Thread: Is Passive Income Real?

I recently heard a great quote about the mythical beast of online passive income...

"I work 16 hours a day, so I can earn money while I sleep!"

Some days feel like that, a lot more so when starting out.

Now, however, all but one of my affiliate websites are what I consider highly passive... meaning I can run them and maintain current levels of income on less than 1 hour a week (total for all sites).

If I want to grow income, I'd be up in the 4 - 6 hour / week range.

Mr. Hacker,

You summed up nicely what I took 1/2 a book trying to say.

Originally Posted by Jonleehacker

"I work 16 hours a day, so I can earn money while I sleep!"

Some days feel like that, a lot more so when starting out.

lol. Yea, I think that is the big myth.

Passive is possible, but first you have to pay the dues. LONG HOURS and NO (or negative) pay!

Passive also comes in .... degrees. It still takes some time to monitor and tweek.

Great post!

I gave you rep speed, and was going to joke that at 225 mph, what difference would it make . . .

But I noticed that when I did rep you, it bumped you up to 230 mph.

Zooooooom!

-Russ H.

This is a good post. You identified several means to receive passive income but it does take some due diligance to see what works for you. There are so many "gurus" out there promoting something but everyone needs to look at their own situation, find their one trick pony http://www.thefastlanetomillions.com...rick-pony.html, and then just go for it.

Tom

Great thanks to AroundTheWorld.

Personally, I have learned that the best ways to get passive income is to provide useful information contributed by users. In other words, user generated content that provide valuable information will give you the best result.

You build a system (like YouTube), which allows user to contribute the content. I am not saying it's easy. Building a great system is a lot of hard word. Once the system is up and running, you need to build another system to distribute the information to the crowd.

Don't get me wrong. Information is not limited to just online information. There are tons offline/local information out there that need to be consolidated. You just need to be creative.

To me personally, earning passive income is not a question. The question is now much you can earn?

Originally Posted by AroundTheWorld

Once it is built, then you convert to passive by:

1) Putting key people in place.

I totally recommend people to read the book.
Millionaire Club Recommendations - Good to Great: Why Some Companies Make the Leap... and Others Don't

Don't be the bottle neck of your own company. You own it, but have someone to run it.

Thanks Sonya!

A lot of people just getting started struggle with this as it relates to leaving your comfort zone, in addition, as Russ posted in Greg's thread about landlords that too many people are just quitting their jobs to start businesses without having anything established...

With that in mind, how long did you and Doug work a 9-5 while building up your businesses before you could comfortably quit and focus on the business full-time?

What our biggest road-block right now is the mirage of a comfort zone we're in is keeping us from being fully motivated to effectively use that 5-9 period to execute an action plan, but at the same time it would be suicide to just quit our jobs and expect to pay the mortgage/food bills in the period of zero or negative cashflow as it seems so many are doing right now who are just setting themselves up for failure.

The irony is the middle-class trap is the feeling that despite not really owning ANYTHING(most everything comes with a monthly payment, not a problem if those things are appreciating or cash-flowing assets ), that having everything you need(food, shelter, clothing, healthcare) and a few luxuries you don't(car, furniture, electronics, etc) prevents us from pursuing the one item we truly need- FREEDOM!

I read Kiyosaki's rich dad poor dad and a few more. Yes passive income is key but if it were so easy, everyone would be doing it. Took me a few months before I started making some money with my web business. Having said that once I got to grips with what it entails and probably with a large dose of luck, It has evolved to a significant source of income

So what am I saying

The passive income idea is solid, but initially will probably need a large amount of work... about 16 hours a day?

Originally Posted by vr4playa

With that in mind, how long did you and Doug work a 9-5 while building up your businesses before you could comfortably quit and focus on the business full-time?

We were a one income family. I went to school, raised the kids, and started a business while Doug brought home the money.

Once my biz income could replace his income, he quit.

I like that you are looking at both sides of the equation. You are so right about the middle class trap.

Another thing we did is live very frugally. Had only one car. Lived in a very, very small house. etc.

If you have money and lend it, thats pretty passive. If I take a $150k note from a person, and pay them 10% on that over a year, thats $15k they literaly didn't lift a finger for.

The catch 22 is you need money first to lend. But money makes money.

Originally Posted by hatterasguy

If you have money and lend it, thats pretty passive. If I take a $150k note from a person, and pay them 10% on that over a year, thats $15k they literaly didn't lift a finger for.

The catch 22 is you need money first to lend. But money makes money.

"First get thee an army of golden slaves to do thy bidding, then you shall enjoy much a fancy feast."

Interesting post Sonya. Passive income is only passive income until something goes wrong or needs to be changed... with the world changing so quickly with new technology and things happening every day - heck, industries are changing over night! Is passive income a myth now? Was is ever an entire truth? Even as a business owner, you still need to check in with your CEO to make sure that business is running smoothly!

