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20 Practical Passive Income Ideas to Try in 2021

Written by on February 08, 2021

We all agree: 2020 was a year unlike any other year. Between a 52% drop in quarterly revenue for small businesses and many companies tightening their belts by hiring freezes, layoffs, and other cost reductions, many of us have had to find alternative income streams.

Even with the year drawing to a close and hopes for an end to the pandemic rise, we can’t celebrate just yet. While there may be some growth in 2021 (as low as 5.5%), many don’t expect things to go back to pre-COVID levels until at least 2022.

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Due to things beyond our control, there is still a lot of uncertainty. But with the new year coming in, it’s the perfect time to minimize that unpredictability by taking another look at ways to supplement our income.

For many freelancers and business owners, that might mean taking on more clients and putting in more hours. But don’t make the common business mistake of relying too much on active income streams. That doesn’t always work out, as there are only so many hours in a day. When you can’t put in more hours, a passive income stream can help cover the gaps.

What is active and passive income, anyway?

active-vs-passive-income

Active Income vs Passive Income Ideas

Active income is when you work with a client to produce something that they pay you for. These can be wages, tips, salaries, and commissions. It includes business income when clients pay for something derived from active work.

Passive income, on the other hand, is money earned regularly with little to no effort from the person receiving it, such as rental income, affiliate earnings, and royalties. There is still work or capital involved, but they are largely one-time activities with regular maintenance work. The money just comes in without more direct work on the recipient’s part.

A healthy mix of active and passive income is usually the best strategy when it comes to generating extra revenue. This allows you to:

  • have more time to do other things: whether you’d like to focus on your hobbies or explore other work, having passive income coming in can free you from having to devote time to other income activities due to necessity.
  • feel more secure about the future: with a steady foundation of passive income coming in, financial emergencies like getting laid off from work or an unexpected financial responsibility won’t put you in the red, and help you get back to track after.
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  • live and work from anywhere: as passive income won’t require you to be physically present 9-5 hours a day and 7 days a week, you can choose to live where you want to.

With the most popular type of passive income being from rental properties, building up your passive income can sometimes feel like a pipe dream. But being a real estate mogul isn’t the only way to generate passive income. And even if you are a real estate mogul, it’s also important to get income from several sources, so that any economic hit on an industry you’re in won’t impact your cash flow very hard.

Thanks to the Internet, it’s become a lot easier to generate passive income nowadays. To help you, we’ve put together a few of the tip passive income ideas you can look into for 2021.

Let’s get started.

rental-income

Idea #1 – Get Some Rental Income

Rental income is one of the most popular forms of passive income, and can be very stable. But depending on where you are and how your community is doing, purchasing property with the intent to lease out can be a daunting experience and require a large investment.

To minimize your risk, make sure you determine first how much rental income you expect from your new property, and what costs are involved for every property you consider afterward. Cost can take many forms such as taxes, mortgage, insurance, and even risks for late rentals and damages.

If you’re not ready to put down the capital for a new rental property, if you’ve got an extra room in your own house, you can look into renting that out as well. While short-term rentals are inadvisable in today’s health climate, you can still consider long-term ones with appropriate quarantine periods and health certificates.

Idea #2 – Start a Vending Machine Business

While this might fall under active income, owning a vending machine business can be a passive way of earning money. Vending machine businesses have generally low startup costs, and you can set your own schedule when you restock and collect money from your machines.

To get started, decide on what you’d like to sell and where your machines should be located. Make sure you also choose the right vending machine, whether you are buying your own or leasing them. If setting up this business on your own is a daunting task, you can also opt to buy a franchise to make it easier for you.

If you don’t have enough capital, however, there are other ways to gain passive income without as much initial investment.

sell-ebooks

Idea #3 – Sell E-books

One of the most underrated ways to earn money online is through writing and then selling e-books. Self-publishing is gaining more and more traction, and non-fiction e-books on a wide variety of topics can be a great income stream for you.

While writing the book can take a lot of effort, as well as preparing it for online publishing as an e-book, the returns can be very good. If you are going the non-fiction route, make sure your topic is timely and that there is a market for it. Self-help and training books can be very popular.

If you want to split the work, you can partner up with other like-minded individuals and split the sales with them as well.

You can look into selling your e-book through your own website or other e-commerce marketplaces. And while marketing your book can mean a little maintenance work every month, you can largely sit back and watch the money come in once everything is set up.

