5 Best Passive Income Ideas and Myths Busted (2020)
Today, the dream of making passive income bombards you everywhere – Facebook Ads promising instant wealth, social influencers, YouTube ads with some shirtless guy in his garage talking about dropshipping. It gets tiring.
It’s true – the world is no longer the same one our parents grew up in. With digital opportunities sprouting up every day, we’re lucky to live in a world with so many options to make money online.
And I’m not one to bathe you with false hope – it takes real work to get yourself to a point where you’re bringing in real, life-changing passive income.
The internet is currently littered with a sea of misinformation when it comes to how to generate this revenue stream. Ecstatic bloggers are consuming piles of “theoretical” passive income ideas, yet these strategies miserably flop when put into practice.
We have ideas everywhere that are outdated – ideas that might have worked in 2005 but aren’t as relevant today.
In this guide, I am going over the best passive income ideas and strategies that work this year.
Not ideas from 2005, but plans on how to create a five-figure/month blog that launched just this year.
Let’s get started.
Table of Contents
Passive income is merely earning money from a venture you are not actively involved in. Typically this is an online business that requires work upfront, but once it is launched and successful, it can run on its own without your day to day oversight.
When many think of passive income, they think of selling digital products, affiliate marketing, online courses, Google AdSense, or selling eBooks.
While there is nothing wrong with these ideas, they require a ton of traffic to make a real living online. What if you want to make life-changing money in three months, not five years?
What Are the Best Ways to Make Passive Income?
Here are my top 5 passive income ideas:
When you hear of starting a blog, you could be tempted to ecstatically jump on the internet and strew throw content up on a website. However, modern-day blogging is not necessarily about writing. It’s about running your blog like a business.
Let me explain.
To make a passive income from blogging, you need to mentally transition from being just a blogger to being a CEO. This psychological shift will allow you to see things from the perspective of a business owner. This way, you aren’t blogging as a hobby but can start to scale your systems like a real business.
First, you need to understand the correct ways to monetize a blog based on the lifecycle and age of your blog. For example, when you’re just starting and don’t have much traffic, it doesn’t make sense to worry about adding advertisements or affiliate links all over your site.
When starting, choose your niche based on audience revenue potential and high-end B2B consulting. By starting from day one selling consulting services to businesses and not low priced products to individuals, you can start making thousands of dollars/month from the outset.
So let us begin your epic blogging journey by getting a domain name and WordPress hosting. From my experience, I would advocate that you go with Bluehost.
They are the host WordPress recommendation, and more importantly, Bluehost offers all of the features needed to create a secure, reliable, fast blog on WordPress.
You can get started with Bluehost for $2.95/month (63% off) with my link.
As many as 95% of bloggers fail.
Many so-called experts claim that bloggers are failing because they aren’t passionate enough or can’t stay consistent with their writing.
This isn’t the case.
The truth is: 95% of bloggers fail because they can’t make it profitable.
I’m passionate about a lot of things, including running, astronomy, fantasy football, Game of Thrones, personal development, etc. but if I had to write about these topics every week and never made a dime, I’d quit every time.
Ideally, we are building a business, not just a blog. Success and profitability are largely tied to the viability of the audience we are targeting.
Take this example.
Let’s say you’re passionate about teaching, and your blog is about how to tutor students when you’re in college.
Fundamentally, this audience is not the most lucrative. Back when I was in college, I was lucky to have over $500 in my bank account. The little money I was able to save was primarily spent on beer and dates, (Tinder wasn’t a thing back then or it would have been worse).
Instead of tutoring college students, what if you focused on corporate consulting and learning management?
Here, you’re climbing the B2B ladder and selling your services to businesses, not individuals. These companies may have hundreds of thousands of dollars to spend every month, not a few dollars that would be better spent on Tinder dates.
However, you can’t jump into a niche solely for its monetary value – you need to have some professional experience in this niche.
How solid is your network in this industry? What kind of influence can you command?
Fundamentally, your chosen niche should have substantial market demand, which is discovered through keyword research.
One great tool for the execution of your keyword research is Ahrefs.
Your main keywords should have a minimum search volume of 5,000. What this implies is that there is substantial interest in what you are targeting.
This interest corresponds to a tangible market demand in the niche your keywords are targeting.
Next is keyword difficulty. The keyword difficulty score indicates the relative competition for that keyword on a scale from 0 to 1. Try to find keywords with a difficulty score under 0.4.
Finally, use Ahrefs to view the keyword’s search engine results page (SERP) ranking history. Here you can view the Domain Authority (DA) of the sites that are already ranking for the term. If the top 10 sites all have high DAs (think 70+), it will be tough for your new website to rank.
However, if you find a keyword with a top 10 site with a DA under 50, there is some potential to rank quickly.
Overall, here are the main metrics to track to research the market demand and viability of your blog’s niche:
- Monthly searches for keyword must have a minimum limit of 5,000.
- The keyword difficulty of the keywords should be lesser than 0.4
- The search engine results for the first page should have one website with a DA under 50.
