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Passive Income Ideas Requiring Upfront Money Investment

This article will describe ideas to create passive income that requires money. The more money you already have to invest, the more you will get in passive income.

It is the result of 1-week research online coupled with years of experience that let me be financially secure.

Even the Internal Revenue System has published a study about passive income. The purpose of passive income is to not be actively involved to generate income. Hence aligning with the “set it and forget it” approach. So, the ideas discussed will not include time-consuming activities such as stock picking, direct rental property management, or online courses.

The Gist (“Too Long Didn’t Read” version of the article)

In this article, almost all online platforms show average returns. Those are the percentages of the amount invested that can be earned in a year if you deposit money on that platform. The money upfront requirement can be in cash or in money you used to buy items you can rent.

1 CD or Bond Ladder and Annuities

“Ladder” means a set of different durations. For example, you could create a bond ladder with periods of 1, 3, 5, 7, and 10 years. When the first bond reaches expiration after 1 year, the “ladder” still has bonds that will mature (expire) in 2, 4, 6, and 9 years.

This approach is useful because it minimizes the risk of reinvesting money when bonds offer too low-interest payments. The ladder approach can be applied also to CDs and annuities.

The 3 alternatives (bonds, CDs, and annuities) offer low returns but also low financial risks. Keep in mind that there are penalties for withdrawing the money before the agreed expiration date. So, it is wise to use only money not needed in the short term.

Also, the 3 alternatives could include fees and you have to check the fine print when opening an account to identify the withdrawal terms and conditions. Sites such as Cit Bank and Ally Bank offer no penalty for CD withdrawal after the first 6 days of deposit.

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Bonds can be created by governments and companies as a way to get funds. Two of their main factors are the interest rate and the bond duration. The interest rate defines the amount that will be paid to the investor who bought the bond. The duration defines when the bond will expire (reach maturity).

So, all money is paid to investors. Bonds are typically labeled as fixed-income types of investment. It means that they provide less volatility (price variations) than other investments like stocks. New York University did a study concluding that bond returns range between 1% to 4%.

Municipal bonds can be tax-free if you live in the city that created the bond. For example, you can live in New York and buy BlackRock’s New York Municipal Opportunities Fund which is bundling many bonds in a fund. Funds are ideal for people not willing to take the time to individually analyze bonds.

Exchange-Traded Funds (ETFs) can also group bonds and typically have lower fees than mutual funds. Two bond mutual funds are Vanguard Short-Term Investment-Grade Fund (VFSTX) and Vanguard Total Bond Market Index Fund (VBMFX). Also, two bond ETFs are Fidelity Corporate Bond ETF (FCOR) and Vanguard Total Bond Market ETF (BND).

Pay attention to interest rate risk. If interest rates in the bond market are rising, bonds’ prices might fall because investors will be constantly buying newer bonds.

Treasury bonds are backed by the federal government and corporate bonds are by a company. So, bond buyers could lose their money if the company defaults.

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Certificates of Deposit (CDs) and Annuities

They differ from savings because certificate owners are not allowed to withdraw the money deposited before the agreed duration (when reaching maturity). The agreed duration is stated while opening the account that will hold the certificates. Durations can range from a few months to a few years; generally in multiples of 6 months.

Since 2011, their return has been below 2%.

Check whether the financial institution is covered by the FDIC. It ensures investors up to $250,000 in case of financial institution bankruptcy

You May Like to Read: What are the Benefits of Annuities?

2 Dividend stocks, ETFs and Index Funds

Based on the stock market, their returns are linked to companies, sectors, and the global economy. A stock is a way a company has to raise money by being listed on a stock exchange.

Dividends Stocks

Many stocks offer dividends but not all. Those that have dividends, provide payments (typically quarterly) to their owners.

Picking the right dividend stock can take some time. One key metric to consider is the payout over earnings ratio. If a company offers a ratio over 110%, the company is paying more than the earnings it got. Most probably, that level of payments will not be sustainable for many years.

And what about the trend? Is the price going up or down over time? As an example of a high dividend stock, Annaly Capital Management pays 10.21% during 2021 NLY.

If you hold stocks for a long period of time, you can qualify for capital gains. Which has a lower tax bracket than income tax. So, research properly on the IRS web page to ensure to compliance with taxes.

Stock markets are impacted by the economic situation in a country and the world. It means that they are influenced by good periods but also by recessions and corrections. Tony Robbins affirms that on average a correction happens once a year and a recession once in 10 years.

Be prepared to withstand those temporary decreases in your portfolio’s value and avoid impulsive selling assets that are worthy in the long term.


Ideal to avoid the research time needed for picking the right dividend stocks. The group has many dividend stocks and provides an easy way for investors to get diversification. One dividend-focused mutual fund is Vanguard Dividend Growth Investors Fund (VDIGX). And two ETFs are Vanguard Dividend Appreciation ETF (VIG) and Fidelity NASDAQ Composite Index (ONEQ).

Index Fund

According to Investopedia, low-cost index funds like VTI or VTSAX have almost zero probability of losing everything thanks to diversification. Even more, if you invest for 20 years in a passive index fund, its returns can beat most actively managed funds.

