23 Best Passive Income Ideas To Build Wealth – Clark Howard

Passive income can help you achieve financial freedom and live the life of your dreams. Who doesn’t want to get paid while you sleep, travel the world or spend time with your family?

When you work, you trade your time for money in some fashion. With passive income, you get paid without actively doing anything.

In this article, I’ll examine some of the best passive income ideas that can help you build wealth.

Table of Contents

What Is Passive Income?

Passive income allows you to make money mostly without actively working.

No matter how hard you’re willing to work, there’s only so much time in a day. As such, passive income can scale more easily. With enough passive income, you can achieve financial independence.

As Warren Buffet once said, “If you don’t find a way to make money while you sleep, you will work until you die.”

The IRS defines passive income as earnings from a rental property or any business in which you aren’t actively involved.

I’ll list and analyze the best passive income ideas shortly. But it’s important to understand that passive income isn’t synonymous with “get rich quick with zero work or risk.”

You usually have to put in time, money or both upfront to achieve passive income. And you may need to work or invest more as time goes along in order to build or maintain your passive income stream(s).

Developing a passive income stream can be more or less risky and more or less lucrative. You can wrap your car in an advertisement for a small amount of money. Or you can invest millions of dollars in a business in hopes of multiplying your investment.


As you read through some of the best ways to make passive income, make sure you understand the risks and how each may or may not fit your life, financially or otherwise.

Best Passive Income Ideas: Traditional Finance

1. Invest in a Business as a Limited Partner

Time Horizon: Long
Cost: Expensive
Risk: High
Reward: Large

Becoming a limited partner in a business is perhaps the pinnacle of passive income, especially when it works out.

You won’t necessarily maximize your return as an angel investor, as many people will make better returns with a fairly aggressive stock market strategy.

If you’re an early investor in a Facebook, PayPal or Airbnb, sure, you’ll be wildly successful. But that’s a very difficult thing to achieve. Even then, your investment will be illiquid for a long period of time.

Also, you typically need to make a lot of individual bets on startups if you’re going to privately invest in companies. You’re hoping to hit a home run, but many times, you’ll never see the money you initially put into a deal.

2. Own a Passive Income-Friendly Business

Time Horizon: Medium
Cost: Relatively inexpensive to expensive
Risk: Wide range
Reward: Wide range, but somewhat capped

If your goal is to earn passive income with little to no work, this route probably isn’t going to appeal to you on paper.

However, there are some businesses that set up well as somewhat passive and potentially become very passive if you hire people.

Examples include vending machines, storage rentals, car washes and laundromats.


3. Invest in Dividend Stocks


Time Horizon: Long
Cost: At your discretion
Risk: Moderate
Reward: Modest, in context

If your investment portfolio has any sort of meaningful diversification, you’ll almost certainly own some dividend stocks. These companies pay out a percentage of their earnings to shareholders, usually quarterly.

You can reinvest those dividends or keep the cash. Some people focus almost entirely on dividend stocks, hoping to live off the dividend checks during retirement while not touching the initial principal. However, this idea may not be as good as it sounds.

4. Buy Bonds

Time Horizon: Variable
Cost: At your discretion
Risk: Relatively low
Reward: Modest

Bonds are a classic passive income strategy. Also referenced as “fixed income,” bonds are a loan you make to a government or corporate entity. If that entity doesn’t default, you’ll get paid back with interest after an agreed-upon amount of time.

Money expert Clark Howard thinks Series I Savings Bonds are worth considering, especially during times of higher inflation. He also says it may be worth keeping your emergency fund in a short-term bond fund when interest rates are extremely low.

5. Put Money in Savings Accounts, CDs or Money Market Accounts

Time Horizon: Medium
Cost: Almost nothing
Risk: Extremely low
Reward: Currently small

You may be able to get 0.50% APY from one of the best high-yield savings accounts right now. That means your $1,000 will turn into $1,005 after one year, but will probably be “worth” less than it was due to inflation.

A Certificate of Deposit (CD) and a money market account are like savings accounts with extra rules. In exchange for maintaining a higher balance or agreeing to leave your money in for a certain time period, you may be able to get a higher interest rate than you would from a traditional savings account.

