Passive income? Is It Real?
Passive income is the money you earn while you’re not actively working on it. People are generally working actively every day by trading their time for money. If they stop working, and so the money stops from coming _ passive income is all about having money trickle in even when you are not on the job.
how real is it?
What about the argument that there is no passive income…
The main thing here is that you are not trading time with money. It is true that some work is required to run a residual income source. To stop this argument from rendering, we could say 100% passive income does not exist, however, 90% passive income really exist.
Depending on the business model, the amount of work required varies after setting up the asset. For example, a vending machine once set up, it requires very little maintenance to carry on. While real estate renting property might need more time to take care of.
3 examples to clarify the above point:
- Passively investing in indexes like the 500 fortune companies, could be the best example of how passively an investment could go. While it does not involve any work from your side, you have to press the button using an app to monthly invest something from your salary, although you can automate that now.
- Rental property – to make it passive, you have to hire a property company to take on the responsibility of your assets. Still, you have minimally received reports of how these properties doing from time to time.
- Start a brick and mortar shop, and hire somebody to run it. Sometimes it’s required to review accounting books, getting involved in negotiating rental with the landlord every year and so on.
While the above examples only talk about the small scale of passive streams. It can certainly be applied on a big scale.
You want an example…
Warren Buffet is a great example for creating huge wealth from almost receiving ‘passively’ revenue from multiple streams.
All he does all day long is reading reports about his companies (some followup is needed) and other new reports trying to pick the best next potential company with a bargain valuation.
Without going into detail, I think you got the jest.
Some examples of passive income include investing in the stock market, real estate, and even running an online business.
Above all, without a doubt, an income can only be generated passively by having an asset. Below lists the types of assets and how you would acquire them.
3 types of acquiring passive income assets
- Buying assets (the Warren Buffet way)
This category follows the Chinese proverbs “it takes money to make money”. One of the most known ways to make money is by investing in a stock or yields. You have to buy a share, as a result, you earn monthly or yearly dividends.
Or you can involve yourself in real estate, buying a rental property will give passive income every month.
Buying assets can be online as well as an offline thing. Flippa is 1# online platform to sell and buy online businesses.
You look up some applications to buy and sell shares online, one app comes to mind is Robinhood. It is a free application, and you can start today. However, the traditional offline route still there to explore by buying physical properties and so on.
- Rental assets
This one can be done if you have extra space in your home, and maybe registering for Airbnb to rent out space. It could also be a storage space/warehouse. Another example is by renting your car using an app for some money to come.
Less common example done by few people is by collecting domain names that might have the potential to resell, like buying domains for commonly used names in your country. You can do your research on this one to learn more. It’s an interesting idea.
- Building assets (almost all marketers online way)
This method is about building an asset which requires a lot of time and effort in the beginning. However, it can be delegated later no to competent deserving people to run the daily operations.
Some examples include blogs, building homes, building companies, and so on.
Offline Passive Income Ideas
Starting a business from scratch requires a huge amount of work and years of effort. In addition, a lot of marketing budget to be spent to acquire customers.
The business has already a specific outline to follow. Fast forward, there is no better way to leapfrog to your passive income stream than taking a franchised license from a known brand that took years to build. Maximizing on the brand value of the company and start selling right away.
As a result, you will be tapping into a customer base that already knows the business and less marketing budget is needed, while the franchised company keep on innovating and acquiring customers on your behalf.
This method requires big capital to invest in. Empty pockets are not suited here. To have a big advantage like that, you have to have big pockets, unfortunately.
#2 Renting real estate properties
Renting properties are a good way to passively receive an income. You can buy a property which needs a huge capital. On the other hand, you can rent a property without paying upfront money, and then renting those properties.
This is a big topic, but in brief, you must have a good knowledge base to operate on about real estate properties, renting values, locations importance, etc. the good thing here is that properties are rarely depreciated.
Secondly, you need to find a motivated seller, someone who owns a building, for instance, but do not have the time to manage it. You get a contract and negotiate monthly payment. Then you go on and rent it out for higher markup.
knowing enough about properties and their values cannot be emphasized Then if you have multiple of these properties, and your banking is more set up.
You could later negotiate better deals by giving yearly rent which is usually cheaper or buy according to your financial ability.
Renting out the real estate properties will help you stay protected from fluctuations in interest rates.
#3 Laundromat business
This is another recession-safe offline business. Setting up an automated laundromat company is pretty easy. You don’t actually have to hire someone. You can set up a coin-operated laundry. Although you need a technician to maintain these machines and give regular visits to protect from different technical hazards.
Read more about this in this Article from Entrepreneur.com
#4 Vending machines/ATM machines
This is an amazing model, that I personally know someone invested in ATM’s, they almost never break, and if you locate them in well-trafficked locations, your commissions will be even more very passively.
Few points to think about to start Vending machine or ATM company:
- communicate with the manufacturing companies
- find out locations that have better access to the potential clients
- negotiate a better lease option
- before everything, you have to learn enough about the industry, the ups, and downs.
As simple as this idea maybe, you have to know enough to protect yourself from all risks and save you from financial burdens.
Read about: Online Passive Income Ideas Anyone Can Do.
How to Pick the Best Passive Income Stream for You?
The right way of taking a decision on what you should do depends on your short term and long term goals. Pick something that could help generate an income according to your current capacity while it’s still relevant to one of your passion.
You could ultimately, try one or keep trying all of them in phases. Choose something you manage given the time you have during your day that would be the wise approach especially in the beginning.
The most recommended path, however, in the passive income sphere is real estate ownership. All the rich have something in common in their portfolio and that’s a property.
Despite real estate being a perfect option, it requires an initial capital not many people can afford, so generally whether a passive income is good or not for you depends on your financial status. Start creating multiple income streams and keep in mind the real estate investing when the time is right, and have stronger financial support.
Some people will be more drawn to the passive income ideas that they get to control. Many entrepreneurs love the idea of creating something, whether it’s a blog, a YouTube channel, a course or a store. And while it’s technically not passive in the beginning, it can be a life-changing experience and one that brings enormous wealth and satisfaction.
These quotes below are best way to conclude…
“If you don’t find a way to make money while you sleep, you will work until you die.” ~ Warren Buffett
“You become financially free when your passive income exceeds your expenses.” ~ T. Harv Eker
“The key to financial freedom and great wealth is a person’s ability or skill to convert earned income into passive income and/or portfolio income.” ~ Robert Kiyosaki
Related Read: Ideas for Online Passive Income