4 Types of Passive Income to Stop Trading Time for Money

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May 19, 2025 |

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Side Hustle Show - 4 Types of Passive Income

Who doesn’t want passive income? Everyone dreams of having it. But how you go about getting it is the hard part.

So how do you get started? It depends on your starting point, your interests, and your long-term goals.

We’ve covered a ton of passive income in the show before (really more like time-leveraged income).

But today I’ll be grouping them into four different types of passive income. This will help you figure out which one makes the most sense for you.

Tune in to Episode 672 of the Side Hustle Show to learn:

the 4 types of passive income you can start building today
real-life examples from people who turned everyday assets into income streams
practical tips to save money, earn on autopilot, and take back control of your time

1. Buy Cash-Flowing Assets

This is the “make money with money” option. This is great if you already have money to invest.

Some amazing options are dividend investing, business lending, real estate, and other asset-backed plays.

Real Estate

Rental real estate is probably the most classic example here. It might even be the most common side hustle in the world.

Dustin Heiner from Episode 387 explained,

“You’re looking at the entire state; look for population areas that have a lot more properties than not, and zoom into that city… See if they meet your criteria, how much money you have to invest, the type of properties that you want, and how much rent it’s going to make.”

And that’s just the start.

Dustin emphasized building the business around the asset. Think of each property as a box of candy bars in a convenience store.

You wouldn’t just open a store without shelving, registers, cold storage, or staff. Same goes for real estate.

He works just 30 minutes a month on his portfolio — thanks to having the right systems and team in place: property managers (aka your quarterback), realtors, contractors, bookkeepers.

But the most powerful thing he said is getting laid off from his government job made him rethink everything.

He had 1 or 2 properties at the time, but it was enough to shift his identity from employee to investor.

It’s like “my day job is now my side hustle” kind of thinking. And that mindset took 10 years to build into full-time freedom, but it started with that low point.

Dividend Investing and Real Estate-Backed Loans

Also under this category is short-term real estate-backed loans through platforms like Groundfloor, and dividend investing.

For years, I focused on building up my truly passive dividend and interest cash flow — setting monthly milestone targets: $1000, $1500, $2000. Super passive, but maybe not the most exciting ROI in the world.

Vending Machines

Vending machines are another popular side hustle I’d put in this category. You buy the machine and the inventory upfront, but they can make money 24/7 without you around.

If you find a great location, it’s not crazy to see $500+ per month in profit. It’s also low risk. If one location isn’t working, you can always try somewhere else.

Mike Hoffman, aka the Vendingpreneur is a great example from Episode 599.

“The best analogy I would use as a new vending machine manufacturer is very similar to a car dealership.”

He ended up financing brand-new machines with zero money down, where he pays around $170/month.

With a good product markup, Mike clears around $800/month on a $1500 machine. Minus the $170 payment, he’s still way in the black. Then he parlayed profits into more machines.

Buying Small Businesses

In Episode 571, Hannah Ingram shared how she got inspired by that Warren Buffett quote: “If you don’t find a way to make money in your sleep, you’ll work until you die.”

So she started researching what kinds of businesses make money when she wasn’t actively working: car washes, laundromats, storage units.

She found a rundown car wash for sale in her hometown listed at $150k. She lowered the price to $140k and negotiated seller financing. It means borrowing the purchase price from the seller, then used business profits to pay off the loan.

Others like Link Moser (buying web hosting businesses) and Jono Santamaria (bought a laundromat) followed a similar playbook.

2. Build Cash-Flowing Assets

This is the sweat equity option. Building something of value, like a digital product, an app, a book, a course, or a YouTube channel. It takes time and effort upfront, but if done right, it can run relatively passively often for years.

One of my favorite examples of planting mini digital money seeds is in the printable and digital product space.

And most sellers are relying on Etsy search traffic, so you don’t need an audience of your own to get started.

Cody Berman explained in Episode 665 that even low search volume terms can stack into significant income streams.

“I usually don’t touch anything under 50. But for me, I’m like, ‘There’s 50 people searching for this a month and there’s zero competition’… I can scoop up, say, even 20% of them, 10 people buy my $5 thing.”

YouTube Videos

Even if you’re not selling anything, ad revenue can add up. Lately, the Side Hustle Nation channel earns $20 to $30 a day whether I upload new content or not.

