Spend five minutes on the internet and you’re likely to see at least five blog posts on making passive income. The idea screams out to you. You don’t quite know what it means but you’ve got an idea.

Passive, not having to make an active effort in something…i.e. no work!

Income, making that cash flow!

So you click through and fall down a rabbit hole of schemes, scams and hard work. Now, I’m not saying there aren’t legitimate ways to make money or that passive income doesn’t exist at all but you need to know the facts.

What is Passive Income?

The exact definition of passive income tends to change depending on whether the author has a passive income course or some affiliate links they want you to click.

At one extreme is the idea that passive income is money you collect regularly with no effort involved. At the other extreme are a lot of the ideas you see advertised just before a Make Money Blogging Course is offered or someone talks about selling on eBay. Many of these ideas require hours a week to manage and are more like side hustles than passive income.

Why Passive Income Online is a Myth

I want to spend a little more time debunking the myth of passive income before showing you a few ideas that are as close to passive as you can get. Don’t get me wrong, I love my online business and every one of the seven income sources that feed into it. I just want you to have all the information before you start drinking the passive income Kool-Aid.

The problem with even the truest forms of passive income, those sources that require no ongoing work on your part, is the time and effort to set them up. When talking about self-publishing, which is actually my favorite passive income stream takes months to write a book and publish. When you’re done, it takes very little to keep the book making money but that initial setup is far from passive.

Many of the ideas you see for online income like blogging or making money on YouTube take just as long to set up as self-publishing as well as continual management producing content. You’ll need a handful of posts before launching your blog, something to keep people on the site reading. Then you’ll need to post at least once a week to keep them coming back.

Sure, after a while your blog or YouTube channel will build some ranking in search and you’ll get readers or viewers for years after publishing. For example, my most popular video is over 18 months old but still gets about 1,750 views and makes $24 every single day.

A screenshot of a cell phone online revenue

I’m not sure what would happen to the video if I completely stopped adding videos to the channel. I don’t think I want to test the idea considering YouTube sends me a check for about $7,500 every month for ads alone.

So while YouTube or blogging might not be that perfect method of passive income, they’re still good options you can take advantage of on five or ten hours a week.

Real Ways to Make Passive Income

Now that we know the facts on passive income, we can start to look rationally at some of the methods of creating a monthly income. Some of these are as close to passive as you’ll get while other take more work so I’ll list them in order of effort.

Self-Publishing is an under-rated income source even if it does take a few months to publish your book. Get your book ranked on Amazon though and the world’s most popular ecommerce site will continuously send you readers.

  • Plan out 8 – 10 chapters and write one a week. Don’t sit down to write a whole book, take it in steps and just focus on once chapter at a time.
  • Don’t be afraid to outsource the tasks you’re not good at like cover design and formatting. You can get these done cheaply on any freelancer site and they’ll give your book a professional look.
  • Ranking your book is all about the launch. Reach out personally to friends and family, asking if they’ll buy a copy during that first week.

Real Estate Investing is one that trapped me at first. I bought into the idea that rentals would be an easy income source…and was very wrong. The more passive route is to invest in real estate crowdfunding or real estate investment trusts (REITs) which trade just like stocks.

  • Commercial real estate rentals can be less management than residential if you still want to go the direct approach.
  • Consider tax lien investing as well where you buy the property tax lien from the county and collect the interest.
  • If you do own individual properties, diversify your portfolio with some funds so you have exposure to different property types in different regions.

Dividend Investing is one I hate to mention but it’s the first thing people go to when they think passive income investing so I want to add my two cents. The problem I have with dividend investing as passive income is you have to work for that money to invest it in the first place. Once you’ve earned and invested though, I’ll admit that this is a completely hands-free form of income.

Blogging and YouTube are the least passive income sources I’ve come across but also the ones that have made me the most money. It can take a while to set these up and you’ll have to continuously update with posts or videos, but they’re unmatched opportunities to reach a community of people and make a LOT of money!

  • Pick a very narrow topic, a niche, for your blog or channel. It will be easier to become the expert in a niche and people will come back to your site every week.
  • Learn the business of blogging or YouTube. Spend some time to learn how bloggers and video creators make money and how they get their content shared. Treat this like a business and it will grow like one.
  • Have fun with it! You might not make much money at first so pick a topic you enjoy talking about and have fun with your community of followers.

While passive income may not exist in the sense we read about online, seeking a second source of income is never a bad thing. Most of these ideas can develop from a hobby into a full-time business and make six-figures a year. Put in a little work and a whole lot of patience and someday they might just turn into that passive income you always wanted.