November 11

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How To Make Passive Income Online

By Hanson Cheng

November 11, 2022


Making money online is a great way to earn extra income or replace your traditional job. But how do you actually make passive income online?

With so many ways to get this done, it can be hard to know where to start. In this article, I'll share all the best ways to make passive income online. From affiliate marketing to creating your own products, there's sure to be a method that suits you.

Let's get started!

What Is Passive Income?

While it might be tough to hear, learning how to make money online through passive income doesn't start with the income being passive. While it would be nice to sit back and collect money from the get-go while you sleep, that's not reality.

Building up a passive income stream is possible, but it takes time and effort to get there.

So what exactly is passive income? In a passive income model, money comes in without you having to do much to earn it and keep this income stream going. This could be from interest in investments, rental properties, or even simply from having a popular blog or YouTube channel. The key is that it's something that doesn't require your constant attention (or work) to maintain.

Ideally, you want to build up a few different passive income streams so that you're not entirely reliant on any of them. This way, even if one stream dries up, you still have others to fall back on.

Pros And Cons Of Making Passive Income Online

Like anything, there are pros and cons to making passive income online. It's not a get-rich-quick scheme, and it's not without its challenges. But if you're willing to do the work, it can be a great way to financial freedom.

PROS

  • You can make money while you sleep: While it's a bit of a cliche, you can indeed make money while you sleep with passive income over the long term. This is a massive benefit if you want to be able to enjoy your life and not be chained to a desk all day. This also means you don't have to constantly work to earn money - it will come in even when you're not actively doing so.
  • It can provide financial freedom: If you can build up a significant enough passive income stream, it can eventually replace your traditional job and give you the financial freedom to do what you want when you want. This is the ultimate goal for many people who start down the path of making passive income online.

CONS

  • You need to put in the work upfront: Unlike a traditional job where you get paid for every minute you work, with passive income, you need to do the work upfront before you start seeing any money coming in. This can be a challenge if you're not used to working for yourself, but it's essential if you want to build up this type of income stream.
  • There's no guarantee of success: Even if you do everything right, there's no guarantee that your passive income stream will make you any money. This is especially true in the early stages when you're just starting and haven't built up a large enough audience. So don't expect to quit your day job just yet!

Best Ways To Make A Passive Income Online

Now, let's consider the various methods you can use to make passive income online.

Invest In Dividend-Paying Stocks Online

One of the most legit passive income online ideas is to invest in stocks that pay dividends. For those unfamiliar with the term, dividend stocks are just like regular stocks - except they also pay periodic dividends to shareholders.

Dividend stocks can be a great way to earn a passive income because you're essentially getting paid just for owning the stock. And if the stock price goes up, you'll make even more money.

Of course, there's always a risk involved with investing, so you should only invest if you're comfortable with it. But if you're looking for a passive income idea that has the potential to make you some decent money, this one is worth considering.

There is then the question of which type of stock to invest in, with the main types being high or low-yield stock options. While this depends on various factors, in general, you should be looking for stocks with a dividend yield of 2% or more. Anything less than that isn't worth the risk in most cases.

Create A Blog And Generate Ad Revenue

One idea you'll find when reading an extra money guide is to share your knowledge and expertise through a blog. If you can build up a large enough following, you can generate significant ad revenue - which means you'll be making money even while you're not actively working on your blog.

Of course, creating a successful blog takes time and effort. To generate ad revenue from your blog, you'll need to sign up for an advertising network like Google Adsense or Mediavine. Once approved, you'll be able to place ads on your blog and earn money every time someone clicks on them.

The typical steps involved in creating a blog and generating ad revenue are:

  • Choose a niche: Pick a topic you're passionate about and know people are interested in.
  • Create content: Write helpful and informative articles that will attract an audience.
  • Drive traffic: Use various channels, including SEO and social media, to drive traffic to your blog.
  • Sign up for an ad network: Once you have a reasonable amount of traffic, sign up for an advertising network.
  • Place ads on your blog: Once approved, you'll be able to place ads on your blog and earn money every time someone clicks on them.

Also, once you have a good amount of traffic to your blog, you can reach out to companies that would fit your target market and offer to place sponsored content on your blog. This is another excellent way to generate passive income from your blog.

Sell Digital Products Online

A passive income online business can be accomplished by selling digital products. Creating and selling information products is a great way to make money while sleeping because once the product is created, it can be sold repeatedly with minimal effort.

The most popular type of digital product is an eBook, but you can also sell items like video courses, audio files, templates, stock photos, etc. The sky's the limit when it comes to digital products - so it's wise to choose something you're passionate about and get started with the idea.

When it comes to the actual steps to take when selling digital products online, you'll need to set up a sales page on your website. This is where potential customers will go to learn more about your product and purchase it if they're interested.

You can also sell digital products on marketplaces like Gumroad or SendOwl. These platforms make it easy to set up a digital store and start selling products with just a few clicks.