To help you pick good dividend stocks, check the list of Dividend Aristocrats (there are 65 companies as of 2021). They have increased their dividends every year for 25 years. If one company stopped dividends during 1 year it will be out of the list. As of 2021, the company on the list with the highest dividend is AT&T with 7.38%. Another list is Dividend Kings, including stocks that have increased dividends for 50 years. To avoid individual picking, there are ETFs such as FT CBOE Vest S&P 500® Dividend Aristocrats Target Income ETF® (KNG) and ProShares S&P 500 Dividend Aristocrats (NOBL).

Many tools exist to hold those ETFs in online brokerages like TD Ameritrade, E-Trade, DeGiro for Europe, M1 Finance, and WeBull (offering 1 free stock).

3 High Yield Savings Account

Online banks offer typically the lowest fees. Also, you can get bonuses at account opening so first, check Bank Bonus. You can earn up to 1.78%, but verify whether those accounts are insured by FDIC. Banks insured by the FDIC are covered up to $250,000, money market accounts are not always.

Consider tools like Chime, providing a 0.5% return, and Credit Union Netspend for 5%.

4 Invest Automatically in Stocks with Robo Advisors

Right before accepting a new job offer, ask for company stocks as part of your hiring package. Those stocks could increase in value in the future. To invest in stocks, you can also consider Robo advisors. They let you define your investment strategy and they apply it consistently.

During the last 10, 20, and 50 years, the S&P had a 10% return on average. If you aim to earn $100 per month you can invest (using compounding effects) $7.5k for 5 years or $5k for 10 years.

Robo advisors let you avoid the time needed for stock picking. Warren Buffett does it but he reads 500 pages a day of financial statements to know how to properly invest.

Betterment has Robo advisors charging fees from 0.25% to 0.4%. These fees are lower than those charged by actively managed funds but higher than those charged by ETFs. Betterment has no fee on the first $10,000 invested. Another option is Bloom, as it can identify hidden fees in your 401k and its fees start at $45 per year.

5 P2P lending

Peer to Peer (P2P) lending can be done to people and businesses. Many people and companies borrowing from P2P platforms do not qualify for a usual bank loan, so those can be risky. Also, crises like Covid make them even riskier as people might have a lack of income.

Prosper offers a 5.5% return on average and is available from $25 loans. With it, you can check prospective borrowers’ historical data. Then, you can avoid highly indebted individuals (high debt-to-income ratios) or low incomes.

Worthy bonds, offering 5% return on average (Not FDIC insured).

PeerStreet, claims a median 8.2% return.

MyConstant offers loans backed with crypto as collateral (guarantee of payment). It is not FDIC insured and claims returns can be up to 7% and 4% for just depositing USD. In Prosper, you have to invest in one loan at a time but with My Constant, you can use a pool of loans to diversify more.

6 Crowdfunding Real Estate/REITs

REITs stands for Real Estate Investment Trusts. That legal argot means that a company acquires and manages properties on behalf of investors. Then, REITs are obliged to give at least 90% of the income they get to shareholders. Thanks to that, they are not taxed as a partnership (corporate tax does not apply). REITs holders can diversify their investments in real estate instead of buying individual properties. Managing and owning properties is expensive, lacks diversification, and takes time to manage directly. REITs offer investors a means to avoid all that.

For bigger diversification, use ETFs that contain REITs. One mutual fund is Vanguard Real Estate Index Fund (VGSLX).

Diversyfund is available to investors from $500. It invests in multi-family units such as apartment buildings. The company improves properties in around 5 years while providing cash returns and then sells the properties for capital gains.

Fundraise lets non-accredited investors invest in real estate from $500. They claim to have returns of 9.4%.

GroundFloor claims 10 % annual returns on average and is open to investors from $10. They repair properties for 12 months and provide cash returns to investors during that time. Their circulars and other documents reported to SEC are properly listed on theirs.

PeerStreet is open to investors willing to lend money and finance property buying from $1k.

Streitwise requires a $5,000 minimum investment. It offers REITs and claims on its site that have provided dividends of over 8.4% in 2021Q2, despite Covid’s effect. They avoid complicated fees and state them clearly: 3% upfront and 2% ongoing.

For more advanced individual picking options for passive income, you could consider mortgage notes (also called real estate lien notes and borrower’s notes). This is a promissory note backed by a mortgage loan. Beware of tax liens and do your due diligence in research before acquiring them.

7 Rental Income and Storage Space

Rental Income

You could outsource property management and maintenance tasks to create a passive investment. If not, you might use a lot of time and money in managing property and tenants. The pandemic has made the situation more difficult for tenants. Many might end up not being able to pay rent. Also, legal protections and eviction moratoriums can forbid you to vacate the property.

Identify your investment returns objectives and the costs (taxes, mortgage, and related expenses). Let’s imagine you want $12,000 in rental income, the monthly mortgage is $3,000 and there is $500 needed for taxes and related real estate expenses. You would need to charge $4,500 monthly rent to reach desired rental income.

There are many online platforms such as Roofstock for single-family homes and RealtyMogul for crowdfunding. The latter has recently decreased to $1,000 the minimum investment and claims it has an average return of 5.4%.

