How to build true passive income from a business and the mistakes to avoid
Financial freedom is a popular subject these days. When we find it, it’s not always what we expected but it is a journey everyone should take at least once.
Making the commitment to take back that kind of freedom is something Derrick shared in a recent article, relating the story of growing up on his father’s pig farm. There will always be struggles any time you reach for something greater but keep reaching and it will eventually be within your grasp.
I’ve certainly done my share of struggling to reach financial freedom. I fell into the myth of passive income early and almost lost everything.
What I learned was that passive income may not exist in the way many think but it can still help move you closer to the ideal to which we all reach.
My Painful Passive Income Mistake
I bought into the idea of passive income, making money on an asset without having to work, after getting out of the Marine Corps in 2001. At the time, the housing bubble was just starting to inflate and everyone was getting rich in rental property.
Or that’s what everyone thought.
I sank the $30K I had saved into single-family houses, remodeled them for a cash-out refinance and then sank that cash into more properties. I was making tens of thousands on the remodel and the fast pace of property price increases was adding thousands more.
Quickly, I ran face-first into the problems with this passive income strategy. Once I grew to six single-family houses and a duplex, management of the rentals became a part-time job or more each week. I was working a day job plus taking night classes and I was exhausted.
It wasn’t too long before I started getting behind in management. Tenants would become late and I wouldn’t evict on time. Even after an eviction, it would take weeks to get to a house and get it ready to rent again.
There was nothing passive about rental property and it almost broke me.
Passive Income Part Two and Beyond
I ended up selling all but a few properties and now have a property manager handle the business. I learned my lesson so I was skeptical when I overheard some friends talking about passive income through blogging in 2012.
Despite all the internet promises and hype, I knew better than to jump into blogging thinking it was going to be easy money. I researched everything I could about different passive income sources online, including how to manage a blog and how much time it took.
What I learned is that blogging, as well as most passive income sources you’ll hear about, is a business. It can create a solid income and the business can build momentum to produce that income even if you take some time off, but it will always take some planning and management.
I started my blogs in 2014 and began developing a YouTube channel called Let’s Talk Money in 2017. It took a couple of years to make enough that would pay the bills but I now make more than I did working a 9-to-5 job. I took an entire month off this summer and still made money on the business, true passive income.
How to Really Make Passive Income from an Asset
If you’re ready to commit to building an online business, understand that it will take work and time before you make much money and it could be years before it generates any passive income.
This is why it’s so important to find something you enjoy doing. You’ll need that motivation to keep at it even when you aren’t making much money. The good news is that you can make money doing just about anything. This video of side hustle ideas might give you some idea or at least point you in the right direction.
Next is to research the different ways to make money through your business. Even if you plan on selling your own product or service, there are several ways to start generating cash for that initial motivation.
⦁ Adsense and CPC Advertising is the easiest form of income though pays very little. Earning that first compensation from your business can be a great motivator though.
⦁ Affiliate Marketing is like CPC advertising though you only get paid if someone buys the referred product or service. Less frequent but higher payouts compared to advertising.
⦁ Self-Publishing is a natural fit for bloggers. You’re already creating the content, might as well reformat it into an ebook to publish.
⦁ Printables are just smaller format ebooks and can be a great way to monetize individual posts.
⦁ Sponsorships are brand partnerships that can pay extremely well but you’ll need to build a community around your business first.
I’d also recommend just spending five to ten hours a week working on your side business. I’ve seen too many people pour everything they have into their business idea. They burn themselves out working 40+ hours a week on top of their day job. When the money doesn’t come flooding in, they get discouraged and quit.
Take it easy at first. Expect to make very little after six months but know that your online business will grow over time.
Finally, find a group of entrepreneurs within your niche and type of business. I was able to connect with a group of financial bloggers on Facebook that first year of building my blogs and it has made all the difference. The group will exchange opportunities as well as support you when you need the motivation.
Passive income isn’t always what we think but it can help you achieve that goal of financial freedom. You may find that you aren’t necessarily looking for the freedom from work but freedom from having to work in a job you don’t like. Build your online business, create that monthly income and someday it may even lead to the passive income you wanted.
About The Author:
Joseph Hogue worked as an equity analyst and an economist before realizing being rich is no substitute for being happy. He now runs four websites and a YouTube channel on beating debt, making more money and making your money work for you. A veteran of the Marine Corps, he now makes more money than he ever did at a 9-to-5 job and loves building his work from home business.