This passive income ideas post was updated on 08/27/2021.
Normal people earn a paycheck and spend most of it every month.
Wealthy people invest their money and time into income producing assets and business ideas that make money.
To get you motivated to free your time and build wealth, I’ve compiled a list of 20 passive income ideas to consider starting today.
Most of the passive income ideas in this list require an upfront money investment which will earn a yield and generate an income stream.
Others require a significant time investment to build a product or business that can generate income.
If you’re new to building passive income streams, make sure to start with a high-yield savings account (see Interest on Cash below) to park your cash before making larger investments. It’s an essential first step toward building wealth. Every penny counts (see more below).
With that, here are 20+ passive income ideas for 2021 to power your wealth building machine.
Note: The items in this list are provided as suggestions for further research. Please perform your own analysis to determine what investments and activities are right for you. Some of these require that the investor is accredited.
1. Real Estate Starter Portfolio
If you don’t have enough cash to buy a rental, real estate crowdfunding is the next best thing.
There are several ideas on this list related to real estate, but real estate eREITs (real estate investment trusts) are the easiest to invest in because everyone is eligible and it only takes a few clicks to buy a diversified portfolio of properties. .
Fundrise empowers ordinary investors to own high-quality real estate at attractive yields. This Washington D.C.-based company is a crowdfunding innovator that has changed the way investors can access profitable returns.
When you invest at Fundrise, your money is instantly diversified among dozens of multi-family residential real estate properties. Any U.S-based investor can invest on the Fundrise platform for as little as $10 with the Fundrise Starter Portfolio.
In light of the COVID-19 crisis, I consider residential real estate to be a safer bet than commercial and retail. That’s why I think now is a great time to invest at Fundrise for the long-term. Investors with a three-year investment horizon or more will benefit the most.
Read my Fundrise review to see my investment returns since 2017.
Read more: Fundrise Review
2. Dividend Growth Stocks
Dividend growth stocks are the easiest way to start building real passive income.
These types of stocks pay you every quarter and typically increase their dividend every year. This long-term strategy is a proven way to build wealth over more than a century.
The place to start to find dividend growth stocks is the Dividend Aristocrats list which consists of more than 50 stocks that have paid and increased their dividends for more than 25 years. As the current health crisis unfolds, these stocks have continued to maintain and grow dividends.
Today, it’s easier to get started with dividend stocks than ever before, thanks to commission-free brokers.
My favorite online brokerage for beginner to intermediate dividend growth investors is M1 Finance. The big difference between M1 Finance and other brokers is that you build your ideal portfolio first, then grow and modify it over time.
For example, you can create a “pie” of your 10 favorite Dividend Aristocrats stocks each at 10% of your total portfolio. So when you invest $1,000, you’ll buy $100 of each of the 10 stocks at the same time.
Or you can buy a dividend growth ETF (see the Dividend ETFs section below).
M1 Finance is available to all U.S.-based investors. The minimum amount to open an individual or retirement account is $100.
If you need help selecting dividend growth stocks, I subscribe to and recommend the Sure Dividend Newsletter.
Sure Dividend recommends undervalued dividend stocks on the first Sunday of every month. Use the the Sure Dividend coupon code “RBD41off” to save on your annual subscription.
Micro-investing is a relatively new term in the personal finance industry. It refers to using very small amounts of cash to invest in stocks or ETFs, often less than one dollar. But many small transactions can add up to a substantial amount over long periods.
Micro-investing is made possible by low-cost technology and zero-commission structures. A smartphone app called Acorns has popularized micro-investing over the past few years.
Acorns automates investing by linking to your credit or debit card, then analyzing your spending. It rounds up every transaction and automatically invests the rounded up amount.
For example, if you buy a coffee for $2.09, it deposits and invests $0.91 to your Acorns account. Then the customers choose a professionally-designed portfolio of low-cost exchange-traded funds (ETFs) to match your investment objectives and risk tolerance.
You’ll create an effortless automated passive income stream that grows every time you spend money.