Best Passive Income Ideas: Rentals

6. Own Rental Property

car washes

Time Horizon: Medium
Cost: Expensive
Risk: Fairly high
Reward: Somewhat high


Renting to other people is a great way to make passive income. But owning rental properties can be hard work, especially if you’re managing the properties yourself.

You will need skill and effort to evaluate properties, hunt and negotiate good purchase prices, complete necessary renovations, find and manage tenants, maintain occupancy rates and troubleshoot problems.

It’s possible to outsource parts of that list. But if you were to make “so you think passive income won’t involve any work” jokes, rental properties would be high on the list of examples.

There’s also an opportunity cost to owning and managing a rental property. You may or may not outperform an S&P 500 index fund, which can require much less work.

7. Rent a Room in Your Home

Time Horizon: Short To Medium
Cost: Inexpensive
Risk: Low
Reward: Between modest and moderate

Finding a roommate or renting a room in your home via Airbnb or an equivalent service is a lower-risk way to make passive income.

It will take some upfront work, as you’ll need to take some nice photos and write some marketing copy. If you’re renting on a short-term basis, you’ll also need to clean often or pay someone to do it for you. But if you enjoy hosting, this can be a great way to turn your extra space into a source of passive income.

8. Rent Your Car


Time Horizon: Short
Cost: Relatively inexpensive
Risk: Low
Reward: Small

I’m not talking about driving for Uber, Lyft or DoorDash. Companies such as Turo and Getaround will allow you to rent your car to other people.

With Getaround, for example, you’ll need to pay a one-time $100 fee and then $20 per month. The Getaround website claims that its drivers earn “about $500 per car per month.”


9. Rent Your Equipment

Time Horizon: Short
Cost: Inexpensive to moderately expensive
Risk: Low
Reward: Small

You can learn a lot about your entrepreneurial and marketing skills by attempting to rent the equipment you own.

Potential options for this include power tools, camping equipment, lawncare tools such as a lawnmower and baby equipment.

10. Rent Your Clothes

Time Horizon: Short
Cost: Inexpensive
Risk: Low
Reward: Small

This seems to be a small industry, but there are people willing to rent clothes from peers — especially high-end designer brands.

StyleLend is one such site. According to its website, you can make $150 per week renting a Gucci purse, for example.

11. Rent Your Pool

Internal Revenue Service

Time Horizon: Short
Cost: Inexpensive
Risk: Low
Reward: Modest to moderate

Believe it or not, if you have a pool in your backyard, you can make money renting it out. The service, managed through a company called Swimply, became popular during COVID quarantines and has seen another spike of interest this summer.

12. Rent Your Driveway

Time Horizon: Short
Cost: Inexpensive
Risk: Low
Reward: Small

Do you live near an airport, stadium or concert venue? Or a popular area where parking is hard to come by? You may be able to make money renting your driveway via Neighbor and a few other sites.


Best Passive Income Ideas: Lending

13. Peer-To-Peer Lending

Time Horizon: Somewhat long
Cost: Moderate to expensive
Risk: Relatively high
Reward: Moderate to relatively large

It’s possible to make double-digit annual returns via peer-to-peer lending sites such as Prosper and Lending Club. These sites allow you to “invest” in personal loans.

There are plenty of risks involved. Just like most investments, it’s probably smart to diversify by putting smaller amounts into many loans rather than a large amount into a single loan.

Best Passive Income Ideas: Spending Rewards

14. Credit Card Rewards

Time Horizon: Long
Cost: At your discretion
Risk: Low, assuming you pay off your credit card balance each month
Reward: Small to modest

Some of the best credit card rewards programs pay 2% cash back on all purchases. If you use a credit card often, it’s worth spending time to find the one with the best rewards program for you.

Just make sure to pay off the balance at the end of each month, because no amount of high-interest credit card debt is worth 2% cash back.

15. Cash Back for Shopping

Time Horizon: Short
Cost: Minimal
Risk: Low
Reward: Small

If you’re the type of person who says, “It was on sale, so it would’ve been a waste of money not to buy it,” anything that gamifies and encourages further shopping may cost you more money than you make.