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Idea #4 – Sell an Online Course

During the height of the COVID-19 lockdowns, interest in online learning, self-help, and education products increased. People were taking online classes and taking the initiative to teach themselves new things.

You can take advantage of this popularity by making an online audio or video course, and offering it up as a paid download or on online class marketplaces. While the initial work to make the product may be time-consuming, making a great product can ensure you have a steady income stream with only a little maintenance to keep your product up-to-date.

Idea #5 – Produce an Audiobook

Podcasts and audiobooks have been gaining a lot of traction over the years, and for good reason. You can take advantage of this and produce your own audiobook, whether on your own or through platforms like Audible’s ACX program.

Make sure that you have a high-quality production, whether you’re doing a fiction or non-fiction audiobook. Like with e-books and online courses, you should deliver great value if you’re going the self-help route.

audio-track-royalties

Idea #6 – Get Royalties from Audio Tracks

If you’re not sold on producing an audiobook but want to work with audio, look into making jingles and audio tracks for other people’s use. People producing their own audio or even video content need various audio tracks for their own production. These people are your target market.

You can license your tracks out on places like Audio Socket, Sound Cloud and the like, and earn passive income through royalties. Make sure you do your research what kinds of tracks are most in demand, in order to maximize your opportunity.

Idea #7 – Sell Creative Digital Products

Platforms like Etsy, Creative Market, Creative Fabrica, and the like can be a great way to earn some passive income especially if you’re a crafty person. Scrapbooking and digital artwork has always had a niche audience and these marketplaces are booming. 

The audiences for these marketplaces range from hobbyists to businesses and professionals looking for material to use in their own businesses, so you can have a wide range of people to target.

Make sure you stay updated with what kind of artwork and images people are looking for to make sure your digital products stay popular.

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Idea #8 – Sell Professional Photos Online

Stock photography has always been one of the most sought-after imagery online. After all, many businesses have a need for a wide range of stock photography for their products and marketing activities.

Best of all, you don’t need a degree to get started as a photographer, so this can be a great way for you to get some passive income.

Leverage photo selling websites like iStockPhoto and ShutterStock if you’re serious about this income stream, although it’s also possible to host your own photos with your own website. Your website can also serve as a portfolio, which can lead to other active income as well.

Idea #9 – Design Merchandise

While possibly not the most passive way to earn income in this list, Print on Demand is a very popular income generating stream nowadays. If you’ve got a little design skill or if you have a knack for witty phrases, you can design shirts, mugs, pillows, blankets, and so many more items. If your designs get popular, you can sit back and watch the income flow in.

You can take a more active role in this income stream by selling your print-on-demand items in your own online shop, but you can also go the more passive route by picking print-on-demand services that have their own marketplace as well. While you won’t have a lot of control over how to market your designs, you won’t have to worry about any of these decisions, too.

dropshipping-supplier

Idea #10 – Dropshipping

Just like print on demand, dropshipping can help you have your own online store with a great range of products, but not really need to do all the work of packing up orders and sending them to your buyers.

Your dropshipping partner takes care of all that, and you can just worry about the marketing and customer relationship building side of things.

Make sure you choose the right dropshipping supplier as this will have a direct impact on how happy your future customers will be. Once you’ve got your shop set up, you can be as involved or laid back as you need.

Idea #11 – Start a Blog

Blogging is one of the most popular activities on the internet. More people are online than ever before because of the quarantine, which makes it a great time to start a blog of your own.

Through blogging, you could add advertisements on your website that give you income either when someone clicks on the advertisement or for every thousand displays of a particular ad on your website.

You can mix some passive and active income by writing advertorials or sponsored content on your blog, especially if your blog’s topic has a strong niche audience.

Choosing your topic, setting up your blog, and keeping it updated with timely articles might be more work over time than creating an information product, but the work is spread out over time. Plus, the blog can be used to advertise for your other income streams, too. Blogs are great used together with a business you’re actively running.

Of course, depending on your content, you might be better off choosing a different format for your content.

Idea #12 – Start a Youtube Channel or Podcast

Like blogs, a youtube channel or podcast can be more work over time, but opens up a lot of opportunities for you. Aside from paid sponsorships, running ads or marketing on your channel can be very lucrative, especially nowadays when everyone is consuming media online.

Take a look at what niche you’d like to work in, and if video or audio is a better format for your targeted audience. Choosing the right niche is important since this will define how many viewers you get, and impact your advertising yields as well.

Of course, whether you go for a blog or a channel, you can also do the following.