4. Turnkey Rental Properties
With unemployment soaring and the economy on shaky ground, I expect to see bargain investment opportunities in single-family housing over the next few years.
Finding cash flow positive rental properties is difficult, especially if you live in an expensive city or suburb. But services are available to help you purchase cash flowing rental properties in cities and towns where the numbers work.
Properties rented out upon purchase are called turnkey properties. Usually, an existing landlord wants to sell a property, but has a tenant in place and doesn’t want to kick them out.
There are several advantages to this. Namely, the numbers already work, and the tenant is already in place. This is particularly helpful if you are investing from out-of-state.
The leading online turnkey rental property broker is Roofstock. Browsing their website for listed properties is free.
Roofstock only operates in cities and counties where the rent comfortably covers expenses. and leaves room for profit. Plus you get the tax benefits of real estate investing. Roofstock will help set you up with a selection of property managers, making turnkey rental an excellent passive income idea.
Sign up for free to browse live deals.
5. Farmland and Agriculture
I think farmland is a safe haven for long-term investors during the health crisis.
Farmland investment returns have outperformed commercial real estate, gold, bonds, and even the S&P 500 since 1990, according to data compiled by AcreTrader. But most of us can’t just go by a farm.
AcreTrader is an online crowdfunding platform that empowers accredited investors to invest in farmland and agriculture projects, making it possible to tap into these out-sized historical returns of 10% or more. With crowdfunding, you buy small fractions of the properties, participating in returns with smaller investment amounts.
Minimum investment amounts range from $15,000 upwards depending on the deals. Farmland is an investment asset as old as time, but now you can access investments through an innovative technology platform. It’s one of my favorite new passive income ideas.
Sign up with AcreTrader and immediately begin vetting available deals, which is a more straightforward process compared to urban commercial and residential. Investors must be accredited to participate. Accredited means your net worth is greater than $1 million or annual income above $200,000.
Each deal type requires specific tax reporting, so be sure to consider the tax consequences before investing. Each deal pays an annual dividend-like distribution in December.
Read more: AcreTrader Review
6. Peer Lending to Real Estate Developers
PeerStreet is another real estate crowdfunding platform I started investing on in 2017. This platform offers debt deals on various real estate projects nationwide for a $1,000 minimum investment. You can easily invest in multiple deals to spread your risk and earn returns in the 6%-8% range.
Most investments are short-term loans for residential flips.
Automatic investment selection is built into the platform. Investors set their criteria for the loans they want to invest in, and when one becomes available, the system invests your money for you. After that, you have 24 hours to perform due diligence on the loan.
PeerStreet is the most elegant real estate crowdfunding platform I’ve used. Unfortunately, it’s for accredited investors only at this time. Also, demand for higher-yielding loans has increased due to the recent scarcity of loans above 7%. It takes longer now to assemble a high-yielding portfolio greater than $10,000.
RBD readers get a 1% yield bump on your first investment.
Read more: PeerStreet Review
7. Cash Back Rewards
The best way to keep your spending organized is to use the same credit or debit card for every purchase.
I prefer credit cards over debit cards for two reasons:
- Better fraud protection
- Cash back and travel rewards
If you’re not maximizing rewards for every dollar you spend, you’re missing out on a valuable built-in discount on everything you buy.
Two caveats. Only use credit cards if you pay off our balance every month. Interest costs will quickly deplete your cash back rewards. Also, pay attention to the annual fees.
Here’s a list of the best cash back rewards cards.
If you like to travel, you can also earn valuable welcome bonuses on top of the daily rewards on spending. Dollar for dollar, you can typically earn more from travel rewards than cash back.
Here’s a list of the best travel rewards cards which includes my favorite at the top of the list (we used this card to fly our family of five round-trip from D.C to California for free).
Earning travel welcome bonuses can easily net you $1,000+ in value every year. This is a no-brainer passive income strategy.
