Passive income ideas: 7 options – and what they really take

Passive income is income that continues without you having to work for every penny, once the first work is done – for example commission from a site with affiliate links, sales of a digital product or rental income. The honest answer to "how do I get passive income?" is that you pay for it in advance: with months of work, with capital or with both. In return, what you build can keep paying while you do something else.

The phrase "make money while you sleep" is not entirely wrong – an article can sell a product at 3 in the morning – but it hides how much work lies ahead, and that nothing runs entirely by itself. Here are 7 passive income ideas, what they take, and where the traps are. If you are looking for methods that pay faster but need ongoing work, see make money online.

Two kinds of passive income#

The first kind you build with work: content, products or tools that can be sold or earn money many times once they have been made. It needs no start-up capital, but a long period where you work without earning anything. The second kind you build with capital: money that is invested, or a home that is let out. It needs money first and carries a risk of losing it. Most people start with the first, because time is easier to come by than capital.

1. Affiliate site: the most accessible model#

An affiliate site is a website about a topic where you recommend products via affiliate links and earn a commission when a reader buys. It is close to the classic idea of passive income: a guide that ranks high on Google can send readers on to a store for years. You have no stock, no customer service and no start-up capital beyond a domain and hosting.

The passive part only comes after the active part, though. A new site needs many good articles before search engines send meaningful traffic – and that takes months. We have worked through what a site can earn in how much does an affiliate site earn: the range runs from zero to a full-time income, and there is no credible average.

The ongoing work nobody talks about

Even a site that is doing well needs upkeep. Products are discontinued, prices change, and last year's guide loses its place on Google to a newer one. Stores can change their terms: with us, a tightening of a program's rules only applies 14 days after it is saved, and the commission rate is locked on each click, so clicks that have already happened keep their rate. But new clicks follow the new terms, so you need to keep an eye on things. Expect to spend some time every month updating the most important pages.

2. Digital products#

An e-book, a set of templates, a budget spreadsheet, printable planners or a small piece of software. The product is made once and can be sold again and again without extra cost. The challenge is selling it: without an audience, nobody finds the product. That is why digital products are often combined with a site or a channel – the same audience can buy your own products and click your recommendations.

3. Online course#

If you have knowledge people pay to learn, a course can be recorded once and sold many times. It is more work to make than an e-book, and it needs regular updates when the subject changes – especially in software and marketing. Questions from students are part of the package, so it is rarely entirely passive.

4. A video archive#

Videos that answer timeless questions – how to repair something, how a product is used, which option suits whom – can be watched for years. The money comes from ads where the platform offers them, from affiliate links in the description and from partnerships. The channel still has to be fed to keep the algorithms interested, though, so the archive is passive while the channel is not. If you want to work with short videos, read make money on TikTok and Instagram.

5. Licensing photos, music and templates#

Photographers, musicians and designers can sell licences to their work on marketplaces for stock photos, music and templates. Each sale typically brings in a small amount, so the model needs a large catalogue and quality that stands out. It suits people who already produce a lot and have work lying around.

6 and 7. Letting and investments#

Rental income and investment returns are the most classic forms of passive income, but they require capital and carry risk. Letting also involves work with tenants, maintenance and rules. We do not give investment advice – seek advice from an independent adviser before you put money at stake, and check how returns and rental income are taxed in your situation (in Denmark on skat.dk; elsewhere with your own tax authority).

Tax on passive income#

Income being passive does not change the tax. Commission from an affiliate site and sales of digital products are taxable income, and in Denmark whether it is taxed as a hobby or a business depends on a specific assessment – see hobby or business. No tax is withheld before the commission is paid out, so you must report it yourself. We have gathered the Danish rules for affiliates in affiliate income tax and VAT in Denmark, and for your own situation skat.dk applies – or your own tax authority if you are taxed outside Denmark.

Where should you start?#

If you have no capital, but time and a topic you are passionate about, an affiliate site or a channel is the most accessible place to start – and it can later be expanded with your own digital products. If you need money now, passive income is the wrong place to begin: a side job or freelancing is better, and we have gathered the options in make money from home. If you are new to affiliate marketing, start with our guide to affiliate marketing.