The goal is to keep stacking evergreen videos that have a long shelf life. Stack up ten $100/month videos and that’s another $1,000/month in mostly passive income.

Create them once, get paid over and over again — that’s the hope anyway.

I’ve been using a tool called Pictory to speed up production, pulling in b-roll and editing clips quickly.

Product Reviews: Amazon Influencer Program

Sometimes your content doesn’t even have to be YouTube-worthy long.

Tyler Christensen from Episode 656, found success with 1–2 minute product review videos.

“Set manageable goals, do 5 videos a week, but do that consistently over a period of several months. And then it starts to compound.”

And that’s just one income stream. Once you’re established, brands might send you free products, pay for videos, and you’ll still earn your Amazon commissions. Maybe even resell the product after you’re done!

Personally, I only uploaded a fraction of the videos Tyler has but still made over $700 last year.

Online Courses

In my recent interview with Spencer Haws from Episode 667, we talked about how it’s becoming harder to sell a straight-up pre-recorded video course.

The trend seems to be shifting towards more cohort-based groups, personalized coaching, and community participation.

Still, I go back to Jacques Hopkins from Episode 596, the Online Course Guy, who has kept his system mostly on autopilot with his Piano in 21 Days course.

When we recorded, Jacques had sold over $4 million worth of his piano course, including lately between $10k to $30k a month.

That’s the power of building an asset that you can sell to multiple people, following a repeatable and scalable system.

Software

Very similar model to an online course where you create something once and sell it repeatedly. Pete McPherson from Episode 659 shared how he used AI to help build a few different web apps.

He recommends “scratching your own itch” or unbundling a feature from a bigger tool and selling it as a standalone.

You don’t even have to be a coder anymore.

Kindle Books and Self-Publishing

Another one of my passive streams is from Kindle books, paperbacks, and audiobooks. Outside of launch periods, those titles still earn $200 to $500/month.

It takes a lot of work to create, but once it’s live, it can be a source of another passive income.

And in non-fiction, consider your book a lead-gen tool or authority builder. Royalties are just a nice bonus.

Other low-lift ideas include journals, coloring books, and public domain publishing (like Aaron Kerr from Episode 364 who made $100k from an Anne of Green Gables compilation).

Websites and Blogs

I’d include websites or blogs, but the marketing and SEO landscape has been challenging lately.

You can send visitors to your site from places like social media, Pinterest, email lists, or paid advertisements. Once they’re on your site, you can earn money through ads or affiliate links.

Some articles I drafted years ago are still bringing in revenue every day, but just not as much as they once did.

3. Rent or Sell Access to Assets

This category is about finding ways to make relatively passive income by renting or licensing access to stuff you already own… or stuff you can get your hands on.

That might mean extra space around your house (Airbnb or Neighbor), your backyard pool (Swimply), or even the data generated by your phone (Caden or MobileXpression).

RV Rentals

Garr Russell from Episode 625 went into panic mode after buying an expensive RV his wife didn’t want to use. So what did he do?

“I jumped onto Craigslist and threw it up for rent… I literally had inquiries coming in within a couple hours.”

He bought more RVs, then eventually pivoted to helping others rent out their RVs as kind of a property manager/booking agent.

Rental Arbitrage

A twist on this model is rental arbitrage — leasing long-term, renting short-term with the landlord’s consent.

Richie Mathews from Episode 588 did this with apartment units, furnishing them IKEA-style and listing them short-term.

You’ve got some upfront costs, but less than buying real estate outright.

Mobility Scooter Rentals

Then there’s the approach of buying small-ticket items just to rent them out. Lenny Tim from Episode 564 launched a mobility scooter rental business after testing demand first.

“My first thing was to just build a website to see if there’s demand… I didn’t buy any equipment at all at first.”

Only after getting consistent requests did he go out and buy his first scooter—used, for $500. He now owns seven.

“I pretty much get my money back within one to three rentals.”

Validate demand before buying anything. Keep it lean, keep it simple.

Dresses as Rental Assets

Summer Fisher from Episode 652 applies the same logic to fashion.

I’m a fan of these types of lower-cost, unconventional rental assets. We did an episode about moving boxes, photobooths, and even portable hot tubs.

But Summer explains why dresses are a unique asset class people probably don’t think about.

“When you’re buying a dress, you’re buying cashflow basically. So the dress, just like a house, is the asset, and I’m buying the cashflow from the rentals.”