8. Be a Good Neighbor
Innovative technology and the gig economy have opened many opportunities to earn income from side gigs. But most of them require extra work.
What if you could earn passive income from renting space in your home WITHOUT the hassle of tenants or tourists?
Well, a startup called Neighbor let’s you do just that. Neighbor matches homeowners with empty space with people with who have extra stuff.
Neighbor is out to disrupt the $40 billion self storage industry, by empowering home owners to rent their space to earn passive income.
The “Airbnb of storage”, Neighbor handles the bookings, payments, and insurance so you don’t have to.
But unlike Airbnb, homeowners don’t have to worry about cleaning fees or loud party people. On top of that, people who rent space usually need it for longer, reducing turnover and headaches.
So declutter your basement or garage and start making money with Neighbor.
9. Professionally Managed Commercial Real Estate
Commercial real estate used to be a difficult asset for individual investors to get into. However, with the growth of real estate crowdfunding, individual investors can now directly access high-quality commercial real estate and let the professionals manage it.
While Fundrise is good for residential and limited commercial exposure, EquityMultiple is a leader in the commercial space.
EquityMultiple identifies sponsors and lenders with strong track records, finds investments that fit their requirements, then perform exhaustive due diligence to find the best deals for its investors. Each deal is placed in a separate LLC for protection and funds are pooled from investors.
For now, EquityMultiple is only for accredited investors ($1,000,000+ net worth). Minimum investments start at $5,000. Returns are in the 7%-14% range. Learn more about how EquityMultiple works at their website.
Read more: EquityMultiple Review
10. Mortgage Refinance
Even today, long-term mortgage rates are still historically low. Crazy low thanks to Covid-19 and the 2020 recession.
If you can refinance your mortgage and save a few hundred dollars a month, you’ll struggle to find a better investment for your money.
For example, if a mortgage refinance costs you $3,000 in closing costs, but your monthly payment decreases by $300 per month, you’ll break even in the first year.
That’s a 100% return in less than a year. The $300 in savings is technically not like the other passive income ideas, but it will increase your passive cash flow after one simply action. Definitely worth the effort.
That’s why everyone should regularly look at their mortgage numbers to determine if a refinance is right for them. For our last refinance, we used Credible* to compare interest rates.
11. Interest on Cash
One defensive tactic for the 2020 recession was to increase your cash holdings to increase financial security and prepare for investment opportunities.
If you have only a checking account or a savings account with an interest rate below 1%, you can easily increase your passive income by opening a high-yield saving account.
This is a no-brainer for 2021 while interest rates are still in your favor. Any money you don’t spend or immediately invest should be earning for you in a savings account.
An interest-bearing savings account is perhaps the most passive income stream of all.
Anyone can do this with a minimum deposit of $100 or less. That may not earn you much the first month, but as you deposit more each month and the interest compounds, you’ll start earning decent money without doing any more work.
Every penny counts.
It’s a risk-free return on your money and it’s FDIC-insured. Your money works for you, not the other way around.
Compare interest rates on high-yield savings and money market accounts.
12. Litigation Finance
Litigation finance is a type of alternative investment offered on the YieldStreet platform. Legal investments come in different forms including pre-settlement financing, legal advertising, and post-settlement finance.
I learned about this investment class listening to YieldStreet CEO Milind Mehere on Episode 59 of the Invest Like a Boss Podcast.
While this sounds kind of strange, these investments are sound and have an excellent track record. Investors can earn 8%-20% yields but must be accredited. YieldStreet also offers real estate crowdfunding investments.
13. Get Bumped
The Bumped app gives you free stock when shopping at stores and brands you already go to. Sounds too good to be true? Yeah, it’s that good.
Though similar to other shopping apps, you receive shares of your favorite stock or ETF instead of cash. This helps new investors get started investing.