The steps involved in selling digital products online are:

  • Decide what you'll sell: Knowing what digital product(s) people will buy and what solutions such a product will provide is critical. 
  • Create the product: Do your best to create a high-quality product your target audience will be interested in.
  • Set up a sales page: Use WordPress or any other website-building platform to create a sales page for your product. Be sure to include compelling copy and attractive visuals.
  • Start selling: Once your sales page is live, start promoting your product and collecting payments.
  • Deliver the product: Once a customer purchases your product, set up automation to have it delivered electronically.

Sell Physical Products Online

Selling physical products is yet another avenue worth exploring. Thanks to platforms like Shopify and WooCommerce, it's easier to set up an online store and sell digital and physical products.

The great thing about selling physical products online is that you can automate a lot of the process - everything from manufacturing to shipping - so you can focus on other aspects of your business.

Of course, there are some downsides to selling physical products (namely the high cost of inventory and shipping), but if you find the right niche and development, it can be a great way to generate passive income.

From drop shipping to print-on-demand, there are several ways to sell physical products online. The steps involved in setting up a physical product business are:

  • Find a niche: Again, as with any other business, it's essential to find a niche for your physical product business. This will help you focus your marketing efforts and attract the right customers.
  • Research products: Once you've found a niche, it's time to start researching products. What kind of products would your target market be interested in? How can you make your products stand out from the competition?
  • Set up a store: Use the platform of choice to set up an online store for your physical products. Be sure to choose a platform that's easy to use and has all the features you need - from automatically adding tax to integrating with the right payment processor, the right features can make or break a business.
  • Promote your store: Once your store is up and running, start promoting it through social media, your blog, and other channels. The more exposure you can get, the better your chance of making sales.
  • Fulfill orders: When an order comes in, fulfill it promptly and send the product to the customer. That said, if you're using a dropshipping service, they'll take care of this for you. In this case, ensuring you're working with the right suppliers is vital.

Create An Online Course

Another great source of passive income online revolves around great content - and what better way to show off your expertise than by creating an online course?

Thanks to platforms like Udemy and Skillshare, it's easier than ever to create an online course and start earning money passively. And the best part is, once you've completed recording the course and published it online, you can sell it repeatedly - so it's a great way to generate serious passive income.

Said differently, creating an online course requires a bit more work upfront than some other methods on this list, but if you're willing to put in the effort, it can be a great way to earn passive income for years.

Also, an online course can be an extension of your blog or an entirely separate platform.

Here are some questions to ask yourself when creating an online course:

  • What is the market for my course? Who is my target audience?
  • What format will my course be in? Video? Audio? Text?
  • What platform will I use to host my course? Udemy? Skillshare? My own website?
  • How much time and money will I invest in creating the course?
  • What kind of packaging and marketing will I need to sell my course effectively?
  • How often will I need to update the course content to keep it fresh and relevant?
  • What other courses in my niche can I use as inspiration (or competition)?

Offer Consulting Or Coaching Services

Learning how to create passive income online can come through building an agency that helps people get better results in their life or business.

If you have the experience and expertise to help people achieve their goals, you can offer consulting or coaching services - either in person or online - and start building your reputation in this area.

The great thing about offering consulting or coaching services is that you can typically charge a premium for your time and knowledge. Then, when it comes to turning this into a passive income machine, you'll be able to hire other people with the right expertise to offer consulting or coaching services under your business brand. 

This will help you scale your business quickly while also turning the whole process into a passive way to generate an income once all the operations are put in motion.

Generate Leads For Businesses

An easy passive business model that can work for just about anyone consists of generating business leads.

There are many ways to do this, but the premise is that you find businesses that need leads - usually in the form of potential customers or clients - and then help them get those leads onboarded.

For example, let's say you're good at digital marketing. You could start a lead generation business where you help companies get more traffic and conversions from their online presence. 

The great thing about lead generation is that it's usually a straightforward business model and can be pretty profitable. All you need to do is find businesses that need leads (which is virtually every business in operation) and then help them get those leads.

Learning how to generate leads comes down to choosing a platform and learning how to use it effectively. From social media channels like Facebook Ads and LinkedIn, to paid traffic platforms that include Google AdWords, there are several ways to generate highly qualified leads you then sell to the right business.

Build An App

Another great way to earn passive income online (that also requires an initial outlay of time and money but can generate passive income for years to come) involves building an app.

This is no small feat - it takes time, effort, and money. But if you can create an app people love and consistently use, it can be a great way to generate some serious money.

Finding and fulfilling a specific need is at the heart of any good app. So, before you start thinking about how to build an app, you need to find a problem that people are struggling with and figure out how your app can help them.

Once you've done that, it's time to build your app. This will require some know-how - whether starting from scratch or using a no-code platform.

Invest In Real Estate

People love real estate as one of the top passive income online business ideas because it has the potential to generate a significant amount of money with relatively little effort.

While there are several ways to invest in real estate - from traditional buy-and-hold investments to more creative options like Airbnb and home-flipping - the basic idea is to use other people's (or a bank's) money to buy a property and then explore the various options that open up.

With these options usually involving a property that appreciates over time, real estate can be a great way to generate long-term passive income.