Idea #13 – Start Affiliate Marketing

Affiliate marketing is great used in conjunction with a blog you’re running. You can add tracked affiliate links on your blog posts, and earn a small commission every time someone clicks through your link and makes a purchase. Many online e-commerce marketplaces have affiliate programs, which makes your job even easier.

Of course, even if you don’t maintain a blog, you can still do affiliate marketing. Any website you manage can be a funnel for your affiliates, as well as your social media accounts and other online communities. If you’ve got a little following, why not share your favorite products to them and earn a little cash on the side?

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Idea #14 – Try Network Marketing

Network marketing, also known as multi-level marketing, seems to be gaining popularity again after a negative spin in the past. These companies let you earn passive income through building your downline, which is a team that works underneath you.

The initial work involved is usually through your own selling activities, but also in expanding your network. But when you’ve built a good network, you can start to earn without even doing anything.

It’s important to scrutinize any company who engages in this platform, as there are many questionable activities in this grey area. Make sure to do your research on the company, their business, history, and financials, and not just listen to what its members say.

car-advertisement

Idea #15 – Advertise on Your Car

Cars are costly expenses, but you might have no choice but to maintain one. However, if you’re interested in making money off of your car but don’t want to get involved in ride-hailing services, look into putting advertisements on your car.

There are companies who will pay you to put advertisement stickers on your car. Many will require you to launch an app when you drive so they can properly pay you for the time when their ad is “live”. Others pay monthly, but do require minimum drive times/distances based on your history before they hire you.

If you’ve got a clean driving record, have a relatively new model, and don’t mind having ads on your car, this can be a great passive income stream.

Of course, once you’ve got passive income coming in, make sure you’re storing that money the right way.

savings-account

Idea #16 – Get a High-Yield Savings Account

Online banks have started to offer higher interest rates than more traditional banks, and can be worth the time to transfer to. While it might be a little tedious to transfer over to a different bank than what you’re accustomed to, a little work can help you a lot.

Make sure that the account has an excellent interest rate and won’t charge you fees for regular use or transfers.

And if you’re looking for even higher yields…

Idea #17 – Invest in a High-Yield CD

A certificate of deposit (CD) is a type of account you can get from your bank or credit union. You can earn higher interest from normal savings accounts, but you’re required to leave your money untouched in the CD for a longer period of time.

CDs are a safe way to grow your money, as your original capital is insured as long as your bank is backed by the FDIC. You’ll want to research online where you can get the highest CDs in your country to make the most of your investment, but you can forget about it afterward until it’s time to get your money back.

If you’re getting a little more money to allow you to a little capital, you can reinvest that in other passive income streams, too.

invest-in-stocks

Idea #18 – Invest in Dividend Stocks

If you’ve got a little capital, you can start purchasing dividend-yielding stocks that will give you a payout at regular intervals. This is one of the most passive forms of income, since you don’t need to do anything else other than hold on to your stocks (though you may want to go through your stocks list every so often to make sure you want to keep holding on to them).

Of course, choosing the right dividend stocks can be tricky. Some research on the company’s background, business, history, stock price and dividend payout amount and frequency, and the like will be important when choosing the right company to invest in.

If you’d like to invest in a wide variety of companies, you can also look into exchange-traded funds or ETFs. Just remember to monitor your stocks and funds from time to time to make sure how your financials are doing.

real-estate-investment-trusts

Idea #19 – Invest in REITs

You can look into real estate investment trusts (REITs) if you’d like to diversify your stock market investing even further. These are crowdfunded real estate platforms that can get you good returns on your initial investment, though you can also purchase EFTs containing REITs to lower your risk.

Just like dividend stocks, you should do some research whether you’re purchasing an individual REIT or an ETF. Their financials and track record is important so that you know the risks as well as their payout.

Idea #20 – Look into Peer to Peer Lending Platforms

Peer to Peer (P2P) loans are personal loans between you and a borrower, processed through third parties like the Lending Club and the Funding Circle. You loan these individuals and businesses money, and you earn through interest payments on the loans.

These websites typically have algorithms to predict returns and risk, but since these loans are unsecured, you do have a higher amount of risk. Make sure you investigate each borrower’s history, as well as provide smaller loan amounts to minimize your risk.

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Conclusion

Whether we’ve been working the gig economy for a while now, or have been employed through the worst of the pandemic, a little forward thinking can help give us a little security through these uncertain times. 

Passive income streams can give you a little breather between more direct money-making activities. Though many require either capital or some up-front work to get it started (or both!), think of it as an investment for your future. You won’t regret it.

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