tax-free at the state level, too.
You may also consider investing in a Roth IRA, a retirement account in which you invest money you’ve already been taxed on. The earnings from a Roth IRA are not subject to taxes when you withdraw funds at retirement age — meaning you can grow your money without being taxed on the gains.
Another option, if you own a home that has appreciated, is to sell it and collect your equity — which is typically tax free up to a certain point, provided it has been your primary residence.
The world is open
Creating a passive income stream can start small – something you can do while working your traditional 9 to 5 job. However, for some , that side hustle can become the career they truly want. It may take time, effort and a lot of energy, but side hustles can often become true sources of passive income for people worldwide. Whether you run your side hustle alongside your current job or are seeking to make it into your full-time career, the opportunities to create an extra source of income abound.
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