I am sure you must have heard the term ‘passive income’ referred to in many financial magazines and papers, or on business reports on the telly. But what is the definition of passive income, and how to make money with passive income?
What is passive income
Think of a singer or song writer. A singer and the writer of a song can have one or a couple of big hits and score really high in the pop or country music charts. But they temporarily loose inspiration and creativity and stop writing and singing for a while until they come up with another successful idea. In the meantime, however, and for as long as that song is played for years and decades to come, that song writer and that singer will earn royalties from that music piece. And the profit made by that song could potentially be passed to their heirs, depending on the record deal with their producers.
Passive income is exactly that. You work hard on a project, and income is generated automatically from that project thereafter.
The opposite of this way to make a revenue would be for you to work for an employer, where unless you physically go to work every day and work in your role, you will not get paid. In some sales roles, in fact, you may only get paid a basic salary, where the biggest share of your salary is dependent on the number of sale deals you seal every month or quarter. So if a month is a little on the slow side, no salary at all – or very reduced!!
Naturally not all ways to make an income from home that we have looked into so far will generate a passive income. Generally speaking, freelance positions are deemed the prototype of active income. You must be proactive in seeking job, and your work will often be paid through a commission scheme.
So, a photographer will first of all have to find a client that will hire his services as specialised in wedding photos, and will then get paid only on delivery of the picture snaps, and provided the newly wedded couple is happy with the outcome.
Likewise, a teacher offering private tuition will need to look for clients constantly. A teacher will agree a pay rate which she will receive at the end of every teaching session rendered to the child. Her or his earnings may not necessarily be affected by whether the child passes or fails their exams, but having a child passing a test with flying colour will be an added bonus for the teacher, who will promote her or his services with the added accolade.
How to get passive income from home
There are two ways to make money through passive income. Some ventures require that you make a monetary investment, others require a time investments.
What has to be clear is that with passive income ventures, you never make immediate money. Nor the word ‘passive’ should lead to you to in to the false belief that it is an easy way to make money and does not require much elbow grease at all.
As mentioned in my other posts and pages, no matter which avenue you intend to explore as ways to make an income from home, you must always be prepared to work your socks off. At the end of the day, you are trying to set up a business, your own self employed business, from scratch. And it will take commitment and hard work for you to see the fruits of your hard labour.
Just as if you were employed by a big corporate magnate, or if you were on a commission based salary with a smaller family run company.
Ideas requiring a monetary investments
Ok, admittedly this type of passive income may not suit many of us, as we may be short of cash to start off the business, or we may find it too risky to put our hard earned savings in a venture that may have a risk element attached to it.
Nevertheless, let me give you a few ideas:
- Property investment – you could consider investing in purchasing a property, or a few properties, which you then may want to put on a rental market or you may want to refurbish and sell on for a profit. A good way to invest in properties is to purchase at auction, where it is deemed that the sale price is reduced over figures open market. Either way however, it is always good to do a good upfront research on the property you are having in mind, as there may be hidden costs from local authorities and for legal services involved.
- Rent your garage – if you have a garage adjacent to your property, you could consider renting it on. Again, you do not have to do much, other than ensuring the tenant is reliable enough to pay you on time, and you may want to put in place a basic tenancy agreement which may have legal value. Unlike with properties, people tend to go for cash in hand payment solutions, but this arrangement may turn up risky for both landlord and tenant likewise.
- Get a lodger – Or you could consider renting a room in your house if you are under-occupied and have a spare room that you no longer use. Admittedly, this solution may require your daily input in preparing meals for your lodger, or in having to do housekeeping for the room. But again, you can agree terms with your lodger by giving them access to the kitchen and by making them responsible for the housekeeping of their own room.
- Invest in stock shares or trade in binary options – of all the solutions I have spoken about, possibly stock market is to me the riskier option. But on the other hand, you do not need an investment of thousands of pounds or dollars, as you can join for as little as a few hundreds.
Ideas requiring a time investment
This option requires that you invest a lot of time to set up your venture before you see the results, but once you start monetising on your project, the results are outstanding. And, because most ventures are website based, this is the kind of passive income that I prefer. All I need is an internet connection, my laptop, and willingness to work hard at a project to start off with – no need for upfront financial investment.
So, what can we do with time investment?
- Affiliate marketing – in a way this is my area of expertise. As mentioned when outlining the basics of affiliate marketing, this method is particularly successful if you have a blogging or review based website, or an e-store. And it may take a long time for your website to start bringing in revenue, but once the ball starts rolling and you start ranking higher and higher with SEOs, visitors are likely to use your website to make purchases without you having to contribute to your site as regularly any longer, as you would have built your reputation of credible reviewer in the niche you are working within.
- Creating an app – if you are a guru and regular user of apps on your smart phone, you can easily relate to this concept, and surely you will have ideas of an app that will not yet have covered the demand of regular users such as yourself. You can create an app with the help of a programmer, and then sell your app to any App store. The passive income is determined in this case by royalties similar to the ones adopted in the musical world.
- Produce music – this does not necessarily means that you may have to be ‘hired’ by a production company. There are music storage companies, which will store your music to be used in commercials or on videos. You will earn a passive income every time that your licensed music is played or used.
- Selling photos – again, you will have to invest in time (not necessarily in a camera, as often smart phones nowadays take very high quality pictures) to create a portfolio of pictures. You can then make your portfolio available to photo storage companies, such as Pixabay.com to mention one like many, and you will earn every time that somebody uses one of your pictures.
- Create paid for training videos – there are several online platforms where you can published training videos in whichever subject you feel strong and passionate about. Anybody can purchase your training over and over, and that is where the passive income is generated. If you will, it is teaching taken to a wider distribution level. Udemy.com is one of the many available marketplaces available online, and possibly the most diffused, and widely used by students worldwide.
Work harder for a more lucrative outcome
The suggestions I mention above do not want to be an exclusive list, as in fact there are myriads of business opportunities that you can translate in passive income.
No matter which type of passive income you intend to try out, the one thing you must be prepared for is to set out a solid basis. And to do so you will need to put hard work in your project.
You must also be prepared initially and for a period of time not to see fruition from your project for a period of time. And particularly when you try to establish yourself online and build your reputation as an honest and trustworthy brand, this will take time. Then again, once you do, customers will be attracted to your portfolio of pictures, or to your website, and they will bring in income without any more of your initial effort.
It would be interesting to hear whether you have attempted any of the above avenues, or how you have made a success of your passive income based business. Please do leave your comment below to share your experience.