Passive income ideas

Passive income can help give you more financial freedom and flexibility, but how do you go about generating it? While some passive income ideas are easy to set up, others may require a bit of upfront work and ongoing maintenance.

We've put together a list of the best ways to earn passive income into categories, and how much effort each involves:

One thing to keep in mind is that certain passive income ideas may be more effective during certain economic conditions. For example, during times of rising interest rates and high inflation (like we have now), a high-interest savings account may be a more reliable source of passive income than something like property.

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Investing

Investing is perhaps the most hands-off way to earn passive income. All you have to do is deposit some money into an interest-bearing account and leave it there while the cash starts rolling in. Of course, your income will depend on the level of interest the account offers, will how much you put into the investment and how long you leave it there.

Here are some passive income investment ideas:

• 1. Savings Accounts

  These won't generate tons of interest for you, but they're dependable and it's better than letting you money fester in your checking account. Some brands like ubank offer competitive rates at 5.5% p.a.

  Effort involved: Low

  Learn More

  • Compare savings accounts

• 2. Peer to peer lending

  If you're a peer to peer lender (you are the investor) you can lend out money privately to borrowers. Platforms like RateSetter let's you decide on the target rate you want to receive and the amount you want to lend. You're then paired up with a portfolio of borrow loans to match your preferences.

• 3. Managed/index funds

  This is where you pool your money together with others to invest in a common range of assets. If the fund does well, you do well. IG Share Trading allows users to invest in index funds with a $0 monthly fee.

  Effort involved: Low

  Learn More

  • A guide to managing funds

• 4. Term Deposits

  These are kind of like savings accounts, but you invest a specific amount of money for a specific amount of time. They are also dependable but you won't be able to access your money until the agreed time is up. Check out this competitive offer from Citibank.

  Effort involved: Low

  Learn More

  • Compare term deposits

• 5. ETFs

  These are like managed and index funds, but instead of buying units in the fund, you are buying shares in the ETF. This setup makes it simpler and less expensive to invest. IG's Share Trading platform allows users to trade ETF's with no monthly fee.

  Effort involved: Low

  Learn More

  • Guide to investing in ETFs

• 6. Shares

  Buying and trading shares in the short term isn't exactly passive, so if you want to earn passive income in the share market, your best bet is to buy shares in established companies with a track record of success or take an investment strategy that focuses on the long-term growth of a company. Look for companies that pay dividends. There are heaps of competitive share trading platforms out there including IG Share Trading as well as the winners of our 2019 Finder awards Saxo Invested Australia and Self Wealth.

  Effort involved: Low

  Learn More

  • Best online share trading platforms

• 7. Robo Advice

  This is a fancy name for Automated Investing, a relatively new type of investment that is starting to take off in Australia. Robo Advice replaces a human investment adviser with a computer algorithm that invests and rebalances your portfolio for you based on your investment timeframe and risk tolerance. Without the need to pay advisers' salaries, Robo Advisers can offer attractive returns.

  Effort involved: Low

  Learn More

  • Compare robo advisors

Property

You always hear stories about people striking it rich in real estate. That's because it is a tried and tested way of bringing in some extra cash. Not only does the price of your assets tend to go up in the long term, but you can also earn rental income along the way.

These days, affording a rental property is out of many people's reach especially in Australia's big cities. But buying rental property is not the only way to get into the real estate game. Here are some other ways to invest in real estate:

• 8. Rent your investment property out

  This is a no-brainer if you already have a property which you don't need to live in. You can either use the traditional rental market or go through the share economy with a platform like AirbnB host. (This may take additional work, so it's not truly passive but there's the advantage of higher returns than traditional real estate).

  Effort involved: Low to medium

  Get started with Airbnb

• 9. Crowdfunded real estate

  This is another way for the average investor to invest in real estate projects they couldn't otherwise afford. They are less complicated than REITs and usually involve buying a stake in a specific real estate project rather than buying a stake in a real estate company with many holdings.

