Today I want to talk about my top 5 passive income streams. Without getting head deep in defining what is passive income or if there’s even such a thing to begin with, I want to list my top 5 income earners in order since this is a question that I get quite a bit.
This list is in order of passive income streams that generate the most profits for me to the least. Note that I mentioned profits and not merely revenues. That is because some of these passive income models have a heavier cost structure, diminishing the bottom line profits.
I generate most of my passive income through web properties, specifically niche websites. What I like best about internet based businesses is that the barriers to entry are little to non-existent. Moreover, the start-up cost is bare minimal. In fact if you already have existing web properties (and thus hosting services), your start up cost is a mere $7-$10 spent for the domain name acquisition.
Currently I blog and manage several niche websites in my portfolio. What I like about this passive income model is that I can establish several streams of income within each web property. For example, I generate income from private and public advertising, affiliate commissions, lead generation, sale of my own digital products, etc.
I also like the fact that as each properties cash flow increases, I have the opportunity to sell the property as a passive income producing asset, resulting in significant cash infusion. I have sold a few niche websites in the past for a five figure gain on sale. My biggest success resulted from the six figure sale of my e-commerce website back in 2007.
Despite the number of web properties I maintain, of all my passive income streams, internet based income models take the least time and attention, and are the easiest to manage.
A healthy portion of my passive income comes from the investment of capital as well. I have retirement accounts, regular trading accounts, fixed deposits (CDs) and investments in small scale hedge funds that generate profits. Unlike profits from web properties however, I let the profits from stock market activity remain and compound within their accounts. Some accounts such as retirement accounts leave me with no option but to keep the funds in there until I retire.
Unlike web properties, stock market investing requires money to make money, and often comes with a much higher exposure to risk because I cannot personally control the outcome of companies I invest in. That said, stock market investing is still one of the more lucrative passive income streams for me, especially portfolios structured for aggressive growth and generating long term income.
Dividend investing however is something I am only now learning about in depth and plan on building a portfolio of dividend stocks on my own. Aside from the few speculative picks, all my portfolios are now professionally built and managed (not necessarily recommending this is the best route).
Investing in real property is one of my favorites because real property is something that is tangible which I can see, touch and feel. I also see it as a vehicle that provides real value to another human being. As a landlord, I feel that I am an important member of the community who provides quality housing to tenants in need. Real estate is also an excellent hedge against inflation over time.
In the stock market, one can trade on margin (debt/leverage) up to 50% of their portfolio value. In real estate, leverage can go much further, in some cases 100% or even more if you can draw a line of credit on the built in equity in an undervalued acquisition.
While I do not trade on margin in the stock market, I certainly acquire real estate on heavy leverage. I like this passive income stream because I feel I have more certainty and control over the outcome of my performance. There are also significantly more tax advantages involved in real estate investing compared to the stock market.
Real estate investing is relatively hands off for me as I have property managers who maintain my properties. But with all that said, my passive income profits from real estate investing are less than the profits from the stock market because there is a much bigger cost component to real estate such as mortgages, personal notes, taxes, association dues, assessments, property management fees, ongoing repairs, maintenance, etc.
I do enjoy the positive cash flow from my real estate portfolio each month, but more importantly the equity buy down, property appreciation and tax benefits. I have not evaluated real estate investment holistically versus investment in the stock market and it is an exercise I plan on taking on one of these days. It would be interesting to realize whether the stock market is truly more lucrative for me compared to real estate. I have a very strong feeling the results will be close.
Because I am a diversity freak, couple with the fact that I love my community, I decided to purchase a small brick and mortar business a few years ago. I bought an undervalued business with the hope of turning it around and selling it at a significantly higher value.
The business had its struggles initially, mostly due to my lack of diligence, but has since gotten on the fast track and is doing quite well for me. I was initially active in the business but it is now under competent management that allows me to wash my hands off it. Steve – thanks to you and team if you are reading this.
The reason this passive income stream is on the bottom of the list is similar to real estate investing, there is a relatively large cost component involved in running a brick and mortar business such as a massive rent amount, utilities, salaries, etc. Nonetheless, the business earns me a nice chunk of passive income on an ongoing basis.
