Creating Passive Income

Passive income is how the rich stay rich. By creating something that can work for you without requiring your time.

What is passive income? Passive income is an asset that generates income for you without you having to constantly work to earn. For example a job requires you to put in hours and those hours are translated into a wage per hour. If you make $15 an hour your max earnings per week is capped at $1680 and that means working every waking hour seven days a week. It is not possible.

A passive income stream would earn you income without you having to put in time to earn. Some may require a good amount of work to get started while others just require capital. Below we discuss how to get started and ways to grow you streams of income.

I suggest you keep your day job as the streams grow, don’t let the money go to your head. When I was younger I left a job because I began making as much from my passive income and self employment. I thought if I dedicated more time to it I could grow it, while this was true I didn’t take into account the future. After a few months the music lessons that became my bread and butter started to slow down, I forgot summer was a thing and kids didn’t have time for lessons. My income dropped drastically.

The good thing about it was it put my ass on a fire, requiring me to come up with more ways to earn but to save you I will explain how I and others earn passive income.

Start earning passive income

Passive income may seem impossible, how can I earn money without having to work? Well it really does require work, for example a book is a great source of passive income. A book requires you put in the initial time of writing and marketing it. Once you get the book published and ready for sale the rest is just making sales. If the topic is popular or has some demand you should see growth.

The idea is put time in now to earn money indefinitely for the future. Instead of converting hours into wage convert hours into assets that earn. These assets are the foundation of your passive income.

Good assets to earn passive income

My all time favorite asset is a business. Though this has a pay requirement or time requirement. If you can create a business that you don’t need to work you have an asset. If you are required to be there daily to keep it afloat you have a job. Remember that distinction. Many people claim to have businesses where they go in everyday at 9am and leave at 6pm. Those people may own the business but they have jobs.

One of my best learning experiences was when I worked for a small business where the owner would need to be there everyday or the business would fail. He lost time with his children and family. Eventually he closed the business because he couldn’t work so much, his passion project turned into a nightmare. He never had an exit strategy so he worked a job that he owned.

If you have the capital you can just buy an already established business, just make sure the owner is not present in day to day operations. For those that don’t have the capital a few ideas.

Drop-shipping is a great way to start a business. Find a product from a manufacturer that you think you can mark up and resell. The mark up is your profit and most drop-shipping sites just require you type in customers shipping information. Obviously if your shop grows to the point where you need to do it all day then hire someone and free up your time.

Reselling is the same strategy, find items at a discount and resell them for higher. I have a friend to makes a very good profit from reselling. He has two staff members, one girl who works fulfilling the orders and a guy who is very versed in finding items at a discount who collects a commission for items that sell. His structure allows him the freedom to pursue other projects while earning from his business.

Yes he began as a one man team, spending time looking for items, listing and fulfilling orders. He claims to have spent two years working to build his business to the point where it runs itself. The guy who picks items for him earns 15% commission on the profit, so he is motivated to find items that are way below market making money for both of them.

The key take away is build it yourself if you don’t have the money to buy one.

Another asset I love for passive income is information. If you have information to share people are willing to either spend their time or money on it. Articles, blogs, e-books, and real books are all good examples. Each can be leveraged off each other. Starting a blog may seem daunting or writing a book impossible but imagine this…

You start a blog about pets. You love animals and begin writing about pet care, diets, and training. The first month you spend writing a few articles a week, at the end of the first month you have 15 or so articles online. You can now take from what you already have and begin putting an e-book together. The work from one became the work for another.

If you really wanted to go all in make a youtube channel where your articles become videos, the scripts are already written! Set up links for your content so your viewers/readers can find all your content from a few clicks. You begin leveraging you already written content as much as you can. This also leads to the greatest passive income of all, a social following.

If you have constant viewers/readers to your sites you have money on the table. For example that same pet blog really blew up after the first year, your youtube is getting a couple thousand views a month. Why let those people go without extracting all you can from them? Check out affiliate links, they are amazing for earning passive income.

People want their products to be sold and you have an audience who listens to your recommendations. Find a few products in line with what your writing about and begin linking them into posts, or videos. For every sale of those items you collect a fee.

That last example is a powerful one, it can create a large passive income stream across many platforms while only requiring the work of one platform. It is a strong way to diversify your earnings while also freeing up your time.

Passive income with capital

If you have money just sitting in a savings account you can make that money work for you too. Best you earn in a savings may be 1.8% right now, or a CD at 2.5%. Take that money and invest it, find a place where your return is higher, there are many many options.

If you have capital 15k+ a dividend stock portfolio may be right for you. A dividend is a payment of the extra profit from a company paid to its’ shareholders. Research a few different dividend stocks and buy a few. Diversification is key. Some stocks out there have a 5% monthly dividend. You can either live off the dividend as some people do or reinvest it to grow your portfolio for the future.

Another great asset to buy if you have the capital is rental properties. Rents increase average 2% annually and renting is at an all time high right now in certain markets. You may be saying I don’t want to be a landlord and deal with that but you can always hire a property management company or manager to handle it for you, while you just collect monthly checks.

Remember that real estate has risks and is considered to be a non-liquid investment, meaning the money you put in is not easy to get out, compared to stocks. Always do your research on cashflow of a property and expenses. Don’t be afraid to ask sellers what they pay in taxes, utilities and other costs to maintain. These are key factors in your profitability.

When I was in real estate school they talked constantly about the 4>3>2>1 method. Which is for people looking to build a small portfolio leading to their one family house to live in. First buy a four family building, rent three apartments and live in one. Most of the time the rents will cover all expenses with no profit, allowing you to live for free while your tenants pay off your debts. Leverage the equity from that into a 3 family, move there and rent the last apartment. I think you see where I’m going, at the end you have 9 rented apartments which should all be cashflow positive allowing you to buy that dream house at no out of pocket cost to you, you leverage your equity from your portfolio.

Any passive income stream that you are thinking of buying requires due diligence. Many businesses are for sale with the guise of being profitable to only be lying to would be investors. DO YOUR HOMEWORK or you will lose your money. As always any questions leave them in a comments! I love to help educate people it’s why I started this blog. I don’t charge for simple questions and answers so get it while it’s free.

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