Last Updated on September 13, 2020 by joseph
o start, *pure* passive income simply means “you are rich”. The only way to earn income without doing a thing (ever) is by having a large sum of money. The good news? There are hundreds of other ways to earn income in both a semi-passive or passive way. Specifically, you can create semi-passive streams that tail off, you can invest in higher risk passive income that *may* generate a return well in excess of inflation and you can always work part time to generate “semi passive” income. Below is an outline of streams of income (what we view as best to worst).
A Landing Page with No Updates: This is the best form of semi-passive income. It means you have a website that *does not need to be updated*! Now we have to repeat that phrase. You create and set up a website that sells a product and *does not need to be updated*. If it needs to be updated then it’s not longer in the tier one semi-passive income segment.
Any website that sells a product that does not require updating could include anything from: vapes, electronic cigarettes, retail clothing, protein powder, cosmetics, jewelry etc. Quite literally anything where you go to a website and the same products are being sold day in and day out. Importantly, the reason why this is the best form of passive income is because of the return profile.
Roughly speaking say it takes about a year to get enough traffic to earn $2,000 a month. This may not seem like much, however, if it only took a year to get done correctly you’re now getting $24,000 a year or the same value as having $600,000 (in a single year!). If you create two of these you can now focus on bigger ventures. This is the primary reason why we recommend online sales as a starting point. If you can just create two of them you’re now free to build something more meaningful and have the money to both live on your own or reinvest the money into paid traffic to a more important venture (important ventures are not semi-passive income as you’ll be grinding away to get past plateaus). In short, a landing page that converts is your best form of semi-passive income.
Management Income: While we prefer having other people manage rental properties for us, there is money in this game as well. If you want to become a landlord you’re going to be forced to commit time (interviewing new tenants, repairs etc.). This means it’s not quite passive income but the time spent can be *leveraged*. This is a key part of this semi-passive income stream. If you own properties with a high cap rate (meaning annual rental income over value of asset) then you can obtain some leverage to boost the returns. This is secondary to landing pages for a key reason… If you go down this route use the static income to cover the cost of the mortgage payments by 2x.
Lets assume you have $4,000 a month in semi-passive/passive income. This means you can take on a mortgage payment of around $2,000 a month (we take a conservative stance and assume your $2,000 payment includes everything). To keep everything simple, this means you can put $80,000 down to obtain $400,000 in real estate value. Assuming your interest rate on the debt is around 4%, your payment is going to hit right around $2,000 a month (we include home owners insurance, taxes and some wiggle room for repairs in this $2,000 estimate). Now you can sleep well knowing your payments are protected and can look for the best possible tenant giving up a few bucks (slightly lower rental income) for a stable semi-passive stream of income.
Updated Information Websites: Yes you can make some money from blogs, but the real money is in paid traffic product websites. We are including this as a form of semi-passive income because we’re sure everyone visits at least one website with updated information not classified as a blog. Let use Coupons.com as an example. Now certainly, no one here is wasting their time clipping coupons. But. Remember that there is a LOT OF MONEY in selling to the masses (hence why motivational seminars always work! Never ending supply of always broke dudes looking to get “amped up!” or “fired up!” or “Hyped!!”). The masses are always looking for ways to cut costs, so you can offer a website that does just that (like the coupons website).
Another good example of information based websites is credit card offerings or something like million mile secrets. No one wants to actually do the work and they correctly advertise with the slogan “Big miles. Small Money”. This barely makes our semi-passive stream since there is a lot of updating here. It is possible to run a smaller scale website like this without working a 40 hours per week. (not easy but doable)
Your entire net worth and income stream is no different than a sales funnel or building a pyramid. We’ll say it once and we’ll say it again. You’re either building someone else’s dreams or you’re building your own. With that you should be looking at the framework as follows:
1) You build a business and put every cent into making it grow whenever you see a risk reward opportunity that favors you
2) During your free time you build a few landing pages to sell products that are known to be high quality and get them to generate a few thousand dollars a month
3) If you struggle to do step 2, move to a managerial or information based product where you’re constantly updating, it’s a grind but all the money is being invested in item 1 where you’re looking to buy traffic
4) With excess money flowing in, start building out a recurring income portfolio of “return based” passive income. We have no major preference at this time (we used to prefer dollar cost averaging) between the four items but we do recommend a mix of at least two of the ideas
5) Depending on your risk profile look at protecting a couple of years of income by investing into low risk passive income items.
There you have it every important as it relates to passive income into a single post.
Importantly, for those that are serious about developing multiple streams of income and a high net worth, we can recommend Personal Capital. The Company offers *free* software tools with the following four key features: 1) ability to avoid losing money by tracking all fees associated with an investment product allowing you to choose the best possible fund for your future, 2) portfolio analysis where your risk profile is stacked up against your current age and retirement goals, 3) in addition to these free tools, you can also track your net worth and path to becoming a millionaire and 4) when you hit $100K in networth you’ll receive a free one time consultation with an investment professional at Personal Capital. After linking up all of your accounts you’ll be able to sit back and watch as your net worth goes up and your fees remain minimal over the next several years. We strongly believe that Personal Capital is the premier personal finance software tool when compared to its competitors such as Mint.