Before diving into the blog and learning more about the different levers that can be used to increase your income, I wanted to put something out there first about my philosophy regarding how to create passive income streams and “passive income” in general.
Passive income DOES NOT EXIST.
There I said it. Everyone has seen advertisement 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.
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 on a daily basis, that didn’t seem passive to me. Actually, in the majority of the 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 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 have 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 perform research on your investments (or investment advisor) and monitor the 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 lever the output of that company’s entire workforce, their marketing, their products, their patents, and literally all of their assets – generating you more income.
There are a lot of free tools out there that you can use to monitor your investments. Lever that technology and take control of your investments!
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 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 lever your ownership of the property 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 I 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?) out there to help you create RESIDUAL income streams. Generating income online takes a lot of work, but is absolutely amazing when it works.
Ultimately, You need to work.
You have to work to make money, work to make it work for you, and really work hard to keep it. (But you can work smart.) All of the above faux ways of how to create passive income streams are great opportunities to lever 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”.