Also, note that this can be an online/offline hybrid model or even a completely offline method, depending on whichever way you run your business.

Become A YouTuber

If you want to earn passive income online but don't want to do any of the above, you could consider becoming a YouTuber.

The basic idea is to create videos people want to watch and then monetize your channel with ads or sponsorships. Understanding the tools YouTube provides and having an idea that can educate or entertain (or both) will help ensure your channel's success.

You will have to get some essential equipment, like a good quality camera, microphone, and editing software. You'll also need to put in the time to create videos that people will want to watch. But if your channel picks up, there are tons of monetization methods that you will have available at your disposal.

How To Make Passive Income Online With No Money

Investing money will generally make any business process easier, and building up a passive income online is no different. While starting an online business with no money is hard, you'll find a way if you have the will to do it.

The following are a few ideas that require little to no money to get going but do require time and effort.

Write An E-Book And Market It

If you have a knack for writing and some knowledge to share, why not write an e-book?

You can use platforms like Amazon Kindle Direct Publishing or CreateSpace to publish your book.

Once your book is available, start marketing it on social media and other free channels to reach as many people as possible.

Sell Niched Photography Online

If you're a photographer, then you could sell your photos online. There are plenty of stock photography websites where you can upload your images and earn money each time they are downloaded.

Try to specialize in a particular niche to stand out from the crowd. This could include subsets of popular niches such as travel photography, food photography, or nature.

Sell Using Affiliate Marketing

Affiliate marketing is a great way to make money online without creating your own products or services. You promote other people's products and earn a commission for every sale you generate.

Many affiliate programs are available, so be sure to research the options before starting out. With this type of business, matching the right product with the right audience is critical. As such, having access to the right group of people and being creative in how you market to them can allow you to start a passive online business for free.

Income Sources Of The Riches People

In this final section, I wanted to explore the income sources of some of the wealthiest people in the world.

As you'll see, many of them have made their money through various channels, which over time become passive, meaning that they require less and less work to maintain.

Rental Income

Rental income is one of the most popular forms of passive income, especially among wealthy retirees. It offers a steady income stream with the potential for appreciation if the property is well-maintained and in a good location.

For many, rental properties also offer the advantage of deducting certain expenses, like mortgage interest or repairs and maintenance, on your taxes.

Royalty Income

Another form of passive income that can be very lucrative is royalty income. This is money you earn from owning the rights to something, like a patent, copyrighted work, or trademark.

The key to making good money from royalties is to create something of long-term value – i.e., something people will continue to want or need long after you build it.

Those that have gotten rich from royalty income have typically done so by inventing something or creating something that has become very popular over time.

Profits

Another common form of passive income profits can come from a business you own. If you have a successful business, at some point, you may be able to negotiate a deal where you sell parts of it and continue to receive a perpetual income from this sale.

This can be a great way to make passive income, but it does require that you have a successful business in the first place, which requires a long-term view.

The best types of businesses that generate profits that one can eventually sell are those with high barriers to entry, substantial brand equity, and a loyal customer base.

Investment Income

Another great way many make long-term passive income is through investments. This can be done in various ways, such as investing in stocks, bonds, or real estate.

Successful investors are always cautious about how much of their portfolio they're willing to risk. They often have a diversified portfolio that includes investments in different asset classes. This minimizes their risk while still allowing them the potential to earn a good return on their investment.

Interest income

Finally, another form of passive income is interest income. This is money that you earn from lending your money to someone else.

The key to making good money from interest income is to lend your money to a reliable borrower who will repay the loan with interest. 

Successful lenders can make accurate decisions regarding who to lend their money to. They also diversify their lending portfolio across many borrowers to minimize their risk.

How To Make Passive Income Online - FAQ

Can I Leverage My Skills To Make Passive Income Online?

Yes. For example, if you take a position as an online business manager, you can learn the ropes when running a successful online business. Then, you can offer your services to others who need help running their businesses.

Over time, you can hire staff to help you with the day-to-day running of your business, freeing up your time to focus on strategic tasks and leaving you with a more passive, residual income.

What’s The Best Way To Learn How To Earn Passive Income Online?

There are a lot of ways to make money online, but not all of them are created equal. Some methods are more passive than others, meaning you can earn money without putting in a lot of active effort.

Depending on the industry and your skill set, the above list includes a few methods that can help you get started with earning passive income online. Knowing what you enjoy doing and what you’re good at will help you better match up with one of the options above.

Conclusion

As you can see, various ways to make passive income online exist. The key is to find the one that best suits your needs and goals.

While the start-up costs for some of these methods may be higher than others, the potential for long-term passive income makes them attractive.

So, if you're looking for a way to make extra money without having to put in long hours at a traditional job, consider one of the above methods.

Last Updated on November 11, 2022 by Hanson Cheng

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Hanson Cheng

About the author

Living in Bali with my Fiancee and puppy, (Alina and Pickles).
Scaling online businesses and sharing lessons learned on this website and in our email newsletter.

Always happy to hear from you, so find me on Instagram if you want to say hi!

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