- The top 5 search engine results should have changed slightly in the last six months
After you choose your blog’s niche, launch your blog with Bluehost and WordPress, the biggest thing to focus on is real-world relationships.
Create your first five blog posts and stop writing.
Instead, focus on building real relationships with other bloggers to get backlinks and guest posting opportunities. You can read my full guide on the importance of guest blogging and how it helps build your Domain Authority.
This approach helped me to gain over 3,000 backlinks from over 500+ domains in my blog’s first six months.
Also, I aim to get backlinks from high DA blogs. The higher the DA and more relevancy to your blog’s themes, the more the links will help your search rankings.
Also, remember that we are aiming to build valuable links. This is why the domain authority of the website (we want to link back to us) matters as well. The SEO value of your backlink heavily relies on the domain authority of the website.
Monetize Your Blog
For the first three months of your new blog, focus primarily on building up your blog’s Domain Authority. This approach helped my blog go from 0 to 18,000 organic site visitors per month in 90 days and 44,000+ in 6 months:
Then this number accelerated to over 125k within 11 months:
To make passive income blogging, start with content, and link building strategy. Sell high-end consulting first, build your email list, then over time move to online courses and affiliate marketing after your traffic grows.
Once you’ve built up your Domain Authority and have a few consulting clients under your belt, let’s dive into how to move one step closer to passive income by selling an online course.
Over the last five years, we’ve seen revolutionary digitization of education. You no longer have to be sentenced to the four walls of a classroom to get a top-notch education.
And with the rise of social distancing and virtual meetings, this growth is only accelerating.
People are embracing this virtual modern education and happily purchasing online courses.
You can leverage this digital shift by starting an online course as well. If you have a depth of knowledge to share, people will listen to you and pay for your expertise. And you don’t need a Ph.D. to begin your online class – just a strong background in a topic you care about.
Additionally, students are even using tools to help them with academic coursework and papers, so online courses don’t have to only be video classes. Courses can also include worksheets, homework, guides, and written tutorials. The options are endless.
The first question to ask yourself is: “What problem is my course solving?”
The second question is: “Will people spend money on my solution?”
If so, you’re on the right track.
The online course platform you choose should allow you to manage the full education process. It should also integrate with other solutions like MailChimp and Google Analytics.
There are many great platforms like Teachable, Podia, Ruzuku, and many others. Ultimately the online course platform I recommend is Thinkific.
First, you have to prepare your course outline and content plan. How will your course transform your audience when they are done going through it?
After you plan your outline, break it up into 10-minute video segments that you can create.
Before getting too deep into course creation, it is smart to pre-sell your course to your audience. Gauge interest, send them to a pre-sales landing page, and see if they click that buy button. While asking your readers if they would buy the course can gauge some interest, nothing is more accurate than actually tracking pre-sales.
Your course’s price is also an important decision when launching. Premium courses sell anywhere from $49 to $1,999. Your price will depend on your audience’s needs and how in-depth you are going to go with the content.
A good baseline is to aim between $199 and $499 when starting out.
To launch your online course, get started with Thinkific, get your video equipment, screen-share software, microphone, editing software, and shooting location.
Once shot, edited, and uploaded, it’s time to promote your course. Make sure to funnel your welcome email series into your online course offering, and feature it on your blog. You can also share your course on social, create an affiliate program for your course, and test paid social advertising.
When to launch: 6 months after you launch your blog, within six months, you should have enough traffic and an extensive enough email list to move from high-end $2,000-3,000 consulting sales to a $199 – $499 online course.
You’re one step closer to passive income.
It takes more than just joining high paying affiliate programs and adding affiliate links all over your site to make passive income.
You need traffic.
I recommend affiliate marketing as strategy #3 when it comes to making money online.
Whereas digital marketing tactics require upfront spend, affiliate marketing can make you extra money and additional revenue. It’s a great way to make extra money without hitting your bottom line like ecommerce or other online store sales.
Let’s say you’re recommending an affiliate product and make $20 per sale.
If 2% of users who click your affiliate link convert into a customer on the merchant’s website, you need 50 clicks on that one affiliate link to make one sale. To get 50 clicks on that one affiliate link in your article, you may need 1,000 visits to that page. In this scenario, to make $1,000, it could require 50,000 visitors that blog post.
To remedy this, make sure to create review posts that can include five affiliate programs in one article at a minimum. That way, you are increasing the likelihood of outbound affiliate link clicks and the potential to make more commissions.
Additionally, add affiliate links to different types of content – blog posts, emails, video overlays, etc.
From my experience, affiliate links work better when embedded in affiliate website reviews (where you write an insightful, helpful analysis of a particular product). You should add them to in-depth tutorials related to the products. Plus, they fit well in an automated welcome email series.
When to launch: while you can and should add affiliate links to your blog content at any time when appropriate, you should expect to make a lot of money from affiliate marketing until your blog is 5-7 months old.
After high-end consulting and selling your online courses, affiliate marketing is the final piece of the passive income puzzle.
