What is Passive Income? Passive Income Definition and Terms
By Martin Hurley
Updated May 2023
So what is passive income?
Passive income is an income stream that comes in even when you are not actively engaged in the activity or business generating the income. It is a great way to create a reliable and steady source of income without having to be constantly involved in managing it.
You can earn passive income from a variety of sources...
- Rental income from real estate (houses, apartments, land, etc)
- Collecting royalties from intellectual property such as books, music and artwork
- Investments in stocks, bonds and other financial instruments
Additionally, you can also make money through affiliate marketing, creating digital products, subscription services, or by reselling items online.
With the right guidance and dedication, you can create a passive income streams that will provide you with financial freedom in the long-term.
The simplest definition of recurring or passive income is income that flows in on a regular basis without requiring active effort to generate it. Although you still need to set it up, it can be worth the time and effort to get it started.
Passive income ideas
No matter what type of passive income strategy you choose to pursue, understanding the basics of how it works and how to best leverage it is key to success.
This blog has free guides, resources and programs that can help you learn about and maximise your returns from passive income.
Just looking for some quick basic passive income ideas?
Here's some further ideas to build up your cash flow...
- Invest in dividend stocks like ETFs or mutual funds.
- Rental property or room, bungalow, studio or AirBnB.
- Selling digital products such as eBooks, online courses and software programs.
- Set up an online store and sell physical items, such as handmade crafts or vintage clothing (not completely passive as it's quite hands on).
- Create an app or game and collect royalties from sales.
- Participate in online surveys and focus groups for cash rewards.
- Invest in peer-to-peer lending platforms such as Lending Club or Prosper.
- Generate income through Youtube by creating sponsored content, video reviews or vlogs.
- Selling stock photos, videos, emojis, designs or illustrations online.
- Build a blog and monetise it with ads, affiliate marketing and sponsored posts.
- Develop an Amazon FBA business (fulfillment-by-Amazon) and sell products on Amazon’s massive marketplace platform.
- Create a membership website and offer exclusive access to content for a monthly fee.
- Set up an Etsy shop and sell handcrafted items (or merchandise).
- Flipping websites or domain names for profit.
- Offering consulting services such as web design, social media management or SEO optimisation.
- Writing and publishing a book on Amazon KDP to collect royalties.
- Invest in cryptocurrency such as Bitcoin or Ethereum for long-term passive income.
- Become a landlord and collect rent from tenants.
- Create an online course and sell it on platforms like Udemy or Teachable.
- Selling advertising space on your blog or website.
- Become a drop-shipper and sell products from wholesalers without having to buy inventory up front.
- Launch an influencer marketing campaign on social media platforms such as Instagram, Twitter, or YouTube to promote products and services for a fee.
- Crank some dollars into a high yield savings account for interest income.
Passive income definition
The simplest definition of recurring or passive income is income that flows in on a regular basis without requiring active effort to generate it.
Having said that, generally you need to set up the income streams first. This can take some effort, and chew through your time. Sometimes it requires upfront investment too.
Like we mentioned, these income streams (also known as multiple streams of income) can come from investments in the stock market or real estate, and also from digital products like courses, software and subscription services.
Passive, or active income, provides a reliable source of income that can offer financial freedom and security.
It is a great way to build wealth over the long-term. With some dedication and planning, it can be incredibly rewarding.
Passive income opportunities
So, how many income streams to set up?
Set up as many passive income streams as you want! Whether that's real estate investment trusts or dividend stocks, the opportunity is yours for the taking.
Or maybe you just want to create passive income from a few of the ideas above. The more income streams, the more the money flows in.
Some income streams bring in a few dollars a month, others a few hundred dollars.
Keep in mind you'll probably need to chat with an accountant or financial advisor regarding taxable income at some stage too.
It's not always easy to get it right, but when you realise you've actually created a passive income stream, it's incredibly motivating!