In the world of wealth-building, one of the most powerful strategies is Residual Income. Residual income is also known as passive income or recurring income or extra income. The right passive income can generate income for the present and can also serve as a retirement source of funds. That’s how powerful it is. Its always better to have multiple streams of income.
So, what exactly is residual income? And, what are a few of the best passive income opportunities? If you are asking yourself these questions, then stick around as this article is going to explore the answer.
What Is Residual Income?
Residual income is defined differently, depending on you who you ask. For some, residual income means earning that is derived from a limited partnership, rental properties or enterprises that the investor is not actively involved. For others, it means money coming in even if you’re sitting on a beach while sipping a pinacolada. Even this moment, you may have a different idea of what a residual income is.
For this article, let’s loosely define residual income as earnings from investment or projects after you have made your initial contribution, whether it’s money or time.
An example of a residual income is like having $100,000 in an investment vehicle. It grows 10% a year. This means that you will be able to withdraw 10,000$ per year, or around $833 a month forever. Of course, this is assuming that the investment grows 10% a year. This is only a simplified example, as there are other factors that you need to consider such as inflation.
Residual income appeals to a lot of people as it sounds like you are getting money for nothing. It sounds as its one of those legitimate get-rich-quick strategies. However, don’t be fooled. Building your residual income will take a lot of work up front.
What Are The Best Residual Income Opportunities?
Now that we have covered what residual income is all about, let’s cover a few best opportunities for creating residual income for yourself.
* Information Products
Creating information products is a great opportunity for creating residual income. Selling information may come in the form of DVD, CD or ebook.
To make a good residual income from selling information products, you need to know that it will take a lot of work. One of your main focus is creating great and useful content. Trash or half-baked products rarely result into long-term residual income. You will need to create something that people are willing to discuss and spread on their own.
Once you have created a great product, your next step is to devote your time and money around the product. You will have to plan for a serialization, market your product and create a strong platform for your product.
Another thing that you need to know that one product will hardly bring you great success, unless you get very lucky. You will have to create a lot of different information products. Again, selling information is not easy work, but once you have a good working model, money will start coming in while you kick back and relax.
* Rental Income
Purchasing a rental property is one of the most time-honored and effective ways of creating residual income. The idea is to purchase a property, rent it out and collect rent money every month. The idea is pretty much simple and straightforward, but there are a lot of things that you need to know.
First of all, you will need to educate yourself. Like any industry, you will have to learn the in’s and out’s. Otherwise, you will end-up with a property that is draining money rather than producing income for you.
There are 3 major things that you need to be on the lookout if you plan to build a residual income from rental properties: the property’s financial risk, the property’s associated expenses and return on investment.
A few serious questions that you may need to ask are: will my tenant damage my property? Am I welcoming a deadbeat tenant? Is there a market for a profitable rental property in my area? All of these questions must be addressed seriously. One mistake could lead to negative income or debt.
* Affiliate Marketing
In this day and age, you probably heard that affiliate marketing is great for creating residual income. The idea with affiliate marketing goes something like this – you create a website or blog, promote a 3rd party product through a link, the visitor clicks the link and purchases the product and you will earn a commission. Many consider affiliate marketing as passive income as you can simply outsource most or all the work.
Affiliate marketing may be a residual income, but the truth is it won’t be at first. You will have to learn how to create quality content and build traffic. Both of these will take a lot of trial and error to get it right. Once you have learned to master these two affiliate marketing fundamentals, things will get a lot easier and the income stream starts coming in.
* Peer-to-peer Lending
If you are thinking of building passive income like the way banks make their profit, then Peer-to-peer lending may be the one for you. Peer-to-peer lending is also referred to as P2P lending. The idea behind P2P lending is all about lending someone money, and you will get back your money plus interest rate.
Most of the time, P2P can yield to 8 – 12 percent interest rate. With P2P lending, you are directly lending money to an individual via a 3rd party entity (usually a website).
Now, let’s cover what you really need to know about P2P lending. First of all, the money you lend is unsecured. Hence, there is a huge risk factor here as the borrower can simply default their loan with little consequences. To make P2P work for you, you need to learn how to diversify and analyze.
When it comes to diversifying, experts suggest that you divide your money for lending into smaller amounts. In fact, experts suggest that you spread your money over 100 or more loans. This will cut the risk if few of your borrowers default on their loan.
The next way to significantly cut your risk is by analyzing the historical data of the borrower. Focus on a borrower’s repayment rate and the purpose of the loan.
P2P takes time to master as there are a lot of metrics that you need to analyze. Mastering these metrics can significantly cut your risk and can turn your entire investment into a profitable one. Keep in mind that P2P isn’t exactly an entirely residual income as you may have to continually reinvest your money (via lending), but it sure beats the 9-5 way of earning money.
Residual Income is all about working once and getting paid over and over again.
It’s not the same with a regular job as you will only get paid once for the job you have done. Residual income is one of the tried and tested strategies for creating wealth. If you wish to create a residual income for yourself, then you might want to try selling information, get a rental property, affiliate marketing or P2P lending.
Any of these will require work and continuing education. However, once you get it down, you will be on your way to creating wealth.