You don’t even need to spend money on inventory up front. She suggested two creative approaches:

Consignment model – Ask friends and family if they have dresses they’d let you rent.
Try before you buy – Order from a site with a return policy. List it for rent. If it doesn’t rent, send it back before your credit card bill is due.

You learn what rents and build from there.

Product Licensing

Now if you want to skip the physical asset game entirely, product licensing is one way to do that.

Stephen Key from Episode 173 from explained this model in a way that clicked:

“You’re basically renting your idea to a company… and they’re going to pay you on every one they sell.”

You don’t have to raise money, start a company, or manage production. You’re paid for your intellectual property — your creativity.

Typical deals are around 5% of gross sales. It may not sound like much, but when companies have wide distribution, it adds up.

And most big brands actually want outside ideas. Look up things like “Hasbro Spark” and you’ll find formal submission portals.

Other Licensable Assets

Beyond products, here are other assets you can license:

4. “Reverse” Passive Income

The fourth type of passive income is a bit unconventional. I call it “reverse” passive income because it comes from saving money instead of earning it.

A penny saved is a penny earned, right? Well, because of taxes on earned income, a penny saved might actually be worth more than a penny earned.

And there’s no extreme couponing required.

Simply spending less money may be the fastest path to improving your bottom line.

The Substitution Game

This is my go-to strategy: replace what you’re spending money on with something cheaper, faster, or better.

Pull up your credit card statement and go line by line. Ask: Is there a better alternative?

I switched cell plans from Verizon to Ting to Mint Mobile and saved thousands over the years.
Renegotiated our TV and internet packages.
Shopped around for car insurance.
Dropped credit cards with annual fees.

Another thing that a lot of people don’t consider was actually a big substitution Joshua Sheats mentioned on the show from Episode 94, which is moving to a lower-cost-of-living area or a no-income-tax state.

That alone saved us thousands when we moved from California to Washington.

On a smaller scale, house hacking is a smart move. Buy or rent more space than you need and rent out the rest. It can drastically cut your housing costs.

In business, the Substitution Game is called Operation Tool Swap.

Steve Chou and I switched from Zapier to Make.com after a big price jump.
Paused unused subscriptions like Otter when similar functionality was already baked into Descript.
Downgraded our Ahrefs plan to a cheaper tier without losing capability.
Even my voice clone (Robo Nick), which I created from ElevenLabs, is on a toggle-as-needed plan.

The 30-Day Rule

For non-essentials, I use a 30-day waiting period.

I set a calendar reminder. If I still want the item in 30 days, maybe it’s worth it.

Most of the time? I forget about it entirely.

Jen Smith’s 4-Question Framework

In our episode on genius ideas to stop spending money, Jen Smith gave us her 4-question framework to use pre-purchase:

How can I get this for free? (Buy Nothing groups, borrowing, etc.)
How can I get it for low cost? (Secondhand stores, Poshmark, eBay, etc.)
How can I get a deal on it? (Coupons, sales, cashback apps)
How can I buy it full price without guilt? (If none of the above options work, but it aligns with your values and budget, go for it.)

That intentionality leads to big savings.

Cashback, Discounts, and Bonuses

Ahead of any big purchase, I try and do a few things:

Use Rakuten or check Cashback Monitor for affiliate cash back deals
Look in your credit card portal for card-linked offers (Chase, Bank of America, Capital One, etc.)
Use discount gift cards (Costco is a great place to start)
Check for credit card sign-up bonuses if you’ve got upcoming big expenses — $200 to $1000 in value just for spending money you were going to spend anyway

I also did an episode on bank bonuses with Dylan from Episode 663. If you open new bank accounts and meet a few requirements, you can earn $200 to $300/hour.

Recap: The 4 Types of Passive Income

Buy cash-flowing assets: real estate, vending machines, small businesses
Build cash-flowing assets: digital products, printables, courses, websites, ebooks
Rent assets you own or control: RVs, cars, mobility scooters, dresses, photobooths
Reverse-passive income (cut recurring expenses) – play the substitution game, maximize cash back, strategically work bank bonuses or credit card bonuses into your year, consider a no spend challenge.

I always recommend starting with a goal that’s big enough to be meaningful, but small enough to be achievable. For me, it was $1000/month. And the site that got me started was a little blog on virtual assistants back in 2012.

Episode Links

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