The way I think I'm starting to see it now is one of two ways: Do what you love to do, or are extremely passionate about so the work doesn't feel like work, it feels like fun (I do it all day long because I love martial arts). Or two; do something to make money but automate it as much as possible so you don't have to spend so much time doing what you hate!

Thanks for the post ATW. I saw a few on that list that I've looked at recently and have a friend looking into the mobile home stuff. Great post. Thankyou.

This is really a phenomenal thread! For me RK's book was a real eye opener and I also dreamed of truly passive income. What i realized was that IMO there really is no such thing as truly passive income. I have to agree with ATW that money is kind of on a spectrum, although I tend to classify it in 3 ways. HM (high maintenance) job or business where you work all the time, LM (low manintenance) maybe you have rentals or a web business that takes a little time to tend to weekly and MINM (minimal maintenance) this is where a totally automated website or financial investments might come in. Takes a fraction of the time that HM income does and a smaller portion than LM does.
I would think we all have to agree that when it comes to how you make your money and how you provide for yourself it must be checked on by you at least some of the time. I think the Madoff scandal would prove this out. Whatever vehicle you use to create income takes some effort so there is no such thing as just sitting back and watching the money roll in.

Originally Posted by AroundTheWorld

Sell a business w/ a portion of the price as a note.

I would like to stress the benefits of "passivity" via notes. You can have a business that has ZERO passivity, but the act of selling it, could create passive income via the standard method -- take the proceeds and invest it into fixed income instruments -- or via the carry-back note.

One of the offers I received on my business was $5M in cash and a $1.9 million dollar note payable monthly at 8%. When I received the loan amortization documents in due diligence, the monthly payment was > $35,000/mo. At the time although I was making 3-5X as much, my living expenses where just barely past $10K/mo ....

Forget the $5M, I was lapping my chops at the pure passivity of the note which I considered to be very safe since I was already familiar with the cash-flow of my business.

Unfortunately, this deal did not go through but to expand on your post, you can sell ANYTHING on a note -- you can sell labor intensive businesses and transform it into a passive business via sale on note. Just be sure the note can be paid and you have recourse -- don't skimp on the legalities.

Great post Sonya headed for Legendary status!!!!!

IMHO it should be called low maintenance vs high maintenance income.

Notes are passive until one goes south, than you have to work to recover your money.

Rentals are passive until something happens, than you work. Plus setting them up is quite labor intensive.

But its not a work I mind doing, better than a 9-5.

Great post!

It is definitely true that passive income comes AFTER working hard for a long time. I read someone saying that "you have to work more than anyone else for some time and only then you can enjoy the life others can't(passive income)".
Some options for online business passive income:

Forums (as already mentioned)
Affiliate sales (someone sells your product)
Memberships site (now this one is what I might do in the future..)
Automated Blog with AdSense

I want passive income too but it wont come without lots of work at first!

Cheers

Dividends are a form of passive income, although it pays to monitor the health of the businesses whose shares you hold.

I think the important distinction to make is that the income is recurring in nature... not so much that you don't have to do anything to earn it, but that you do something once and get paid over and over again for it. Whether it be researching real estate or stocks and then making a purchase, or it could be trailing commissions on mortgages or insurance that you've sold.

One thing I learned from the Cashflow game is to go for capital gains first. Then when you make a substantial profit this can in turn generate a substantial cash flow.

Yeah thats the trick, you need the money first to generate cash flow.

Make a lot of money, than invest it for cash flow. Thats a good formula.

Passive income is real!

But it won't be passive in many of the places you described.

A mobile home park is only passive once it is completely filled up with GOOD tenants. Until then, it will require a lot of your time and money. If you buy one that is already filled up, it will probably not cashflow. Same goes with storage facilities -- they are extremely management intensive.

Rental properties can be very passive IF you buy the right kind of houses in the right areas and get the right kind of tenants. I own many rental properties that I have not seen in 9 years and have not talked to the tenant in 9 years.

My average tenant has been with my 5 - 6 years. And because I have a really good management system in place, i don't need a property manager, don't have to deposit rent checks, and rarely hear from my tenants because they are authorized to call my preferred list of contractors directly if anything needs to be done. The tenant pays the 1st $50 in repairs so it cuts down on the calls.

If I owned Section 8 housing it would NOT be passive. I could expect much higher turn over and would probably get a house back that needed a lot more than paint and carpet when a tenant moved out.

I have two online businesses and they are both very passive - requiring less than 4-6 hours of my time per week on average. They each crank out money every single day.

The thing I really like about an online business is that you can run it from anywhere.

Only when I'm working on a new project does it take more of my time. The problem is I'm always working on new projects.