Read more: Bumped app review
14. Dividend ETFs
If you want to keep things simple and diverse, use your online brokerage account to buy a dividend-focused ETF. These ETFs are relatively low-cost and pay a higher dividend than a total market index ETF like VTI. Some examples include:
- Charles Schwab US Dividend Equity ETF (SCHD)
- Vanguard Dividend Appreciation ETF (VIG)
- ProShares S&P 500 Dividend Aristocrats (NOBL)
- iShares Select Dividend ETF (DVY)
- SPDR S&P Dividend ETF (SDY)
You can buy these in a commission-free account such as M1 Finance or a more traditional online brokerage account like Ally Invest which is also now commission-free. Buy within an IRA to avoid paying taxes on your dividends.
15. Invest with a Conscience
You don’t need to own oil stocks, firearms, and other vice stocks in your index funds to earn a return. Various options are out there for investing with your conscience, be that of a pacifist, vegan, or environmentalist.
The best option for socially responsible investing (SRI) is the socially responsible Cash-Enhanced Robo Portfolio at Ally Invest. Ally Invest Cash-Enhanced Robo Portfolios manage your invested money for you, leaving more time for you to earn and save.
The Socially Responsible portfolio is “shaped by companies with ethical track records, you’ll only invest in businesses that actively practice sustainability, energy efficiency or other environmentally-friendly initiatives”. Cash-Enhanced Managed portfolios are now free of advisory fees.
16. Sell Your Designs
Creative designers have a wide selection of places to sell their designs as merchandise. Etsy stores are a popular choice for crafty types, but selling on that platform is work intensive.
A more passive option is to utilize a platform such as CafePress to sell your designs. It’s a simple model. You create and upload a design. CafePress sells your designs on t-shirts, hoodies, and a variety of other products. Then you make money from the design you create and upload once. Designs need to be good to earn. Or really funny.
17. Create and Sell a Digital Download on Your Website
If you have a blog or other kind of website, you can easily sell a product directly from your site using a service called Gumroad. Gumroad makes it easy to sell your product to any visitor. Or, create your own website for the purpose of selling a product. or turn your hobby into a business.
Your product can be as simple as a PDF or spreadsheet you’ve created that can help people. You create your product one time, then put it up for sale on your website and Gumroad handles the financial processing. Improve your product, create more, and grow a mini-business without having to rely on a larger platform such as Etsy, Amazon, or Shopify.
Gumroad charges $10 per month for the service plus 3.5% + 30¢ per charge. Utilize a blog or social media to drive sales.
18. Create an Online Course
Online courses have exploded in the past five years. Experts and creators can now create video courses to teach others their craft. A course can be about anything that people want to learn. Friends of mine have created courses and say the amount of effort is similar to writing a book. But once its done and starts to sell, it’s a solid passive income stream.
An online marketplace called Udemy is the most popular platform for creating courses. Udemy has a built-in audience making selling easier. However, Udemy takes a sizable portion of the income and controls some of the pricing.
Another option for people with an online presence is Teachable. Teachable is an all-inclusive end-to-end solution to create and sell a course on your website.
Best of all, if you want to learn anything, nowadays there’s a course for it on Udemy. Learn how to earn passive income via a course, or build your own course to earn passive income!
19. Create a YouTube Channel
Did you know YouTube is the number two search engine behind Google? Of course, Google owns YouTube too, so we’re all at their mercy. So why not join the party?
It still blows my mind that a 6-year-old boy is one of the top ten biggest YouTube stars in the world having earned $11 million last year. My kids love Ryan.
But you don’t need to be a mega-star to earn money. I use YouTube to learn about DIY projects like fixing my leaf blowers and replacing my shower faucet. If you have the expertise, YouTube is a place you can showcase your advice to teach and/or entertain.
Ads displayed before, during, and after the video drive revenue. But you can also send viewers to your online store or blog to drive sales. The cost to get started on YouTube is very low and monetization funnels are plentiful.
20. Bond ETFs
Less sexy than stock ETFs, bond ETFs are the simplest way to invest in fixed income. Bonds are simply a way to loan money to an entity. In return, you receive interest payments and eventually the returned principal.