US Farmland: Farmland, Farm Together, AcreTrader

Accredited investors are those whose yearly income of more than $200,000. They can access sites like EquityMultiple for more investments.

Storage space

In the US, 1 in 11 people pay for storage space. One platform to rent your storage space is

8 Rent Car/Parking Space

A car’s value diminishes faster as it is used. So, the income obtained from renting it should be higher than its depreciation. Verify your insurance fine print to be sure you are not losing coverage if something occurs when renting the car. Many insurers might ask for an additional insurance policy in case of car renting to honor insurance claims. That could increase current vehicle costs like maintenance, repairs, washing, etc.

Renters might end up damaging the car. To cover you from that risk, Turo includes up to $1M insurance if the car rented was bought after 2005 and has less than 130,000 miles. Alternatives to Turo are Getaround and HyreCar. The latter rents cars for common services such as Uber, DoorDash, and Instacart.

Parking Space

You could list your free space on sites such as Craigslist, LeBonCoin in France, PetitesAnnonces and Anibis in Switzerland, MercadoLibre in  Latin America, etc.

Stow, It specializes in vehicle storage. You are able to list for free but it charges a 10% fee on rentals. Other options are  Curbflip, Parqex, SpotHero (that recently acquired Roverparking), and Pavemint. The latter can vet users, insure and collect payments.

9 Rent Home and Unused Space

If you go on vacation, you could get rental income that can pay for your trip when you leave or just increase your income if you stay there but still have unused available space to rent. If your available space is big enough for hosting an event, use ShareMySpace.

It lets you list online your available square footage. If you are already renting and you want to sub-rent the property to someone else, the owner’s authorization is required.

The risk of renters damaging the property exists. But services like Cozy and SpareRoom help you list your space online for rental while identifying bad tenants.

AirBnB is one of the most well-known platforms to rent. It is available in more than 220 countries and has enabled 4 million hosts to welcome 900 million arrivals since its creation in 2007. The company behind has created “AirBnB Experiences” to let users host events, meetups, and tours in a given city.

It charges 3% on every booking done through it. Others might charge more like VRBO, charging 5% per booking, and 3% additional if the guest pays with a credit card. But there are more alternatives like Vacasa, which specializes in vacation home rental.

10 Rent Household Items

It includes items like lawnmowers, mechanic and power tools, tents, coolers, etc. You can use online platforms to list your items. Then directly renting through them or just as a means to reach your customers and establish the renting prices later. Beware of associated liability for risky items like power tools and your property is damaged or stolen.

There are websites specialized in types of items. For instance, baby gear in It includes insurance on items rented. On the contrary, Frindswitha and PeerRenters are useful for all types of equipment. Finally, Spinlister lets people rent sports items such as surfboards, stand-up paddleboards, snowboards, or skis. The company charges 17.5% on each rental but claims its users can rent a bike for $500 per month.

For clothes, StyleLend is for users willing to list and rent designer dresses and accessories. RentNotBuy specializes in design brands that rent much more easily (Oliva, Alice, Eliza J, Chanel) than fast fashion (Forever21, H&M).

11 Saving Apps/Cashback Sites

Why not get something back from things we have to buy anyway? There is where cash back apps, sites, or credit card rewards shine. But getting rewards for buying is useful only if you were to buy the items anyway because you need them.

Specifically for credit cards, always pay off your cards every month. It is convenient to choose the one with a reward program related to your frequent spending. For instance, for a frequent traveler, a credit card that gives more rewards for flights could be better.

Avoid acquiring too many cards to not drop your credit score. And beware of apps that are not seriously concerned about privacy.

12 Buy a Passive Business

Such as billboards, car washes, food trucks, laundromats, vending machines, etc.

Sites like specializes in vending machines. Once buying through them, you are responsible for keeping the machine stocked and then letting hungry and thirsty people buy its items.

For ATMs, ATM Money Machine lets people buy them for $1,399. Then, the machine can be offered to the public. So its owners earn fees that others pay for using the machine. They require a permitted acquisition and an agreement with a financial institution.

For billboards, FitSmallBusiness mentions detailed estimates for physical billboards. They can be rented from $500 per month and digital ones range from $750 to more than $14,000 depending on location.

13 Cryptos and Alternative Investments

Cryptocurrencies can be held to earn interest on them following the same principle as certificates of deposit or savings accounts. BlockFi Interest Account is insured with Ledger vault but not FDIC insured. Nexo has its deposits insured by Lloyd’s bank up to $100 millions.

Finally, you could take a look at alternative investments such as high-end art with MasterWorks (opened to investors from $1,000) and fine wine investing with Vinovest starting at $1,000. If you need further information you can check out this alternative investment blog.

What is the Next Step?

If you try all ideas at once you might end up overwhelmed and doing nothing. It is wiser to pick one idea and establish a passive income source. Then improve it for more income or pick another once the first is set and ready to go on without your active involvement.

The IRS has retirement plans for self-employed people. In general, retirement accounts have tax advantages. Take a look at an Individual Retirement Account (IRA), Roth IRA, or Simplified Employee Pension IRA (SEP-IRA).

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