Although it sounds universally appealing and many people want to get into it, not too many people understand what passive income actually is. Eventually passive income becomes quite easy, however, it does require an upfront investment. According to Don Gayhardt, well-known financial expert, the best type of passive income is largely based on the amount of savings you have available to invest in it. How much of a return you want on your investment and how long you’re willing to wait before getting paid out are also factors to consider when looking into investment choices. You will also have to take a look at the level of risk you are willing to take. All of these factors will help determine what investment plan is best for you because there are many different kinds of passive investment choices to consider.

Here are some of the top passive investment opportunities to consider:

Real Estate

Investing in real estate is the most common type of passive investment because, after the initial large expense of a down payment, you essentially start building equity immediately. Better yet, if you can invest in a rental property you can bring in a monthly payment that might even cover your mortgage and you’ll build up equity even more quickly.

Short-term Rental

Renting out rooms in houses is not a new concept, people have been doing this for decades and it’s another great example of passive income. What is more relatively modern is the practice of renting out your entire home as a short-term vacation rental. Depending on where you’re geographically located this might be a better option than having long-term rental agreements, which are most often annual agreements.

Dividend Stocks

Purchasing dividend stocks is another great example because after you make the initial purchase you will make a percentage of a company’s earnings without having to do anything else. You can either get regular withdrawals or you can choose to reinvest your earnings, it’s up to you. Don Grayhardt says that it is common for people to choose to invest in “dividend aristocrats”, which are businesses who have shown profits on their investment for at least 25 years.

Peer-to-Peer Lending

This is a relatively newer option, the title for which is quite accurate. With peer-to-peer lending, you can help others achieve their goals, earn interest on your investment, and not have to deal with any complex banking agreements. This option has grown in popularity recently because it caters to new borrowers who wouldn’t necessarily qualify for standard bank-issued loans.

Invest in a Business

With so many startup businesses happening all over the country, there are countless opportunities to invest in one of them. After an initial investment, you can become a silent partner and not be involved in the day-to-day operations.

Refinance Your Mortgage

Not everyone would consider refinancing a mortgage a passive investment, but since a single activity can result in saving thousands and thousands of dollars over the life of the loan, this is actually one of the most popular forms of passive investment.

There are several types of passive investment options, but you should make sure and choose one that is right for you.