Instead of buying lots of individual bonds, you can buy a bond ETF to diversify among many bonds and leave the selection to the ETF managers.
Bond ETFs come in many different varieties including government, corporate, short-term, long-term, junk, municipal, international and in variations and combinations of each type. Like most investments, higher yields mean higher risk. So choose your bond ETFs based on your risk tolerance, asset type, and liquidity.
In taxable accounts, I prefer municipal bond ETFs to avoid taxation.
Some of the more popular Bond ETFs include:
- Vanguard Municipal Bond ETF (VTEB)
- iShares National Municipal Bond ETF (MUB)
- Vanguard Total Bond Market ETF (BND)
- iShares Core U.S. Aggregate Bond ETF (AGG)
- iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD)
- SPDR Barclays High Yield Bond ETF (JNK)
- iShares iBoxx $ High Yield Corporate Bond ETF (HYG)
Bond ETFs can be purchased on the stock exchanges through a no-fee online broker.
21. Start a Blog
I’m ending with this one because a blogging side business has been my path to creating significant passive income through a massive time investment. But now that I’ve invested the time into my blog, much of the income I earn is completely passive. I’ll explain.
When you write a blog post on your website, that article immediately goes out to your followers. But the content also remains on the website for others to find via search engines or social media. Each time somebody reads your content, there’s the potential to serve them an ad, product for purchase, or affiliate link (many links in this post are affiliate links). Each set of eyeballs that read your content carry the potential for passive income.
It’s harder than it sounds. You’ll need lots of high-quality content and numerous eyeballs to read it to generate income. So you need to create more eyeball traffic through promotion, building an audience, and collaborating with other bloggers. Earning money takes time.
This blog took three years to generate any significant income. But now that the pieces are in place to earn an income, it arrives with very little additional work. In other words, if I completely stopped doing anything to this blog today, it would continue to generate passive income for years.
Don’t start a blog unless you 1) have something valuable to offer to readers, and 2) are in it for the long haul. If you’re interested in blogging, read my post How To Start An Online Business to learn how to get started.
Conclusion – Passive Income Ideas 2021
Thanks for reading through this entire post. For this year, I wanted to provide a mix of some of my favorite tried-and-true passive income ideas, plus some fresh ideas to keep this list helpful to everyone.
Let me know what you think in the comments. Next year, I’ll aim to expand the list even further. If you have any additional ideas that readers could benefit from leave your idea in the comments section or contact me.
Note: Some of the links on this page are from our sponsors which may influence the list order but not the recommendations.
** Fundrise Disclaimer: The information contained herein neither constitutes an offer for nor a solicitation of interest in any securities offering; however, if an indication of interest is provided, it may be withdrawn or revoked, without obligation or commitment of any kind prior to being accepted following the qualification or effectiveness of the applicable offering document, and any offer, solicitation or sale of any securities will be made only by means of an offering circular, private placement memorandum, or prospectus. No money or other consideration is hereby being solicited, and will not be accepted without such potential investor having been provided the applicable offering document. Joining the Fundrise Platform neither constitutes an indication of interest in any offering nor involves any obligation or commitment of any kind. The publicly filed offering circulars of the issuers sponsored by Rise Companies Corp., not all of which may be currently qualified by the Securities and Exchange Commission, may be found at www.fundrise.com/oc.
What passive income ideas are you investing in this year?
Favorite tools and investment services right now:
Credible* - Now is an excellent time to refinance your mortgage and save. Credible makes it painless.
Personal Capital - A free tool to track your net worth and analyze investments.*Advertising Disclosure: RBD partners with Credible which offers rate comparisons on many loan products, including mortgage refinances and student loans. This content is not provided by Credible or any of the Providers on the Credible website. Any opinions, analyses, reviews or recommendations expressed here are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by Credible. RBD is compensated for customer leads. Credible Operations, Inc., NMLS Number 1681276, not available in all states. 320 Blackwell Street, Suite 200 Durham, NC 27701.