Passive Income – Holy Grail?

Passive income is income that you get for putting in as close to 0 hours of ongoing work as possible. You will have some initial time investment, but on an ongoing basis it should require little effort. The easiest example is dividend income from stocks. You own the stock and it pays you a quarterly dividend, no matter what couch you are sleeping on. There are other examples: eBooks, Affiliate Marketing, Niche sites, etc.

On the surface this seems clearly like the Holy Grail…I get to do whatever I want and money just gets put in my account? Sweet!

Unfortunately, I don’t think it’s quite as easy as it sounds. For dividends, you need to first own the stock. Digital efforts seem doable but it’s competitive and I’m convinced it’s a lot harder than it looks on YouTube.

Digital Assets

Common products here that I’ve looked into are Niche Sites, eBooks, online courses and Affiliate Marketing.

Niche sites are websites that you build about a certain topic (Niche) and then work to get ranked by Google. You monetize the site through ads and/or affiliate links. I built one of these a few weeks ago on a topic that interested me, that I’m trying to get going.

eBooks and online courses typically involve you teaching someone else about a particular subject. The work usually involves researching the area of interest, developing credibility (unless you already have it), building an audience\customer base email list. The key seems to be truly providing value to your audience as well as picking a good Niche.

Affiliate Marketing is basically just creating advertisements for someone else’s products and earning a commission for every person who purchases that product or from that vendor. The most common platform seems to be Facebook now days, but the options are countless.

All of these take work and dedication up front, but ideally once going, they would require minimal effort to keep earning profit.

Real Estate

Real estate investing also keeps popping up and it’s something I’ve considered over the years. One advantage with real estate is the ability to use leverage (debt) to procure properties, so the upfront costs are lower.

Real estate investing also keeps popping up and it’s something I’ve considered over the years. One advantage with real estate is the ability to use leverage (debt) to procure properties, so the upfront costs are lower.

I’ve looked at buying single family homes as rentals. My local market isn’t great for this. I know you can buy out of state, but this isn’t super attractive to me at the moment. You’ve also always got the risk of a tenant destroying your place and unexpected big expenses (HVAC, roofs, etc).

Hands Off Real Estate

I’ve had an account with PeerStreet for a couple years, which lets you invest $1000 at a time into loans for individual properties. I started pulling my money out last year. I decided I didn’t like that it was illiquid, multiple properties had gone into defaults\foreclosures and the returns weren’t keeping up with the market (at the time). The defaults\foreclosures were just annoying, I didn’t lose any money, it just kept that money tied up for a lot longer.

Lately, I started reading about real estate syndication. This is similar to PeerStreet, but more traditional. You pool your funds with other investors and the management company purchases properties. Returning dividends along the way and eventually capital appreciation. The investment minimums on these is usually 50-100k. I was originally unsure of these with the real estate market and larger minimum investment, I did just recently throw in on one of them, so we’ll see how it goes. An important note, it that many require that you are an accredited investor, so that may be a roadblock for a lot of people.

Vacation Rentals

The other area I’ve put some thought into is vacation rentals in other countries. AirBnB or short term rental returns looks pretty compelling. The biggest barrier here is the inability to finance the property.

What passive income sources have you looked into or tried?