5 Passive Income Sources And How to Choose the Best One​

This article contains 5 categories of sources of passive income and how to chose the best one. Most often, passive income requires investing money, and/or investing time and effort. And some types of

At Beginners Passive Income, we often get asked “what passive income is best?” Before we help you decide on the best passive income source for your needs, let’s have a look at the different ways to make passive income.

What passive income is best? The following are different passive income sources:

  • Investments
  • Brick & Mortar Businesses
  • Online businesses
  • Side Hustles
  • Peer-to-Peer Economy

Most of the time, passive income requires investing money, and/or investing time and effort. And some types of passive income are more time demanding at start than others.

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This website provides beginners hundreds of ideas to make passive income, and each idea is categorized by investment, business, online business, peer-to-peer economy or side hustle. If you are still wondering what passive income is, check out this article where we explain what passive income is in detail.

The following sections will define each passive income source, while providing you examples, so you can decide which kind of passive income is best for your needs. We have listed them in order of the easiest for beginners, to the most complex.

1. Peer-to-Peer Economy Income Sources

Although the peer-to-peer economy has always existed though trade, it has never been easier to find people searching for what you have to offer thanks to peer-to-peer marketplaces. These sites and apps are the easiest places for beginners to get started making passive income.

The peer-to-peer economy is a decentralized business model that consists of two individuals (yourself, and the buyer) interacting to buy, sell, or rent goods or services directly from one another, with the help of a platform or marketplace that puts you in touch.

Peer-to-Peer Rentals

Peer-to-peer exchange platforms have majoritarily developed around rentals to complement the sharing economy. Over the past decade, literally hundreds of startups in the peer-to-peer rental space have appeared and are offering marketplaces to put renters and owners in touch.

Pro Tip If you are intrigued by any of the passive income ideas listed in the following sections, feel free to click on them to learn more. The link will lead you to a longer article on our site where we provide how to’s and a detailed evaluation of each idea to help you decide the best passive income source for your goals.

If you own your home there can be many ways to monetize your property. Most people have heard of AirBnB one of the most popular peer-to-peer platforms in the world. AirBnB allows you to rent your home to travellers. But there are also peer-to-peer platforms that allow you to rent your parking spot, your car, and other empty spaces in your home for storage.

If you have a bike, you can rent it, with other specialised sports equipment. As for motor vehicles, you can also rent your car, boat, motorhome and motorcycle. If you have tools and other things lying around your home, you may be able to rent those too.

Renting your things on a peer-to-peer marketplaces is one of the fastest and easiest ways to make passive income as a beginner. Most of these passive income sources do not demand too much of your time, some require very little time at all (ex. renting your parking spot).

Other Share Economy Revenue Sources

Other services offered on share economy, peer-to-peer platforms are not related to rentals. They may include peer-to-peer delivery services, home wifi-network sharing, and used clothing platforms.

2. Businesses That Can Be Automated or Outsourced

We have selected some of the easiest businesses to create and then eventually automate or outsource. Keep in mind that creating a business is an active endeavour. It will take a couple years to get off the ground and actually automate and outsource.

However, you can build a business with the goal of making it entirely passive by eventually automating and outsourcing parts of the work. Here are some examples of some businesses that can allow for that.

Small Businesses

Some small businesses that can eventually be automated and outsourced for passive income include storage space rentals, ATMs, laundromats, vending machines, game machines (Arcade Style), self-service kiosks, self-service coin-operated car washes, food trucks, and ice cream shops. In order to outsource these businesses, you will need to hire employees to replace yourself. Some will require you to be very actively present at start.

3. (Monetized) Online Businesses

Everyone is talking about making passive income online. You can easily create a YouTube channel or a blog these days, and they can be excellent sources of eventually passive income. But if nobody are visiting either, then you will not make any money at all.

There are proven ways to create your online projects so that they follow a formula for success. Check out Project 24 by Income School for example. Ricky and Jim talk about how it generally takes 24 months to be able to make . And they have a very clear, proven way to do it. If you don’t put in the work, sadly it won’t happen.

Here are some ideas of online sources of passive income. Click on the items you are interested in to learn more. They will lead you to articles on this site that go into much more detail on how to build each passive income source with pros, cons and recommendations:

  • Blog (Monetized)
  • Affiliate Marketing
  • eBay
  • YouTube Channel
  • Print On Demand
  • Niche Membership Sites
  • Niche Site Focused on an Online Community
  • Niche Site focused on Book Reviews
  • Gaming Apps that Pay
  • Sell Physical Products Online
  • Buy Domain Names And Park and Sell Them

4. Side Hustles That Are Eventually Outsourced

You may have some talent you can cash in on. What do you excel in, at work or at school? What do you spend your spare time doing? What are your passions or your hobbies? If you have a talent of any kind, there may be a way to monetize it through a side hustle that you eventually make passive.

