While passive income investments get the lion’s share of attention — things like rental homes, dividend investing, etc. — the inconvenient truth is that it takes a lot of money to make money with these strategies.
Case in point: you’d need to invest $100,000 and earn 12% annually (which is far from a guarantee) to make $1,000 a month.
On the other hand, a passive income business that can run itself is a much more viable option. You don’t need a six-figure sum to generate a meaningful income with a passive income business; all it takes up-front is your time.
In this article, we’ll list our favorite low-cost passive income business ideas you can build today.
What Is a Passive Income Business?
We define a passive income business as the ability to earn money today and in the future for work that you’ve done in the past. In other words, your business’s ability to generate revenue
There are two ways a business can run without your ongoing active participation:
- Automation: Use technology to perform repetitive tasks.
- Delegation: Have someone else perform repetitive tasks.
With the right systems in place (and in some cases, the right people), almost any business idea can generate passive income. To understand why, let’s look at what a business is at the most basic level.
As described in the now-classic business book, The Personal MBA by Josh Kaufman, a business has five distinct parts:
- Value creation: Discovering what people need or want, then creating it.
- Marketing: Attracting attention to, and building demand for, what you’ve created.
- Sales: Turning prospective customers into paying customers.
- Value delivery: Giving your customers what you’ve promised and ensuring that they’re satisfied.
- Finance: Bringing in enough money to keep going and make your effort worthwhile.
Think of value creation as your overall business idea. This is where you’ll need to put in the bulk of your up-front effort and investment. To create passive income, the goal is to create something of value — a product or service — that has no marginal cost of replication.
As angel investor Naval Ravinkant said in his famous Twitter thread how to get rich (without getting lucky):
From there, you want to automate the marketing, sales, value delivery and finance parts of your business. Of course, this is easier said than done. But your business won’t be truly passive unless you automate each part of it!
For each of the passive income ideas listed below, we’ll address how and to what extent you can automate these elements of your business, leaving out finance, as that aspect of the business is largely automated by default with these options.
The Best Passive Income Business Ideas
Remember: nearly all passive income streams require work on the front-end, during the value creation phase and systemization process.
Expect to put in the effort to set up the systems, software and people that will minimize your future inputs for your business.
Once those pillars are in place, what you’ve created should continue to run with only occasional work from you, creating value that compounds over time.
Each of the options below will require minimal inputs after you’ve set up these compounding systems.
#1. Create Information Products
The demand for information products (like e-books, online subscriptions to premium content, digital patterns, tutorials, membership websites and digital courses) has risen sharply over the years, and it isn’t slowing down. We ranked this as the top passive income idea because of its efficiency: you create the product once and sell it over and over again.
Beyond value creation, how can other parts of this business be automated?
Marketing: If you build your information product on an existing course platform like Udemy or Skillshare, where audiences are visiting specifically to purchase courses, a lot of the marketing work will be done for you. (With the caveat that these sites take a share of the profits.)
For platforms where you’ll need to bring the audience (such as Teachable), you can create ads or even leverage affiliates to bring attention to your product.
Sales: Once you’ve brought in potential customers through your marketing, you can run an evergreen sales funnel to move them from interested to buyer.
Value delivery: Information products must be revised occasionally to reflect the latest updates and stay relevant, so while this income stream is largely passive, there will be some periodic ongoing maintenance required. There’s also a customer service aspect to running an information product business, which can be easily outsourced using a virtual assistant.
#2. Leverage Affiliate Marketing
This option is just as good as information products. The key difference is that with affiliate marketing, you’re not the one making the products — just the one selling them.
Small, boutique websites and blogs, as well as giant juggernauts like Amazon, will pay you a commission (and often a recurring commission) for the customers you send their way.
The value creation aspect of running an affiliate marketing business is your ability to provide value that can help people make a purchasing decision. This is where the real potential lies, as the mistake beginners make in affiliate marketing is thinking it’s just about getting as much traffic as possible.
While that can help you make a quick buck, if you’re promoting bad products (or even good products) and not adding value, the traffic you worked hard to acquire will not stick around.
Marketing: To be effective at affiliate marketing, you have to attract people who are interested in what you have to offer. Creating a blog or your own YouTube channel and focusing on traffic from search allows you to attract an audience by putting in the work up-front, which can then bring in the right people for years to come.
Of course, the more work you put in (and continue to put in), the higher the potential.
Regardless of the platform you choose, your audience must know, like and trust you enough to buy the products you’re promoting. Once they do, they’re more likely to buy the products you promote, which will create affiliate commissions for you.
Sales: Once you bring qualified traffic to your platform of choice, your goal is to provide those people with the information they need to help them make the right purchasing decision. A common example would be doing a product review, which details your experience and thoughts on a given product or service.
Value delivery: While you may send your audience away to make the actual sale of the product or service, it’s still important to treat every person who visits your platform as highly-valued. An evergreen email funnel can allow you to maintain a relationship with them — as can more valuable content, to make additional purchasing decisions.