I’ve had a chance to invest in a few start ups in the last few years in the capacity of a small scale “angel” (not through open market stock acquisition). I now consider this a passive income stream because these businesses started to generate some returns for me last year in the form of “dividends”.
My overall goal from these investments however is not so much cash flow as it is appreciation of capital from either company valuation or an acquisition. I might cover these topics in the future depending on how the investments shape up and whether the discussion fits the scope of this blog.
Well there you have it, my top 5 passive income streams. I do have some active income streams I selectively embark on such as consulting projects and corporate training.
Those gigs are far and few in between however. I prefer spending my time enhancing my existing businesses and contemplating additional passive income ideas.
I have several other passive income ideas that I have been contemplating, many of which fall under one of these buckets but other passive income models that are completely new to me. I will update you on my progress as I learn and implement some of these in the near future.
I like what I do because of the diversity I am able to create. In the example of internet based businesses, I am able to establish multiple streams of income within each existing stream.
Readers: What about you, what are your top passive income streams? Are you in the process of developing any? What is it that you’d like to experiment with more?Previous: How to Write an Effective Sales Page to Sell Your eBook
I love real estate, probably because I have been in it for over 15 years and it takes a while for some real estate assets to bloom and they have so right now real estate is my number one passive income producer followed by online assets into which I only recently started to invest: < 1 year. 3. is stocks and there is not four of five. I like diversity, even within assets themselves: so in real estate a combination of multifamily, residential, and commercial and online; a good source of advertisers and e-commerce.
diversity within diversity – I like that Artur. what area(s) do you invest in?
Phoenix, AZ, USA and in Poland – for real estate.
very intrigued about Poland – would love to have a chat over it sometime. I am looking at some Asian and European markets as well right now
Your portfolio seems perfectly diversified!
Apart from investing in a physical business, my portfolio is the same as yours.
I keep getting told that I should increase my real estate exposure but the management headaches and maintenance costs keep directing me back to the wonderful world wide web 🙂
have you considered hiring property managers? how much do they charge in the UK? in the USA, the going rate is 10% of monthly rent – well worth it in my opinion. real estate has several advantages not found in online business, but there is also the flip side
I love stocks that pay dividends, especially if their dividend % has been steady or growing for the last 5-10 years or if they are a big blue chip company that isn’t going anywhere like AT&T and Verizon.
certainly a strong component of the passive income arsenal. the challenge with equities is that it takes money (serious money) to make good money
This is a great post Sunil! I am new to this internet marketing business and I have started a few sites already while I am learning more on this field. I have experience some trial and error creating sites and due to this one of them is already generating income thru Adsense but very little at this moment. My wish is to let this grow and add more to build my portfolio of sites. My goal is to make a passive income to live with. I am still learning and your generosity to share your knowledge helps me and a lot of us here. Thanks!
you are most welcome. please let me know if what specific topics you are interested learning more about. welcome to the blog Jude
Nice insight Sunil.. I guess you are an indian???Can you tell me which spam blocker do you use in your website for filtering spam comments???
Indian indeed Charlie. the one I use is Growmap Anti Spambot Plugin
Lovely blog Sunil , you are really giving me some great ideas , thank you , very profitable.
always welcome Lansford – let me know how I can help further
I really want to develop Niche sites. I have played around with them a little but I know I could spend more time on it. It seems to be a great way to make some passive income.
the good thing about working on it some more is if done right it could pay off for a long time to come
I’m curious if your niche websites have been affected by Google’s latest algorithm change? I know mine have been pretty drastically.
Do you only rely on free SE traffic for your sites?
some did and others did not. hard to narrow in on the common denominator however. for most niche sites, I rely on SE traffic. however for my blog I have a more diversified approach. I am also launching a niche/authority blog/site combo that will engage several methods. I will blog about this experiment more. what’s your story?
Its great to know see you making good income from your sites. Hats off to you for being able to maintain 5 niche sites (probably more by now). I have only just started my second site and am finidng it hard to focus my attention as my main site/blog takes over 5 hours per day, and I am just able to write one new article per day.
feed the stallions and starve the ponies 🙂 not literally but …
very impressive and helpful.
Great post and tips!
I see lot of blog help and “make money online” training gathering a great deal of followers. These launches are as big as 10M or more. Any thoughts on such businesses?