Residual income or passive income is money that you continue to receive from work or investments performed once. A couple of examples of residual income are royalties paid to an author for writing a book or dividends you continue to receive from buying a stock. There are many ways to make residual income, and this article will guide you to build your residual income streams from a trickle into a consistently flowing river of money every month.
Instructions
- 1
The first step is to start your first residual income stream. You can do this with no money, just a little bit of time. The best place to start is by writing content for the internet such as articles. There are many sites where you can submit content and get paid for it, but each site is best for certain types of articles.
eHow is best for how-to articles, pays consistently and does well in search engine rankings. Examiner is good for well written, long form articles focusing on specific topics. You have to be preapproved to write for Examiner, but you can make good money. Bukisa is good for articles that are more free form, but that would generate a lot of views. Likewise you can submit articles on any topic on Xomba to make money. Xomba is also good for posting links to your other online content.
2Once a little money starts coming in from your article writing, about $10-15 a month, you can use it to begin the next residual income stream - building your own websites. Your websites could be blogs, but those aren't really considered residual income because they require constant maintenance. A better way to go is to build affiliate marketing websites that require little maintenance after the initial set up.
It doesn't cost very much to start a self-hosted, affiliate marketing website. For example, a hosting company like Dreamhost costs less than $10 to register a domain name and less than $10 a month to host as many sites as you want. Building sites is easy too with one click install of Wordpress, which is a multifunctional and easily customizable content management system.
Find a product that you think will sell, sign up for that products affiliate program and build a site around it. The main affiliate program for products is Amazon Associates. There is also Clickbank for informational products like e-books, and Commission Junction which is a collective of many different company's affiliate programs. You will want to build sites around a specific, niche product. If you have well written, keyword optimized content you can start to draw traffic and customers who will click on your links, buy the products and generate commissions for you.
3You should be starting to see a good stream of residual income coming in month after month. Once you are making a steady $25 a month it's time to funnel that into building your next income stream - peer-to-peer lending. Peer-to-peer lending is where you loan money to other individuals through a site such as Lending Club. Lending Club is easy to sign up for and, since you only have to lend in $25 increments it is low cost to start.
Once you sign up and start depositing money to lend, research the types of borrowers you want to lend to. Focus on borrowers who have a decent credit score and are using the money wisely (to pay off higher interest debt for example). Peer-to-peer borrowers tend to have very low default rates, and you can generate returns of over 10% on the money you lend. Another way that you are lowering your risk is by spreading your money to many different borrowers.
The next residual income stream is for more advanced investors and should only be entered after doing a lot of research - the stock market. The focus here is on residual income, not speculative gambles on high returns from capital gains. So once you start gaining more money from your other residual income streams, you will want to enter the stock market cautiously and safely. This means not investing in individual stocks at first. Until you have a lot of money to commit, investing in individual stocks is too expensive and risky. Also you will lose too much money in commissions to make it worthwhile.
Start slow by investing in mutual funds that follow the market, such as an S&P500 index fund. These investments have low expenses, you can invest a little every month and they have historically returned 10%. Once you are a little more market savvy and have built up a large investment base, you can start diversifying your portfolio with other broad based stocks like ETFs and getting into individual stocks. With individual stocks you want to invest in solid, blue chip companies that pay consistent dividends. Do your research first! Another tip is to keep your individual stock investments to less than 10% of your available investing money. This will keep your risks low, but still allow you take advantage of positive equity growth of that stock.
5The most lucrative residual income stream also takes the most upfront work in terms of research, investment of money and risk - real estate. Real estate investing for residual income means buying properties and then renting them out. These could be commercial or residential properties. If you do your research well, and learn the in and outs of being a landlord, you could find good property that will generate enough rent revenue to cover your expenses. One trick here is to focus on one market and learn it really well. Know how much properties are going for, what rents in the area are and the general direction of the neighborhood.
The key to real estate investing for residual income is to do the calculations before you buy the property so that you know you will be making more in rent then you will be paying in expenses. Besides the mortgage on the property, expenses could include repairs, maintenance, management fees and utilities. Also factor in costs of obtaining tenants and account for vacancies. Don't buy a property that will lose money every month with the hopes that the increased equity over time will make up for it! This is too speculative. What you want is steady income every month after expenses, and the increase in equity value is just gravy.
Another caveat - real estate investing for residual income does not mean buying and flipping houses or speculating on hot markets! These are risky pursuits designed to get one big score. For residual income we are looking for steady income, month-after-month that takes little or no effort after it is set up.
6Like a river with many different tributaries feeding into it, you now you have residual income from a bunch of different sources coming in every month! The nice thing about this strategy is that it is cumulative. You will still be making money month-after-month from your first residual income sources, but that money is constantly being reinvested to make more residual income that keeps growing over time.