Now by maintaining your blog with new content and promotions, you will enjoy passive income through affiliate marketing.
Investments and mastering personal finance are the keys to growing wealth.
While you may not be able to take control of real estate investing like Warren Buffet or rental properties like Donald Trump, you can still make a substantial return from investments.
This is done by leveraging real estate as a passive income source and using these income investments as a means to gain financial freedom with a cash flow outside of your job.
Whether you take part in an IRA, REIT, mutual funds, index funds, P2P lending platforms like Fundrise, ETFs, real estate investment trusts, or high-yield FDIC insured savings accounts, the ways to earn money are endless.
If you are looking for how to make passive income, one great possibility is an investment in high dividend stocks. The annual rates are more impressive than you can get from your bank investments. The potential for capital appreciation is vast. Therefore you have dual windows for profit accrual – from your capital gains as well as from your dividends.
While not famously exploited, there are great investment opportunities in lending clubs. Short term business loans, peer to peer lending sites, and social media trading platforms are swelling on the internet, and you can lucratively leverage on.
The interest rates are spectacular. The fantastic thing is that you can go as low as investing your $30 pizza money into a loan and you can even invest in as many as 80 loans. The choice is all yours, but it is very rare to see your conventional investments match the interest rates from lending clubs.
You can go to the extremes of passiveness by bringing in automation to your passive income generation. Through this approach, you could get an algorithm in the form of a Robo-advisor to manage your investments while you snore away. All you would have to do is nail your risk willingness and let the algorithm rock and roll.
Certificates of Deposit (CDs) are also a lovely investment opportunity for those seeking residual income. The fact that interest rates in CD are locked-in regardless of the volatility in interest rates makes it more interesting. Index funds are effective low-risk investment options if you want to step into the stop market.
Corporate bonds are also suitable for investment when seeking passive income avenues.
Here is a fact, many people don’t know the explosive power of licensing in the lucrative sense. Ideas are ruling the world, and businesses are drooling for them.
Open innovation is beginning to thrive, and businesses are jumping on ideas manufactured elsewhere. If you have significant intellectual property, you are in for big things.
Licensing intellectual property is becoming immensely profitable for inventors. One of the best business ideas you can come up with. You don’t need to step into the battleground to exchange fire with competitors before your product stands, just your idea, and you have done enough!
On the other hand, you could bring existing products under your creative microscope to detect the cracks and how well to improve these products. Get a specific value out and patent it.
Licensing is one of the most solid passive income systems you can explore. So long as products with your patents are being sold, the extra income keeps dancing into your bank account.
Most articles talk about long-term monetization strategies like cash back credit cards or long-term stock market investing.
These are good ideas but they’re a little bit slower than I’d like.
Think about it.
If passive income was easy, everybody would throw their resignation letters at their bosses and moonwalk out of the office.
Companies popping up today are the middlemen – ones who connect the business to the consumer – Airbnb, Uber, DoorDash, Prosper, Udemy, and even eBates are all companies connecting sellers to services and taking a cut in the middle.
While most of us don’t have the ability to create a complicated software company overnight, we can still become middlemen.
Take affiliate marketing, for instance. If you build an audience and start recommending software for example, you can take a cut of each sale.
It’s all possible.
You have to be willing to put in the hard work upfront and break your goals into manageable chunks. As I have a full-time job and a side business, average work weeks can swell to 80-100 hours/week. If you don’t have that kind of dedication, you’re going to struggle to succeed without a substantial investment upfront.
Yes, you can start a business with no money – it’s going to require more effort from you, but it’s still possible. Take a look at people making money on Amazon FBA for as little as $39.99/month.
My favorite way personally is to start your blogging journey with a WordPress blog with Bluehost for just $4/month.
Additionally, if you need a loan or extra money, you can easily sign up for the best credit cards and start earning rewards.
This is my favorite path to passive income:
- Start a blog and sell high-end consulting services
- Perfect your marketing funnel with the right opt-in offer
- In the beginning, focus exclusively on building up your blog’s Domain Authority (DA) with guest posts and link building
- Begin adding affiliate links to your site
- Once your email list grows to a suitable level, sell a product or online course to your audience
- Once you’re at 100k visitors/month, begin ads and sponsored content on your site
- Go from 80:20 consulting/passive income to 50:50, 20:80, and finally 100% passive income
And remember – no time will ever be perfect to start.
Just start now.
Your journey of passive income generation only begins when you start your business.
The possibilities of steady passive income are vast, as long as you’re dedicated and put in the hard work up front.
The key is to start by selling high-end consulting and work super hard at first. Then take your earnings and funnel it into content and systems to accelerate your passive income streams.
Whether you’re a seasoned investor building rental income or a teenager growing your YouTube channel, you can make money online and build passive income.
In the end, there’s no get-rich-quick scheme. While passive income is feasible, it takes hard work, long weeks, and insane determination to get there.
Recommended Reading on AdamEnfroy.com: To continue your path to passive income, check out my ultimate guide on the best affiliate programs, the latest business ideas to copy this year, and the best online marketing software to get started.