Most Passive Income Ideas You Hear About Aren’t Actually Passive

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The truth is, “passive income” is often more of a buzzword than an accurate portrayal of what many investments and side hustles actually are.

Just take a quick look at this curated list of the 39 top “passive” income ideas to help you build wealth from SoFi. This list ranks towards the top of the search results page when you Google the term “passive income ideas”.

Does creating an online course or running a vending machine business sound passive to you? That’s because it’s not.

There’s an issue running rampant in entrepreneurship and side hustle culture – web publishers and finance personalities simply are not telling the whole story about passive income in their content, which inevitably leads to disappointmnet for those choosing to act on their advice.

Why Most Passive Income Ideas Aren’t Really Passive

Here’s the thing. Almost none of the online businesses or income streams popularly regarded as passive are inherently passive. Not only that, many of these ideas require a specific skill set and knowledge base for you to set up the systems needed to make the business or income stream passive.

So if you’re starting from zero, you can plan on putting time and energy into just about anything before you can start generating income passively.

Real estate is an often discussed investment vehicle for passive income – but private real estate investing is not inherently passive in any sense of the word. More on that in a moment.

The Problem Lies In Bad Expectation Setting

I would never discourage somebody from starting a new side hustle or from trying to build a second income stream. And I don’t think many of the popular ideas thrown around on these lists are inherently bad ideas. The issue with passive income hype content arise from its bad expectation setting.

The audience of these pieces tends to be people who are just getting started building wealth or looking for ways to grow their income with a second stream.

Folks may get the impression that these “passive” ideas are easy ways to earn money when, in reality, a significant amount of initial effort and/or specialized knowledge are required. This can lead to poorly informed decision making, time waste, financial loss, and ultimately discouragement from pursuing side hustles altogether.

So if the purpose of this type of content is to help introduce the audience to passive income ideas, it would be much more helpful for content creators to be transparent about the upfront skills and knowledge required to be able to make the income stream passive.

The truth is, building sustainable, profitable income streams takes upfront time and effort if you are starting with nothing. There’s no shortcut or silver bullet that will get you there overnight. Accepting this and developing discipline and a desire to learn high value skills on the other hand is much more likely to lead to passive income in the long term.

39 Not That Passive Income Ideas

The intent here isn’t to dunk on SoFi specifically, but their list happens to be representative of the sort of ideas that tend to appear on many “passive income ideas” lists.

Let’s take a look at each of them and just how passive they are.

1. Open a High-Yield Savings Account

Interest you earn from holding cash in a high-yield savings account, I’ll admit, is very passive income. If you are saving money in a savings account anyways, it’s a good idea to open a high-yield account so you can accrue as much interest as possible.

That said, even with post COVID high interest rates, a savings account won’t yield a high return relative to most other investment opportunities.

2. Invest In a Business

While it’s true that investing as a silent partner in a business can lead to passive income, this type of investment requires a high degree of knowledge and understanding about the business you plan to invest in.

Not to mention, you’ll (hopefully) perform due diligence on the business’ ownership, operations team, and financials before you invest. Proper due diligence takes time and a deep understanding of business financials in most cases, which requires quite a bit of upfront investment of your time.

3. Lend Money to Peers

Peer to Peer lending on crowdfunding platforms is definitely on the passive side of the spectrum. However, these types of loans come with quite a bit of risk and if you plan to do it long term, you’ll need to perform due diligence on the borrowers you’re lending to (noticing a theme here?).

4. Buy a Rental Property

Rental properties are not passive in any sense of the word if you are starting from scratch or investing in properties solo.

If you own a rental property, you have to find tenants, maintain the property, and handle issues that inevitably come up.  That’s not even counting the amount of time you’ll spend researching your market, finding deals, negotiating, going through due diligence, securing financing, and closing your deal!

Once you’ve gone through the process of doing these things a few times, you can set up systems and hire people to manage the property or outsource portions of the process to make it passive for you. It will take a little while to get to that point if you are brand new to real estate investing though.

But before you get to that point, you can plan on putting the time in to learn your market, source deals, perform due diligence, and manage your property once it’s been purchased.

5. Invest in Crowdfunded Real Estate

Crowdfunded real estate investing platforms like Fundrise are a great way to get exposure to private real estate investing without having to put a lot of work in yourself.

All of the parts about real estate investing that can be a headache, including sourcing deals and ongoing property management, are handled by the platform.

Because of this, investing in real estate on a platform like Fundrise is quite passive. With that said, you should still do your due diligence on any property investment you make on the platform.

