Before diving into the blog and learning more about the different levers that can increase your income, I wanted to put something out there first about my philosophy on how to create passive income streams and “passive income” in general.
Passive Income DOES NOT EXIST.
There I said it.
Everyone has seen advertisements of the guy on the beach with a drink, the boat parked in front of his mansion, selling something that is the “key” to how to create passive income streams.
That is complete BS.
The reason that you can’t find how to create passive income streams and need all of the secrets that people are selling is that passive income doesn’t exist. Read my article on protecting yourself from scams and running away from people marketing with Porsches.
Passive income is a myth; there is no such thing. There is always work involved in making money. BUT, and this is a big “BUT”; you can “Leverage” how much return your work generates. Notice the first sentence of the Levered Income website and why it was created:
To show you how to create RESIDUAL income streams.
(not how to create PASSIVE income streams.)
The internet is littered with blogs on what is the best way to make passive income and how to create passive income streams. After reading them, I realized that the passive income sources listed weren’t passive at all. I read a lot of articles about supposed “passive income streams” that I happen to work at daily that didn’t seem passive to me. Actually, in the majority of cases, you can replace “passive income” with “residual income” or “work a lot for income.”
Four “How to Create Passive Income Streams” Myths
Here are four passive income stream myths that I have seen over the years:
Royalty Income is Passive Income.
This is completely false.
Book royalties, for example, require you to actually write a book – which was work the last time I checked. (Not to mention market the book and also build an audience that reads your books – also very tough). Royalty Income is, however, residual income. You have levered a certain amount of time and effort into creating something that continues to pay you in the future.
The only time I received royalty income for an intellectual property creation was for a series of shows I created. Of course, this was only possible based on a lifetime of work in the entertainment industry, and my reputation developed over 25+ years. (Oh yeah, also don’t forget about the years I spent developing the licensed product.)
Stock Market Dividends (or other securities investments) are Passive Income.
Again this is false.
You need to get capital to invest in the first place. Making money to have to invest requires work. You also need to research your investments (or investment advisor) and monitor their performance.
I believe you also have to be actively involved in managing your investments (there is a whole industry out there that is working against you, trying to separate you from your money). Investing in companies allows you to leverage the output of that company’s entire workforce, marketing, products, patents, and all of their assets – generating more income.
There are a lot of free tools out there that you can use to monitor your investments (Seeking Alpha is a great example). Leverage that technology and take control of your investments!
The book all investors should read before starting to invest in anything.
Learn how to figure out what something is worth BEFORE you buy it.
Real Estate Generates Passive Income.
I currently own commercial, multi-family, short-term rental, and industrial real estate. “Passive” is probably the furthest thing away from an accurate description of the owner’s experience.
There are repairs, maintenance, tenant relations, guest relations (in the short-term rental world), taxes, insurance, legal issues, and the list goes on and on. Yes, you can hire a management company, but you need to watch them to ensure that your properties are managed properly.
You can leverage your property ownership by charging rent and making reoccurring income, but it is a far cry from passive income.
Online Businesses Generate Passive Income.
I have always been a geek and love computers and the internet.
I had one of the first IBM desktops (remember the big floppy disks!), as well as one of the first Apple Computers. Over the years, I have created eCommerce stores, SaaS (software as a service) applications, digital marketing businesses, domain sales businesses, affiliate websites, and cryptocurrency mining operations.
I think that the internet and computers are hands down the biggest lever (see a pattern here about the levers?) to help you create RESIDUAL income streams. Generating income online takes a lot of work, but it is absolutely amazing when it works.
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How to Create Passive Income Streams? Ultimately, You need to work.
Sorry.
You have to work to make money, make it work for you, and really work hard to keep it. (But you can work smart.) The above faux ways of creating passive income streams are great opportunities to leverage income, but they are definitely not passive.
You need to focus on the levers that deliver the maximum reward for the least amount of “pull and repeat.”