#3. Develop Mobile Apps
If you have the technical know-how, developing and monetizing an app is another way to build something once and sell it forever. Many apps are even monthly or annual subscriptions, where if you’re able to maintain a low cancellation rate, you can build a large source of consistent income.
Marketing: You’ll need an initial push to reach your target users or else your app will get lost in the jungle that is the App Store. Use tools like social media, news outlets or App Store optimization to make your app visible to the people who will benefit from it.
Sales: In the beginning, focus on overdelivering value while encouraging highly-satisfied users to leave reviews. An app with a lot of early five-star reviews can grow quickly with no other marketing, as the sheer size of the app store can help you increase your exposure,
Value delivery: Any software requires continuous development and support, but most of the code and beta testing will be done upfront. After that, you can add the occasional update or new feature to keep your app relevant and helpful to your users.
If your app solves a problem for your users and is good enough for them to share with friends, developing an app is a great way to leverage your technical skills into a passive income stream.
Recommended reading: How I Made Over $70,000 Developing iPhone Apps.
#4. Start a Blog
Not every blog is a passive income stream. Blogging involves considerable work in the beginning, writing content, managing affiliate links, optimizing for search engine traffic and more.
If you want your blog to be one that’s largely set-it-and-forget-it, choose a blogging niche that’s evergreen: information that is both relevant and unchanging from year to year.
For instance, a blog about optimizing your tax strategy would not be evergreen, because the tax code changes each year. On the other hand, one about dating tips would be evergreen, because things like being thoughtful and smelling nice will never go out of style.
Marketing: Structuring your blog in a way that Google can find your posts (known as search engine optimization or SEO) is key to gaining readers. You can also use platforms like YouTube — which is actually the world’s second-largest search engine — to drive traffic.
Sales: Ads and affiliate revenue are the two biggest sources of income for beginning bloggers. Once your email list and search rankings grow, you can add physical or digital products to boost your blog’s income.
Value delivery: Helpful, inspiring, motivational and educational content is a blog’s lifeblood. But that doesn’t mean you have to write every word on your blog. Upwork, Fiverr and many other freelancing websites are full of capable writers who can help you (passively) deliver value to your readers.
Setting up an evergreen blog (and the proper team to support it) will generate thousands in ad and affiliate revenue for years to come.
Resource: How to Start a Money-Making Blog.
#5. Create a YouTube Channel
Switch the time you spend watching YouTube videos to making your own and you can see a steady stream of profit from ad revenue.
Marketing: While there are over 2 billion YouTube users, the platform is a competitive place for content creators. Optimizing your thumbnails and titles for both YouTube and Google searchers gives you a two-for-one on driving traffic. Structure your videos as a series and cross-promote them to maximize your creative efforts.
Sales: Unfortunately, it will take some steady work on the front-end to monetize a YouTube channel. Currently, Google requires 1,000 subscribers and 4,000 hours of watch time in one year before you’ll see money from the ads that run before your videos. If you pair a YouTube channel with a blog, digital course or affiliate marketing, you can double-dip with ad income from a video that drives traffic to another passive income stream.
Value delivery: Creating and editing clickable videos takes a lot of time, although the work can be delegated. Maximize the value delivery of your videos by creating evergreen content. A clip on how to build raised garden beds or a compilation of funny cat videos will be just as relevant in five years as it is now. YouTube favors videos with high watch time, so keep your content timeless.
People watch 1 billion hours of videos on YouTube each day, so this platform is a great opportunity to build passive ad income.
#6. Sell Designs
Graphic designers and artists can print their art on all sorts of things (t-shirts, coffee mugs, tote bags, etc.) and gather passive income from the sales. Many print-on-demand (POD) sites like Etsy, RedBubble, Teespring and Merch by Amazon will take care of the printing and distribution process for you.
Marketing: Once you load and categorize your design, these sites will do some of the marketing work for you. You can get a boost, of course, by offering these products through your own site or social media.
Sales: Since the website handles the printing, sales and shipping, you’ll only get a portion of the proceeds from each sale. Each site structures payouts and pricing differently.
Value delivery: The POD site should have its own customer service, so keeping your customers happy shouldn’t be too hard. You’ll need to keep tabs on what’s popular and keep your portfolio stocked with designs that appeal to today’s market, which can be delegated.
If you’re the creative type, print-on-demand sites are a great option to passively monetize your work — or just get more sales from artwork you’ve already created.
Recommend reading: How to Make Money on Etsy: 5 Tips + 3 Big Mistakes.
#7. Write an E-Book
The popularity of e-books has been climbing steadily for years and is poised to continue to do so. Writing an e-book can provide passive income, and it also positions you as an expert in your field, which can lead to additional money-making opportunities (like selling courses).
Marketing: Affiliates are a great way to market an e-book, as are guest appearances on podcasts and sponsored blog posts. This content stays online for a long time, so if a person reads a blog post or listens to a podcast featuring your book two years after it has been released, they’ll still hear a plug for your product.