6. Invest in the Stock Market

Investing in dividend stocks or selling covered calls can be a great way to make passive income in the stock market. Once again though, there is a certain amount of knowledge and time required on the front end to make sure you understand the investments you are making.

7. Invest with an Automated Advisor

Similar to investing in the stock market, investing in ETF via an automated robo-advisor is passive past the point of due dilligience.

8. Start a Retirement Account

Starting a retirement account is a regurgitation of investing in the stock market.

With retirement accounts, you won’t be able to access your funds without penalty until you’re around 60 years old. So if your goal is to create a passive income stream for yourself to take advantage of now, this probably isn’t the best way to go.

9. Run An Affiliate Marketing Business

Running an affiliate marketing business isn’t passive at all. On the front end, you have to create an audience who you can market affiliate offers to, in addition to building affiliate relationships.

And as with any content based business, affiliate marketing can be semi-passive in the sense that content you create has the possibility to pay you back over an extended period of time. However, highly successful affiliate marketers are constantly creating new content to grow their business.

10. Rent Out Your Car

Using a platform like Turo to rent out your car also isn’t inherently passive. You need to coordinate pick ups and drop offs with the people who rent your car, and field inquiries from prospective renters on an ongoing basis.

11. Advertise on Your Car

Most car advertising agencies pay proportionally to the amount of visibility you create for the ads on your car. That means you (or somebody you hire) have to drive more to earn more. Any time earning capacity is tied to time as an input, that’s a sign that the venture isn’t passive.

12. Rent Your Parking Space

Renting out extra space in your driveway is passive after you have a renter secured. Like many of the other ideas on this list, there is work on the front end to find and vet a renter.

13. Rent Storage Space

This is almost a carbon copy of the rent out your parking space idea. Renting out extra space in your garage is passive after the upfront work of finding a tenant.

14. Invest in Storage Space

Like investing in a rental property, identifying a self storage facility to purchase requires market knowledge and quite a bit of due diligence on the front end. On an ongoing basis, you’ll need to manage tenants and security of your facility.

15. Rent Your Bike

Renting your bike out sounds fairly passive, assuming the platform you list your bike on can help you coordinate pick ups and drop offs with renters.

16. Airbnb or Rent Out a Spare Room

As with all of the other real estate rental based ideas on this list, renting out a spare room via Airbnb isn’t as passive as it sounds. You’ll be fielding inquiries from renters and working to clean the space and make it ready for tenants.

17. Pet Sit in Your Home

Pet sitting is just flat out not passive income. Is it a chill side hustle? Sure. But if you’re pet sitting your earning capacity is tied to the amount of time you spend looking after somebody else’s pet.

18. House Sit for Someone

Also not passive at all. Chill and potentially quite easy? Yes. But house sitting require you to… house sit. Unless you are subcontracting the labor out, house sitting isn’t a passive income stream.

19. Buy and Sell Domain Names

Flipping domain names, or flipping anything for that matter, isn’t inherently passive. Due diligence and a deep market understanding are crucial if you plan to make money flipping domain names. Especially these days with the domain market being so optimized with many eyeballs on it.

20. Rent Your Tools

Like all of the other “rent out your stuff” ideas on this list, I wouldn’t consider this income inherently passive because it will take time and effort to find consistent renters who will pay to rent your tools.

21. Invest in Royalties

Platforms like Royalty Exchange allow you to invest in the intellectual property that others place for sale. Examples could be rights to songs, albums, or tv shows.

Once you own a royalty, it generates passive income. However, a serious amount of industry knowledge and due diligence is needed to find great deals. The asking price on many of the royalties listed on Royalty Exchange are 10-12 times yearly earnings… you better make sure you are buying a good deal if you are paying that kind of a multiple!

22. Purchase a Billboard

Finding a billboard, closing your deal, then finding advertisers to pay for space on your billboard requires a significant amount of upfront work before it can become passive income.

23. Purchase a Blog

Purchasing a blog is almost laughable as an idea on a passive income list.

Any time you are purchasing a business, quite a bit of expertise and due diligence is required on the front end, which takes time to develop.

But running a blog is not passive at all. If your blog covers an evergreen niche, and you have staff like writers, editors, and managers hired to run the business, it can be hands off for you.

But blogs require a steady dose of content publishing to remain relavent in the eyes of Google and the eyes of your audience.

24. Create and Teach an Online Course

Online courses can be a great business because they can be passive after you’ve created the work and dialed in your advertising campaigns.