However, there are some popular cash back programs that track your spending and offer rewards and discounts. Some of the prominent options include Rakuten, Ibotta and Honey.

Best Passive Income Ideas: Long-Tail Content

16. Affiliate Marketing

Time Horizon: Medium
Cost: Somewhat inexpensive to moderate
Risk: Modest to moderate
Reward: Small to relatively high


Probably the most common form of affiliate marketing involves writing blog posts around a topic, ranking high in the search results and including an affiliate link or links through which you get paid.

Affiliate marketing comes in many forms and sizes. But at minimum, doing it well requires a good amount of upfront work and knowledge.

17. Teach an Online Course

Internet Security & Transactions Services

Time Horizon: Medium
Cost: Inexpensive to expensive
Risk: Depends on the time and money you put into it
Reward: Small to high

A popular online course can be a big moneymaker. However, most people underestimate just how much time and effort it takes to generate a lesson plan, record video(s) with professional production values, offer customer support, market your course and answer questions.

If you can do all of those things successfully, though, you can make some nice recurring revenue.

Check out Skillshare, Udemy, Kajabi and Teachable.

18. Start a YouTube or Twitch Channel

Time Horizon: Long
Cost: Inexpensive to moderate
Risk: Low
Reward: Small to large

If you’re an expert on a topic, or you’re just wildly entertaining, YouTube and Twitch can be lucrative. You’ll need to be good at marketing — usually through SEO — and audience-building.

But if you create regular content for a long period of time, or if you produce evergreen videos on often-searched topics and you are one of the top videos in the results, you can potentially make some nice passive income.

19. Write an E-Book

Time Horizon: Medium to long
Cost: Relatively inexpensive
Risk: Low, aside from your time
Reward: Low to moderate with a rare exception


Similar to teaching an online course or starting a YouTube or Twitch channel, this option will involve considerable work upfront.

If you already have an audience that follows you for your expertise on a particular topic, at least you’ll have a head start on distribution.

It’s not easy to produce a successful e-book, but if you do, you’ll be able to sell, sell and sell it again.

20. Music Royalties

Time Horizon: Long
Cost: Nearly unlimited range
Risk: Dependent on cost
Reward: Nearly unlimited range

There are two ways to earn music royalties: Buy the rights to a pre-existing song or collection, which can take millions, or create your own music and charge royalties for use.

Royalties can be complex in terms of the rights involved, enforcement and trying to sell them. However, if you are musically talented, there are third-party services that can help package and sell your music.

Best Passive Income Ideas: Small Effort, Limited Reward

21. Advertise on Your Car


Time Horizon: Short
Cost: Inexpensive
Risk: Low
Reward: Small

If you’re OK with decking out your car in an advertisement (or multiple advertisements), you can make tens or even hundreds of dollars per month. Some of the most well-known options include Stickr, Sticker Ride, Wrapify and Carvertise.

22. Sell Unused Internet Data

Time Horizon: Short
Cost: Free
Risk: Low
Reward: Small

You can sell unused internet data for money each month. Note that this means you also give up some online privacy. Honeygain is just one website that brokers these transactions.


23. Sell Your Viewing Habits

Time Horizon: Long
Cost: Free
Risk: Low
Reward: Small

Earn up to $50 per year by allowing Nielsen Computer & Mobile Panel to access your computers, smartphones and tablets. Nielsen has recorded consumer behavior, specifically viewing habits, for a long time.

If you’re OK with the company getting some access into your life and if you qualify, you can get what amounts to a fairly nice restaurant dinner from them each year.

Final Thoughts

There’s a huge variety of potential passive income streams. Some take just a few minutes and little to no money to set up and start paying out in days or weeks. Some require millions of dollars and many years with no guarantee of ever seeing a single dollar in return.

The dream of being financially independent and living off passive income can be alluring.

When you evaluate the best passive income ideas, make sure you’re realistic about the time you have available, the cost and the risk vs. reward.

More Clark.com Content You May Like:

You May Also Like