10 Passive Income Ideas for 2025 and How Much You Can Make
Passive income is a steady stream of unearned income that doesn’t require active traditional work to maintain. Common ideas for earning passive income include investments, real estate or side hustles.
You can earn passive income through investing in certain financial assets or by starting businesses that, after an initial investment, start to generate income without regular work. The taxes you’ll pay on passive income may vary depending on the source of the money, so make sure you keep careful records of your earnings.
What is passive income?
Passive income is money you can earn without working a traditional job. You can earn passive income by renting out property, through dividend stocks or a high-yield savings account.
Most ways to generate passive income require an upfront investment of either money, time or both. But once you’ve made that initial investment, passive income can pay off for years to come.
1- Dividend index funds and exchange-traded funds
You can also invest in index funds or exchange-traded funds that hold dividend stocks rather than picking and choosing individual stocks to buy.
This is a form of passive investing for those who prefer a more hands-off approach.
Index funds hold a well-rounded selection of many stocks that aim to mirror the performance of a given index, such as the S&P 500. A dividend ETF or index fund will invest in a selection of stocks that pay dividends. Index funds can help balance portfolio risk, as market swings tend to be less volatile across an index compared with individual stocks.
Dividend ETFs offer the diversification benefits of index funds while mimicking the ease with which stocks are traded. To invest in dividend stocks, index funds, ETFs or other publicly traded assets, you’ll need to open a brokerage account if you don’t already have one.
How much does it pay?
Similarly to dividend stocks, dividend funds vary in their payout. Currently, the stocks on our list of the best dividend ETFs range from about 3.5% to almost 8%. Say you picked a fund that paid 5%. If you started with $10,000, after one year you would have made just over $500. That doesn’t take into account for the growth of your ETF over time or your taxes owed.
2- Bonds and bond index funds
Rather than buy an ownership stake in a company through stock, bonds are a way for investors to lend money to companies — as well as federal, state and local governments — and collect interest income. Bonds are considered a safer investment than stocks, but also generally earn a lower return on your investment.
Experts suggest investing a portion of your portfolio in bonds because of their lower volatility and relative safety compared to stocks, then having a higher ratio of bonds in your portfolio the closer you are to your investing goal (such as retirement).
How much does it pay?
Depending on the bond you buy, and the amount of time you hold it for, the amount you can earn can range. In 2024, the annual average return for a U.S. Treasury security with a 10-year constant maturity was 4.21 Using that figure, if you invested $10,000 and the bond paid interest every 6 months, you would make about $210 semiannually.
3- Real estate investment trusts (REITs)
If you want to build passive income from real estate without the fuss and bother (not to mention the hefty down payment) of buying and managing properties yourself, REITs may be the answer.
Similar to mutual funds, REITs are companies that own commercial real estate, such as office buildings, retail spaces, apartments and hotels. REITs tend to pay high dividends, but they vary in complexity and availability. Some are publicly traded on stock exchanges; others are not.
New investors may want to stick to publicly traded REITs, which you can purchase through an online broker. You can also diversify your real estate holdings by investing in mutual funds or ETFs that track multiple REITs.
How much does it pay?
The FTSE NAREIT All Equity REITs Index, similar to an equity index, tracks the performance of equity REITs. From 1972 to 2019, REITs returned an 11.8% annual return compared to the S&P 500’s 10.6% annual return . This gives us an idea of their overall performance, but for truly passive income, you’ll want to look at a REIT’s dividend.
Let’s say that you invested in a REIT fund that had a dividend yield of 3.68%. That means if you invested $10,000 and held it for a year, you would make around $373 dollars.
4- Money market funds
Like high-yield savings accounts, money market funds are currently paying lucrative interest rates — you can find rates upwards of 4%. Money market funds are mutual funds that invest in lower-risk securities like short-term government debt or corporate bonds that pay income. In some cases, that income may be tax-exempt. Keep in mind that money market funds are not the same as money market accounts, which are more similar to a savings account and typically come with FDIC insurance.
How much does it pay?
At the time of this writing, the highest money market fund rate on our list of the best money market funds was 4.20%. If you started with $10,000, and let it sit for a year with monthly compounding, you could make just over $428.
5- High-yield savings accounts
Another way to earn passive income (albeit at a lower level than stocks and bonds) is a high-yield online savings account, which can be ideal for growing your emergency fund. The interest paid by savings accounts is added to your balance.