  Effort involved: Medium

  Learn More

  • Investing in crowdfunding

Online ventures

Online businesses were tailor made for passive income since you can automate much of the work, and there are numerous ways to do it. Here are just a few:

• 10. Set up a dropshipping business

  A dropshipping business is one where you sell your customers items you don't even own yet, like printed t-shirts. When someone places an order through your online t-shirt shop, you place the order with the t-shirt manufacturer who then ships it directly to the customer. Other than setting up the website, handling paperwork and counting your profits, you're hardly involved.

  Effort involved: Low

  Learn more about Amazon's fulfilment program

• 11. Get into affiliate marketing

  If you have a blog, website, YouTube channel or any other online channel that gets traffic, you can earn money by recommending software, products and services to your audience and receive a kickback every time someone buys something. Just make sure they are products you can actually stand behind.

  If you don't already have a following it can take some time to build one up.

  Effort involved: Medium

• 12. Become an influencer

  If you've got the chops, you can attempt to do what hundreds have done before you, and that's to become Instagram famous (or YouTube, or Snapchat or whatever). If you can build a passionate enough following, you can make money by advertising, running affiliate links, being a spokesperson for brands and creating your own line of products.

  To make it in this game, you have to have a ton of personality, dedication and creativity to pull it off.

  Effort involved: High

• 13. Sell your expertise

  If you're good at something like woodworking, affiliate marketing or yoga, you can build a following by sharing your knowledge through online channels like YouTube or ebooks. After you build your following, you can start to make money by selling more products like online workshops, more ebooks and branded products. Advertising and sponsorships are also possible.

  As long as you're persistant, your skills should sell themselves, although it will take a little while to build a following from scratch.

  Effort involved: Medium

Brick and mortar businesses

There are a couple of brick and mortar businesses that fly under the radar, and which can bring you in a decent level of passive income:

• 14. Vending machines

  Buying a vending machine and stocking it with snacks is a small investment. The trick is finding a spot for it in a high-traffic area. When one vending machine starts pulling in money you can buy a second, a third and so on.

  Compared to the other suggestions here, this will take a little more effort to get off the ground. Your biggest challenge will be to find high traffic areas that don't already have vending machines.

  Effort involved: High

  Learn More

  • Vending Machine Business Finance

• 15. Storage facilities

  Like vending machines, storage facilities are quite low maintenance and its an industry that is expected to grow. If you can rent a space in an old warehouse and convert it into storage facilities, you might just have a winner on your hands!

  It will take a bit of up-front investment and renting the right space for the right price could be tricky.

  Effort involved: High

Rent out your stuff

There are many opportunities out there to make money renting out the stuff you own. Cars are the most popular choice, but similar services exist for other items as well. If you have a lot of nice stuff you don't use, it might make sense to rent it out rather than sell it.

Here are some examples:

• 16. Rent out your room

  Effort involved: Low

  Use a peer-to-peer hospitality services like Airbnb to rent out the extra room you never use or even your whole house when you're away on vacation.

  Get started with Airbnb

• 17. Rent out your tools

  Effort involved: Low

  ToolMATES is a peer-to-peer tool rental website that lets you make money by renting out your tools to someone who needs them. You can post anything from small hand tools to heavy machinery.

• 18. Rent out your gear

  Effort involved: Low

  Rentzi is a globalplatform that lets you rent all the other bits and bobs others might need. Examples include golf clubs, Macbooks and snowboards.

• 19. Use your car to advertise

  There are companies out there who will pay up to $600 per month if you slap a big brand logo on the side of your car.

  Effort involved: Low

• 20. Car share

  Companies like Car Next Door give you the ability to rent your car out to other people on an hourly or daily basis. So if you car's just sitting there a lot of the time, why not put it to good use bringing you in some passive income?

  Effort involved: Low

  Learn more

  • How car share works

Listen: A beginner's guide to passive income on the Pocket Money podcast

Picture: GettyImages

Written by

Alison Banney

Editor

Alison Banney is the money editorial manager at Finder. She covers all areas of personal finance, and her areas of expertise are superannuation, banking and saving. She has written about finance for 10 years, having previously worked at Westpac and written for several other major banks and super funds. See full bio

Alison's expertise

Alison has written 664 Finder guides across topics including:

• Superannuation
• Savings accounts, bank accounts and term deposits
• Budgeting and money-saving hacks
• Managing the cost of living