But don’t gloss over the level of work and marketing expertise required to create a truly successful online course. It’s not as simple as creating a course and watching the dough roll in.

25. Sell Digital Products

Developing good products is hard, and marketing them requires a knowledge and skills. If you plan to make passive income selling digital products, it’s possible, but you’ll have to invest time and money to develop a digital product which actually provides value to people that will get you paying customers.

26. Sell Stock Photos Online

If you are a talented photographer and have a bunch of high-quality photos lying around, this idea is going to take quite a bit of time and energy before it ever becomes a meaningful passive income stream.

In fact, it will most likely cost you a lot of money well before you see a return! You have to buy cameras, learn how to take high quality images, and use editing software to get your photos ready to sell online.

27. Create a Mobile App

Another idea in the laughable category. Even if you hire a developer team to develop an app, you can plan on spending a lot of time (and money) working with developers to make your idea come to life. And once the app has been created, you have to market it to create a user base.

28. Sell a Product

Selling anything comes with work.

From product development, to marketing, to selling, to fulfilling, to providing customer service on the backend, there are things that keep selling product from being inherently passive. It takes a high level of experience and expertise to turn a products based business into a passive income stream.

29. License Your Music

C’mon, really? License your music? If we are just going to pretend a tremendous amount of work doesn’t go into songwriting and producing music, sure, licensing music can be a great source of passive income.

30. Self-Publish a Book

Amazon KDP and a few other platforms allow you to market self published books to a wide audience. However, writing a book takes quite a bit of upfront time commitment.

And even though platforms like Amazon make it easier than ever to get exposure for your books, you still will likely need to market your book quite a bit if you don’t have a preexisting audience.

31. Sell Blank Books

Self publishing low content books on Amazon KDP can be a great income source, if you can find a way to differentiate yourself from the market.

This one is getting harder and harder to make money with over time since the explosion in popularity of AI tools. It seems like everybody and their dog is using Midjourney these days to create AI generated patterns for cover art on low content books like journals and diaries.

So while this one has gotten easier to get started with (less upfront work), it has become a lot harder to actually make money because there are so many products flooding the market.

32. Create Greeting Cards

Design is not inherently passive and you can plan on spending quite a bit of time creating quality card designs that sell. Also, finding a wholesaler or retailer to buy your cards doesn’t just happen on its own.

33. Start a Dropshipping Store

The dropshipping model is a great starting point for aspiring entrepreneurs for a lot of reasons. But because it’s passive income is not one of them.

To start a dropshipping store you’ll need to build a website, find product suppliers, upload products on your store, run advertising campaigns, field customer questions, coordinate shipping with suppliers to fulfill orders, and provide customer service on the backend.

34. Become a Blogger

See #23 Purchase a Blog above. Creating and running a successful blog is in no way passive. And these days starting from scratch, you can plan to spend 6-12 months in total obscurity before Google starts showing your blog in search engine result pages.

Want to drive traffic via Pinterest or other social media? That also requires platform depth of knowledge and work!

35. Start a YouTube Channel

The passivity of a YouTube channel is pretty similar to that of a blog. Even if you’re opting to create a faceless YouTube channel, you can plan on spending time learning the YouTube platform, coming up with video ideas, getting scripts written, and videos edited.

Outsourcing these tasks is very doable for mid level and advanced creators – however doing it well and profitably takes time.

36. Publish an Ebook

Publishing an eBook for all intents and purposes is the same as either selling digital products or self publishing books. No matter which way you slice it, it takes an upfront time and/or money investment to get a quality eBook created. From there you have to market and sell it.

37. Create a Podcast

Should not have appeared on a passive income idea list. What part of creating a podcast sounds passive? Coming up with content? Booking guests? Booking sponsors? Producing? Marketing?

38. Start an ATM Business

ATM businesses have the possibility to become passive assuming you can hire somebody to reload your machines with cash. But at the end of the day, somebody needs to physically service each machine from time to time.

And that’s not taking into account the upfront time you’ll spend finding placement opportunities for your ATM’s.

39. Start a Vending Machine Business

This is a copy past of the ATM business model, but worse! ATM machines only spit out cash. Vending machines serve multiple types of food and drinks, and constantly need to be serviced.

Final Thoughts

If you’re just getting started as an entrepreneur or somebody who simply wants to build long term weath, none of these ideas are bad, per se. But it’s important to know what exactly you’re signing up for at the onset.

Because bad expectations many times lead to people quitting when they don’t get the quick payoff, well before the amount of time required to be successful in a given business.

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