High-yield accounts are a type of federally insured savings account that earns an interest rate that’s often much higher than the national average. The APY of these high-yield accounts may vary slightly, and over time, those small differences add up to real cash, so it pays to shop around for where you put your savings.
How much does it pay?
At the time of this writing, the best high-yield savings rate on our list of the best high-yield savings accounts was 4.75%. If you started with $10,000, and let it sit for a year with monthly compounding, you could make just over $485. That does not account for any taxes owed. High-yield savings accounts are a great way to earn some interest while still having easy access to your money.
6- CDs
A certificate of deposit is a type of savings account that’s used for a fixed period of time. For example, you might deposit funds in a three-year CD, and in exchange, you’ll receive a fixed interest rate for those three years. This is in contrast to a high-yield savings account, which typically has a variable interest rate.
CDs often pay higher interest rates than savings accounts, because they require you to lock up your money for a set period of time. (You’ll pay a penalty if you want to access your funds before the CD term ends.) If you’re willing to do that, locking in interest rates while they’re high can be well worth it — especially if you expect them to come down soon, as many experts do.
How much does it pay?
At the time of this writing, the best annual CD rates on our list was 4.50%. If you started with $10,000, after one year you could earn $450. That does not account for any taxes owed.
Property-based passive income ideas
These ideas revolve around owning and renting physical property. Some, like buying a rental property, may feel out of reach, but if you have a spare room you could consider renting it out.
7- Buy a rental property
Investing in real estate to earn rental income is another way to build passive income. Long-term rentals can provide a reliable source of cash if they are located in a healthy market for renters, but they also carry long-term stressors like maintaining those properties, as well as paying multiple mortgages, property tax bills and other costs.
How much does it pay?
How much you can make on a rental property is difficult to determine, since every property has a different value. In 2024, the average landlord claimed to make just over $16,000 from leased property
8- Rent out your own house
If you can’t afford to buy an entire rental property you can consider renting out your own residence while you’re away on vacation. AirBnb and Vrbo allow you to set exact dates when people can rent your spot. If you’re away for the summer or over the holidays, it may be an opportunity to earn some extra cash.
How much does it pay?
It’s maybe a little easier to quantify how much you could make as an AirBnb or Vrbo host versus buying a rental property, but it will still depend on your location, the size of your home and the quality of your listing.
According to AirBnb, the typical host from around the world earned approximately $14,000 in 2022 . Other estimates are even higher: In 2021, the average American host earned $44,235 in annual host earnings . Of course, those earnings only come after considering the initial investment, furnishing the space, taking photographs, paying taxes to AirBnb and any local or state taxes, and potentially hiring a property manger or house cleaners.
9- Get a roommate
If you’re looking to get into real estate, you can also start small: Rent out a room. Getting a roommate will provide regular, most likely monthly, passive income. Unfortunately, it may mean you have to share a bathroom and fridge space.
How much does it pay?
Depending on where you live, you could earn a few hundred dollars to over a thousand dollars a month versus living alone. For example, in New York City, the median price for a one-bedroom apartment is $4,370 a month. The median price for a two-bedroom is $5,550. If you split that with a roommate you’d only have to pay $2,775 (a $1,595 monthly savings versus if you lived alone). If you live somewhere less expensive, like Sacramento, your savings may be more like $560 a month. Akron, Ohio, is on the low end, with a savings rate of $275 per month.
10- Private equity
Perhaps the original form of peer-to-peer lending, another common form of passive income is funding a private business you believe has the opportunity to generate future income. For high-net-worth individuals, this might be investing in private equity funds, which are typically only available to accredited investors who meet certain net worth or income requirements.
Another way is to back a family member, friend or other trusted partner to help fund their business with an agreement to earn returns from any future profits. But beware: No matter how large or small, investing in a single business is an inherently risky, long-term bet. Never invest more than you can afford to lose.
How much does it pay?
Private equity can vary widely in its return. But last January, famed investment firm Blackstone launched a private equity fund, Blackstone Private Equity Strategies (BXPE). BXPE returned 9.2% through September 2024 — and had an exceptionally high investment minimum. Another fund, managed by the private equity firm KKR, had a 10.66% annualized return as of November 2024 with an investment minimum of $1 million.
Say you invested in KKR’s fund with $1 million dollars. After one year, you could have potentially made $106,600 less any taxes or fees.