Passive income is any type of money that you generate without having to continuously monitor it or actively participate. For example, the salary you earn from your work is considered active income because you work to earn it. But passive income generates money in your account with little or no effort on your part. Typically, investments are the source of passive income.
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The 18 best investment ideas for passive income
However, there are many other ways to earn passive income with little to no effort on your part. The caveat, of course, is that it usually takes some sort of asset or investment to kickstart the income tap. Here’s a look at some of the best passive income investments to build your wealth in 2023.
Certificates of Deposit
High Yield Savings Accounts
real estate investment fund
Crowdfunded Real Estate
Airbnb one room
1. Certificates of Deposit
Yields on certificates of deposit are the highest in years thanks to the Fed’s campaign to raise interest rates to tame inflation. If you are unsure about the direction of interest rates, you can build a CD ladder so that a CD matures each year and can be reinvested at the bottom of the ladder.
CDs are perhaps the easiest passive income investments to start since you only need to apply to open an account. You can start with your own bank. Here’s a list of some of the best CD accounts to help you decide.
2. Dividend Stocks
Dividend stocks pay earnings that are typically above the overall market average, and they tend to rise each year as companies increase their payouts. Dividend stocks also offer the potential for capital appreciation.
3. High yield savings accounts
Like CDs, high-yield savings accounts are FDIC-insured and are paying the highest returns in years. However, HYSAs offer the benefit of being fully liquid, meaning you can access your funds whenever you need them. This makes a HYSA a great option for an emergency fund or to fund a short-term goal.
4. Rental Properties
Rental properties require a larger initial investment but can offer consistent returns that increase annually. If you check your tenants well, you can achieve a reliably high return on your real estate investment.
5. Real Estate Investment Trusts
REITs offer many of the benefits of direct real estate investing — such as high dividends — without requiring a large amount of upfront capital. You can also sell most REITs on the public stock exchanges at any time and thus receive a high level of liquidity.
6. Crowdfunded Real Estate
Crowdfunding is a third way to generate passive income from real estate. It works by using an online portal to partner with other investors and create a pool of investment capital that a manager uses to buy real estate. Just be sure to check the rules, restrictions, and fees before going down this route.
7. Private Capital
Private equity is typically only available to experienced, wealthy investors. However, if you have access to a private equity fund, you might be able to get in the game. Private equity managers can tailor portfolios to their clients’ needs. So if you are looking for high yields, you should be able to find a suitable option.
8. US Treasury Bonds
US government bonds are among the safest investments in the world. Backed by the full confidence and creditworthiness of the US government, there is really no risk of default on the bonds, although you still have to deal with inflation and interest rate risk. But in terms of a secure income, there is no better option, even though you may earn more elsewhere.
9. Corporate Bonds
For many investors, corporate bonds bridge the gap between risk and reward well. They pay more than CDs and government bonds, but are safer than speculative options and can generate decent residual income from a portfolio of high-quality corporate bonds issued by some of America’s best-known companies.
How can I make $500 a month in passive income?
Any number of the ideas on this list could be used to generate $500 and even $1,000 per month. You may need to try more than one to maximize income, but the good thing is you can start making money today. Pick ideas you like and know that a little extra upfront investment may be needed while projects get underway.
Peer-to-peer lending networks carry a little more risk than traditional income investments, but they can also yield more returns. You just have to do your due diligence about who will receive your money. Online sites can help screen borrowers and facilitate transactions, but that’s still a bit of the Wild West when it comes to passive investing.
11. Vending Machines
Vending machines aren’t investments you can trade on an exchange, but they can prove to be a lucrative source of passive income if you understand the market. However, success in the vending machine game is a bit like investing in real estate – you need to buy vending machines that are in the right locations to generate consistent income.
Writing a blog will take a little effort on your part, but once it’s up and running, it can be a good source of ongoing income. Blogs and websites that get a lot of views can charge advertisers more money, so you need to create something that gets widespread interest — or simply buy an existing, successful blog.
13. Online Sales
Sometimes you can earn passive income without paying any money out of your own pocket – although you may have to do a bit of work. Many Americans have many things around the home that are more valuable to others than they are to themselves, from electronics to bedsteads to collectibles. With a little marketing, packaging, and shipping, you can earn passive income without investing any extra money yourself.
14. Parking lots
In some high-traffic urban locations, parking spaces can be more valuable than apartments. If you have an extra parking space that you don’t use, renting it out can be a very lucrative source of residual income, potentially earning as much as $1,000 or more a month in places like Manhattan.
15. Fixed Annuities
A traditional fixed annuity converts your capital investment into a regular stream of income that, depending on the policy you choose, can last a lifetime. This can be a great way to generate passive income while making sure you don’t outlive your money.
16. Airbnb one room
Your home can be a great source of passive income. If you have an extra room in your home, you can rent it out on Airbnb or another online service and generate regular income without having to invest in an entirely new property. You can potentially make $500 a month or more from a single room rental.
17. Car Rental
Just as Airbnb and other services have revolutionized the home rental market, others, like Turo, have taken the mantle of private car rentals. If you have an extra car at home or just don’t use your car much anymore, you can rent it out online to those in need for some extra passive income.
18. Online Courses
If you have special skills or knowledge, or are just good at making complicated material easy to understand, you can create and sell online courses. Once you’ve done the work of creating the courses, your income is completely passive as you can just sit back and collect the earnings from client purchases.
The final result
There are countless ways to earn passive income. Some offer higher returns, some carry higher risk, and some require extra legwork on your part. But with a little research, you can decide which option works best for you.
This article originally appeared on GOBankingRates.com: 18 Best Passive Income Investments To Build Your Wealth In 2023