For example, if you love caring for animals, pet sitting is a side hustle that you could eventually turn into an outsourced business by hiring employees. If you do not want to actually hire employees, then maybe you could outsource parts of the work. This is easier for online jobs like recording audiobooks, copywriting, and implementing chat bots.

There are many ways to turn a side hustle into passive income. But if you just want to get started making money on your own, passive or not, side hustles are an excellent place to start for beginners. Here are some side hustle ideas. Feel free to click on the items you are interested in to learn more. They will lead you to articles on this site that go into much more detail:

  • Recording Audiobooks
  • Product Photography
  • Gaming
  • Copywriting
  • Implementing Chatbots
  • Influencer Marketing
  • Photoshop Editing
  • Data Entry
  • Creating Jingles
  • Logo Design
  • Poster Design
  • Video Editing
  • Customer Service Chat
  • Virtual Assistant
  • Creating Slide Decks

5. Passive Income Generating Investments

The most common type of passive income stream people think about are financial investments. These may include real estate, dividend stocks and corporate bonds.

Although hundreds of (well known, successful) people have made money this way, these passive income sources require financial savviness, important monetary investments and a lot of research. Therefore, they may not be the quickest way to build passive income for beginners.

In order to keep this article beginner-friendly, we will focus on some easier ways to help create passive income through financial investments.

Cashback Credit Cards

Cashback reward cards can also be a very passive way of making money. These kinds of cards give you a certain cash back on the money you spend on the card. If you know you have to make certain expenses every month (ex. groceries, utilities etc.), paying with a cashback credit card will allow you to receive a small return on your spending. In Canada, these cards can provide you with a return between 1% and 10% depending on when you use them. It’s an easy return on money you would have spent anyway.

Savings Account

Opening, and regularly feeding, a savings account is not only a great way to save for retirement, but it’s also an excellent way to start making a little passive income. However, keep in mind that banks are not offering the same interest rates they did in the 60’s. Rates vary between 0.01% and 2% for most accounts. This hardly covers inflation rates in most developed countries, but it can be a good and easy start setting aside some money for a beginner.

Get out of Debt

This isn’t really a passive income source but it is a way to avoid (ridiculous) passive expenses. If you successfully implement a couple of the passive income ideas on this blog, you may be able to get out of debt. And that will save you money you are giving the banks for free every month.

Most people don’t want to do this because they are afraid of the results they will see, but take a minute to calculate how much your debt is costing you each month. We bet the second you see the number, you will be very motivated to never have to pay those recurring fees again. That is passive income you are providing your bank, not yourself.

How do I Know Which Passive Income Source is the Best for Me?

How you choose your passive income source will depend on your specific needs. A good place to start is by figuring out how much money would you like to make. In this article for example, we talk about if passive income can make you rich. The article provides ways to calculate how much money you may need to achieve your dreams.

Once you know how much money you want to make and the time-span you are allotting yourself, it’s time to think about a passive income source that can help you get to that goal. If you need to make money now, some of the quicker, easier ways may be best. If you have the skills and time to build an online passive business, then so be it. If you already have skills and would like to make them more passive than check out these articles.

How much money you actually make also depends on your skills, the time and effort you invest, but also how scalable, seasonal, sustainable, time-demanding, expensive, difficult, risky, and eventually passive and profitable your choice is. To help you make the best choice possible depending on your needs, we ranked each passive income source on this site by :

  • Passiveness
  • Scalability
  • Startup Costs
  • Difficulty
  • Time
  • Risk
  • Seasonality
  • ROI (Return on Investment)

When choosing a passive income stream, you need to keep in mind that it takes time, sometimes months and years, to build a truly passive income source. Some may also require a financial investment. Of course, this is not financial advice and you should consult a lawyer, tax specialist or financial planner in your area to ensure you comply with local rules and regulations depending on your choice. Learn more in our full disclaimer policy.

Related Questions

Here are some articles and related questions to what passive income is best?

What are Some Passive Income Ideas?

Passive income ideas can be placed into 5 different categories and include investments (ex. real estate), brick & mortar businesses (ex. ATMs, laundromats etc.), online businesses (ex. monetized niche sites, and YouTube channels), side hustles made passive (ex. gaming, copywriting, translating etc), and passive gigs from the peer-to-peer economy (ex. rentals).

How Can I make Money Quickly?

If you are looking to make money quickly, have a look at our list of passive income ideas. Some are quicker and easier to implement than others. If that idea excites you and ties to something you are passionate about, give it a try. Keep in mind, building any passive income source requires motivation, perseverance, time and effort.

Beginners Passive Income

It takes time, effort, perseverance, motivation and skill to build profitable, sustainable passive income streams. We hope to inspire you and provide you excellent passive income ideas along your journey to financial independence.

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