There are several ways in which you can create multiple streams of passive income. Let us examine some passive income generating opportunities. You may use one or a combination of the methods to generate passive income.
- Real Estate investors get cash flow from rent in addition to capital gain
- Saving Account owners earn interest
- Investors in shares get dividends and appreciation
- Discount mortgagees earn interest
- Tax lien certificate holders earn interest penalties
- Debenture holders earn interest
- Entrepreneurs who auto pilot their businesses earn passive profits
- Franchisers get a percentage of gross revenue or profits
- Partners get share of profits
- Venture partners get percentage of profits
- Authors get royalties from their books and tapes
- Musicians and song writers get royalties from their work
- Visual artists get royalties from paintings
- Inventors get royalties
- Game designers get royalties
- Actors get a percentage of the profits
- Company Pension Plans offer income flow
- Retired persons get pensions
- Network marketers build residual income through leverage
- Corporate managers get stock options
- Insurance agents get residual income from their sales
- Securities agents get residual sales
- Celebrity endorsers get a gross percentage of profits
- Mailing list owners get rental fees
The above list is not exhaustive. It is possible to automate virtually any business by putting in systems and delegating authority. It is also possible to franchise businesses for passive income or sell shares to create wealth. There are always some costs involved, but the effort is worth it because what you will create is something more powerful: you will create income streams that do not need your presence.
The trick is to let your money work for you and not you working for money. Once you start generating passive income, your money will be working for you night and day even when you sleep.
Categories of Residual Income
For a clearer understanding, we can divide residual income into two broad categories:
- Residual Income sources that require start-up capital or additional fund to maintain and grow
- Residual income sources that require little or no start-up capital or maintenance money
Passive Income Streams that Need Start-up Capital
The first category will need initial capital from your earned income, family money, funds from investors or borrowed funds from banks to purchase assets that will generate passive income for you. When you borrow money, you create debt, which provides you leverage to create accelerated wealth but it also comes with associated risks that can destroy your wealth.
Examples of this type of residual income will be: investing in stocks & other paper assets, real estate investments or buying businesses that have systems in place that need very little of your personal time to run the company. Another example would be that of a good franchise business like the McDonalds – It has systems in place and will need very little intervention on your part.
Passive Income Streams that Do Not Require Start-up Capital
The second category of residual income requires very little financial out lay and is generated through assets that you create by writing a book, song, software, patent or trade mark. The internet has provided a new medium to generate residual wealth through creation of Virtual Real Estate.
Virtual Real Estate
Virtual Real Estate is the new gold rush and without doubt, it is the new frontier that you have to master to create residual income. The internet is creating new millionaires every minute even as you read this book. What is virtual real estate? These are the assets you create on the internet. These include your websites, domain names, email lists, online businesses, Facebook, Twitter and other social media accounts. Once you create these assets you can generate residual income from them for years.
Offline/ Online Residual Income
You can further categorize residual income into:
- Offline Residual Income
- Online Residual Income
Offline Residual Income
Offline residual income generally requires more capital. You can take advantage of a variety of financial advisers and products to start investing in residual income investment schemes like paper assets and real estate. You can also get bank funding for buying these assets and hence can leverage your time and money.
Online Residual Income
On the other hand, online residual income or creation of Virtual Real Estate requires very little, and in some cases, no start-up capital. There are many online gurus but no financial advisers. Banks will not fund it because the risks are too high; it is a new frontier of wealth creation that is still in progression. It is still Wild West out there. You have to make the effort to increase your knowledge to create wealth in this new environment. There are many scam artists who will make you part with your hard earned money on the internet. You have to be extremely careful before pulling credit card out of your wallet. There are risks but very high rewards as well. Opportunities are endless! If you make the effort of mastering the new environment, you can create large amounts of residual income with very little effort in shortest possible time frame.
Creating residual income on the internet does not give you financial leverage but technological leverage. Financial leverage creates debt with associated risks. Technological leverage, on the other hand, is debt free and faster.
Where to Start?
The best instrument to be used to create residual income will depend upon your financial situation, time availability and state of knowledge at a given point. If you have plenty of capital and cash flow from your job or business but no time, then it will be better for you to employ services of a professional financial adviser to invest in offline assets such as real estate, stocks, bonds, CDs, commodities like gold, silver etc.
Alternatively, if you are internet savvy with little or no capital then creating Virtual Real Estate to generate residual income may be the right choice for you. You have to also take into account your risk appetite for a particular type of investment. Your knowledge about an investment and assessment of your situation is the key to making a successful choice of where to start generating your first stream of passive income.