Filipinos looking to escape the 9-to-5 grind seek passive income ideas that help them build multiple streams of income. The main advantage of passive income streams is that you generate regular income without minimal ongoing work. You invest your money or work one time and then you can make money off of it even while you sleep.
There are plenty of passive income ideas in the Philippines that you can explore, which depends on your knowledge, expertise, or experience. The ability to generate passive income streams is the key to achieving financial freedom. It is also a great way to diversify your income source to reduce the risk of a financial setback.
Top 10 Passive Income Ideas in the Philippines
There are several passive income ideas in the Philippines and here is a list of the top 14 that you can pursue. You can choose one or more of the passive income sources to generate a steady stream of income.
1. Rental Properties
Real estate is a recession-proof business idea. Therefore, it is one of the best passive income ideas in the Philippines because it brings about sustainable income from rental money.
If you own a piece of land or property that you do not occupy, you can use that to build a rental property. You can build a multi-unit apartment that you can rent out for a specific amount each month. The more units you can rent out, the higher your monthly rental income. If you have an unoccupied house, you can also have that rented each month for a fixed earning.
The downside to building a rental property is the initial cost. Depending on the size of the rental property you’re trying to build, this passive income idea might require significant investment capital. You can also list your property on sites like Airbnb for short-term leasing.
There is low risk involved with a rental property because there will always be a demand for real estate, regardless of the economic conditions. There is also a huge gain potential, especially if you can keep the vacancy rate low. If your rental property is located near major establishments or in a high-foot-traffic area, you can maximize the potential of this passive income source.
2. Leasing Commercial Spaces
Leasing commercial spaces is another passive income idea if you’re into real estate. Commercial leasing is when an individual or business entity leases space for retail, industrial, or office use.
The landlord and tenant will agree to the leasing contract. Most commercial leasing contracts last for at least a year with a provision for renewal upon the expiration of the existing contract. If your commercial property is located in a high-traffic area, there is a huge demand for commercial leasing in the area. This will ensure a continued income stream for as long as you own the property.
The main advantage of commercial leasing is that you have the provision for rental increases, especially as there are more developments in the area. The ongoing developments can raise the value of the commercial property.
3. Crowdfunded Real Estate (REIT)
Crowdfunded real estate investing (REIT) is another common type of passive income idea for Filipinos. It involves the pooling of money from various investors. That pool of money will be invested in real estate properties and new developments. Your income will come from the interest on the money you invested in the real estate property.
Crowdfunded real estate is the most affordable option for those who are interested in real estate investing but don’t have the capital for it. Not all REITs are the same, though. You must research where you choose to invest your money to ensure that you can get good gains from it.
4. Peer-to-Peer Lending
The microlending business model is popular in the Philippines because it provides Filipinos who are short on cash easy access to funds. There are several P2P lending and microlending companies in the Philippines and most of them operate online. These lending companies operate at lower overhead costs than banks, which makes it possible to offer lower interest rates to borrowers.
The lending company will serve as the middleman while various investors will pool money to offer interested borrowers at a specific interest rate. Peer-to-peer lending is a profitable passive income idea because of the high ROI potential. Indeed, you can earn more from capital gains than your money would be sitting in the bank.
It is also important to be aware of the potential risks to P2P lending as a passive investment. Make sure to invest only with trusted and reliable microlending companies to ensure the stability of the lending model.
5. Pag-Ibig MP2
The Pag-Ibig MP2 program is another proven passive income idea in the Philippines. This program allows investors to get up to 7% annual and compound interest on their MP2 savings account. Aside from an interest rate that is higher than most traditional savings accounts, the money you invest is government-guaranteed. The worst thing that could happen is that you can get the money you invested at the end of the 5-year lock-in period.
The earnings you get on your Pag-Ibig MP2 account are tax-free. Therefore, it is a safe and reliable way to grow your money and make a passive income. Since you can only withdraw your earnings after 5 years, make sure to invest only the amount that you won’t intend to use over that time.
Unit Investment Trust Funds (UITFs) are a form of collective investment scheme. Multiple investors pool their money that will be invested in various securities like bonds and stocks. It is a popular investment choice in the Philippines because they are flexible with good return potential. There are no guarantees on the return of your investment; however, a good fund management strategy can generate a steady stream of passive income.
For example, UITFs can be used to invest in various companies wherein you will earn dividends from those companies. You can also receive a share of the interest on bond payments that make up your fund.
It is more than just a reliable passive income source. UITFs are also a great way to diversify your portfolio to manage your investment risk. The best way to maximize your earnings from UITFs is through long-term wealth building.
7. Mutual Funds
Mutual funds are mostly available through banks and insurance companies. It is a suitable passive income source for Filipinos, especially those looking to diversify their portfolio and manage risks.
There are two types of mutual funds: index funds and actively-managed funds. The first one – an index fund – is invested in a specific market index. The actively managed funds involve a professional fund manager who will select where to invest your money for maximum gain. Each type of mutual fund offers its benefits and drawbacks. It is important to align the chosen investment based on your goals.
Cooperatives in the Philippines vary from agricultural to financial cooperatives. Both of these types are suitable passive income ideas for Filipinos.
Agricultural cooperatives involve the pooling of money to help farmers produce better crops. The investors get a share of the earnings from the farmers’ harvest. Meanwhile, financial cooperatives involve members pooling money to provide funds for borrowers using affordable credit or lending schemes. Any form of interest earned from the pooled money is divided among the investors.
9. High Yield Savings Accounts
If you want to save yourself from the trouble of managing funds and investments, the easiest way to earn passive income in the Philippines is to open a high-yield savings account. Take time to research various savings account options to find one that will produce the highest yield.
Note that the interest you earn from a savings account is considerably low compared to what you will earn from other passive income ideas listed here. However, it is a good option for anyone who does not want to deal with the hassle and stress of managing their investments and funds.
10. Affiliate Marketing
Affiliate marketing is one of the many online money-making opportunities available to Filipinos. It is one of the best passive income ideas in the Philippines, especially if you own a blog or Youtube channel.
Affiliate marketing is performance-based marketing wherein you can earn a percentage of the sales you refer to an affiliate – your partner company. Since you are earning on a commission basis, you have maximum earning potential as long as you can refer more customers and sales to the website of your affiliate companies.
This passive income idea is highly profitable if you have a large following on your blog or social media. The more affiliates you are partnered with, the higher your chances of earning through affiliate sales and commissions.
Some of the top companies that offer affiliate marketing in the Philippines include Lazada, Shopee, Zalora, and more. It is important to choose the affiliate marketing programs to work with so you can maximize your passive earning potential.