Similar to the app store, if you’re selling on Amazon, the goal is to get a surge of five-star reviews early, which will then get your book noticed more across the site.
Sales: If you sell your e-book through online bookstores like Amazon and Barnes & Noble, the sales and distribution process is largely automated through their websites.
Value delivery: Readers will give you feedback on your book via online reviews, so you can make adjustments to your product in future editions if needed.
Writing an e-book is a great standalone passive income stream, and it dovetails nicely with having a blog, an affiliate marketing site, or another revenue source.
Resource: How to Self-Publish an E-Book on Amazon.
#8. License Music
Stock music is a great way for artists to generate income from things they’ve already made. Podcasts, radio shows, YouTube channels and other media need background music, and they license it from stock music libraries like AudioJungle and Pond5.
Marketing: Choosing appropriate tags is key so that people searching for your variety of music are able to find it. If you’re using a website or social media to promote your brand and music, consider enlisting the help of a virtual assistant or social media manager so you can spend more time creating music and less time on the computer.
Sales: Stock music libraries take care of the sales and licensing process. There are different commissions for exclusive (listed in only one music directory) and non-exclusive (listed in multiple libraries) tracks.
Value delivery: Music websites allow your customers to preview your songs before they buy them. The music library facilitates the delivery system and downloading, so there isn’t much for you to do.
You probably won’t get famous or cut a record deal this way, but you will generate a reliable stream of passive income.
Recommend reading: How to Earn Passive Income as a Musician.
#9. Sell Physical Products
Many Amazon, eBay and other online sellers use dropshipping to automate their businesses. A dropshipper sells a product online (on their own website or on a large, existing marketplace like Amazon) but does not keep the inventory on hand like a traditional store would. Instead, the dropshipper places orders on behalf of their customers with the manufacturer or a third-party distributor of the product, who ships it directly to the customer.
See also: How to start a dropshipping business.
Marketing: If you sell through Amazon or eBay, they’ll take care of much of the marketing. You’ll just need to properly categorize and tag your products, as well as create thorough, accurate descriptions so they can show up in search results. If you sell on your own website, you’ll need a plan to attract customers through ads or social media.
Sales: Online marketplaces will take a cut of your earnings, but that’s a fair exchange for all the publicity you get and for taking care of the sales transaction. By setting up a Shopify or other e-commerce store, you can automate the sales process on your own site as well.
Value delivery: You’ll want to keep a pulse on how well your distributor is filling orders. Delays in shipping or sub-par products will tarnish your reputation and hurt your business. You can outsource some of your customer service to a virtual assistant to make your business more passive.
Just because you sell a physical product doesn’t mean you can’t set up your business to be passive.
For more information, check out Shopify’s free dropshipping webinar.
#10. Sell Stock Photos
Are you great at photography? Millions of blogs, news outlets, social media accounts, and more are searching for stock photos every day. Sell yours through a stock photo site to make some money while you sleep.
Marketing: The best marketing for your photos will be done before you take them. Do some research to see what people are searching for, then take photos that fill their needs. A photo of people in business casual at a board meeting may not be sexy, but businesses will buy that photo over and over. Be sure to tag your pictures appropriately so internet searchers will find your photos.
Value delivery: The stock photo sites take care of the licensing, monetary transaction and downloads for your users.
If you’re the creative type and good with a camera, selling your stock photos is a fantastic passive revenue stream.
Bonus: Rent Out Your Assets
What better way to make money than to rent out things you already own?
Peer-to-peer lending sites allow you to do just that. Here’s how to make money from things you have while you’re not using them.
- Home: Airbnb, VRBO and other vacation sites allow you to rent out your home (or bedroom) to vacationers for a few days. Learn more in our guide to starting an Airbnb business.
- Car: Your car sits in a parking lot or driveway for most of its life, but it can make you passive income if you rent it to others on Turo.
- Parking: Allow others to rent your driveway or parking space on Spacer and SpotHero.
- Storage: Sites like StoreAtMyHouse and Neighbor allow you to rent storage space in your home, shed, basement or garage to people and businesses. Think Airbnb, only for storage.
- Boat: When you’re too busy to use your boat, rent it out on GetMyBoat, Boatsetter or Click & Boat to turn your toy into a passive income stream.
Passive Income Business Ideas: Closing Thoughts
One of the best ways to work toward financial security is to stop working altogether. Every human on planet Earth has only 24 hours in a day, so there is only so much time you can devote to making money.
By making more of your income passive, you leverage your efforts to create much more earning power because you’re no longer trading hours for dollars.
Creating passive income can take many forms. It involves anything from creating and selling a digital product to just making a little cash off of something you already own.
If passive income is new territory for you, start small and in an area where you have some expertise. Choose one or two passive income streams to create. Once you put forth the initial effort and investment, the revenue will flow to you with little effort on your part.
And if these businesses seem like more than you’re looking for, try some of the best passive income apps; they won’t make you nearly as much (we’re talking about a little extra spending cash), but they also take minimal time and effort.