Have you dreamed of making money while you sleep? Did you even know that this is a possibility? The concept is called passive income and it plays a major role in obtaining financial freedom and wealth creation.
What is Passive Income?
The basic principle behind passive income is to make money while you are not working. Unlike of a job, where you exchanging time for money, passive income sources focus on creating or buying an asset that creates a steady stream of cash flow.
The idea is to either hire employees or find a system that does not require any. I believe in showing people and not always telling people what to do. The following is a list of the passive income sources I have stared:
Passive Income Sources That I Currently Hold:
- Vending business: A total of 160 locations and 1 maintenance employee. Provides monthly cash flow and doubles my income.
- Online marketing business: Provides cash flow without a high overhead compared to vending.
- Rental real estate: Currently looking for multi-unit dwellings. Living in one unit while renting out the others provides solid cash flow that will increase over time. A deal done correctly could have you living for free as well as collecting cash each month.
- Stocks: Yes I do have stocks. I have very little however. The stock portion of my total net worth is less than 10%. Some stocks pay monthly dividends that could come to you even during hard times. At the time of this writing, all my stocks still pay dividends even 8 months after the crash.
- Mutual funds: I have even less mutual funds than I do stocks. I no longer put money into mutual funds because I have increased my knowledge and I feel that I can do better on my own.
Can you see a common theme here? Most of the investments above provide cash flow on a consistent basis. I am a fanatic when it comes to cash flow. In my mind cash flow equals freedom.
Extra Passive Income Ideas
If you don’t like the things I am doing, here are a few ideas to help you build your own passive income sources.
- Laundry mats: Provides great cash flow and people will always need to wash their clothes.
- Car washes: As long as there are cars people will need to wash them.
- Private investing: These people are also known as angle investors. These people lend money at above average rates (usually 12-14%) in a variety of different fields. I used an angle investor for my vending business and paid him 12%. You could simply lend out money as a mortgage, and then collect the interest. Enough of these and you could live off of the interest and live your life.
- Any business: Buying a business means buying a system that provides cash flow. If you buy a business but are required to do everything then you really didn’t buy a business, you bought a job. The whole point is freedom, buying a job won’t get you there.
These are just a few of the things that you can do to build your own passive income sources. There is no right or wrong when it comes to investing. The investments will either be right or wrong for you, and you will either make or loose money. The important thing is to start, make mistakes and move forward. Find out what works for you and work towards your dreams.
This is a Guest Post by a fellow Yakezie Member, Brandon Schmid who is the president of Angulus Marketing Ltd. and has spent most of his adult life studying money and how it works.
Hey, at least for me on Long Island it’s hard to find multi-family units in nice areas. The only areas I’m aware that I would also want to live in is Long Beach and Mineola and in Babylon Village.
Tell us more about the vending biz. I would be interested in finding out the work required for this.
What percentage of your total income is passive income?
great article. alot of these ideas require some start up cash, but its definitely something to plan for. i am still in my mid 20’s, but i am definitely looking at ways to create a passive income stream for myself.
Hi Stephan,
Start up cash is necessary but if you put together a nice business plan many financial institutions will be willing to take a chance on you. Starting early is key for a couple of reasons:
First, there is room for error. I’ve read that the average person will change their career at least 4 or 5 times in their life. The sooner you start the more mistakes you can make to learn and grow from.
Second, the earlier you are able to gather passive income the more likely you will be able to retire early and generate enough money to live out your ‘golden years’ in wealth.
Good luck with your future!
I’m not sure that I want to go into total details about my income, but here is a general overview:
My mortgage is covered by renters.
I have a vending business that makes twice in gross income what I make with my ‘day’ job
The returns on my investments range from 4% to 10%
So to answer your question, I would say that close to 75% of my total income is passive income.
Cheers!
The vending business was something I thought of while taking a shower before school. It wasn’t an original idea but it has exceeded my expectations for income. It was scary to be in debt and starting a business I knew nothing about, but I was in school so I expected to be in debt anyway.
It’s amazing how quickly you learn the ropes when your time and money is invested. The keys to any form of passive income is to create a plan, research, research, research, and set goals. Everything else will follow.
The only work I do for my vending business is to count the money that comes in. I have hired an employee to fill my machines and purchase the products.
Email me if you have any other questions.
Cheers!
What kind of vending machines?
Real Estate is one of the most challenging ventures. The key I have discovered is to higher a property manager that is someone you trust and that is competent. Usually their experience will be able to weed out the less desirable renters regardless of the location of the home.
Great post Brandon (and Evan)! Passive income, certainly the way to build wealth…no doubt. Personally, I’m on the dividend journey. I used to have a rental unit, but got out of it. Too much hassle. I couldn’t agree with you more; if in RE, have a very competent and willing property manager.
The majority of my machines are the small candy ones that parents ‘love’ at the grocery store. I have a few of the large chip/pop vending machines but I would not recommend starting with those. I have also discovered that most places like the machines in the lunchroom or break areas. Another perk is most places would like a cut of the action but after some negotiation they’re usually not interested in an extra $5 a month.
The best advice I can give for vending is power in numbers. But be prepared, like with any business, for losses early on because finding the right location is tough.
Cheers!
If you don’t mind me asking, but which company did you purchase your vending machines from?
Thanks to everyone for the comments on this guest post and I look forward to reading some of your comments on my blog in the future!
I really like this post. Like others, I am suddenly very interested in getting my hands into some vending. You may be getting an email from me later.
Also extremely impressive passive income percentage! That is really really great. I hope to be at that level some day!
Thanks again for the recap!
I really like the vending machine idea. A year or so ago I read about a neighborhood kid who had a little business going with about 4 or 5 machines in the area and he was making a nice little income for himself. I can only imagine what 160 of them would bring in.
I love the idea of online marketing business because there are options where we can start with a low capital and still earn substantial income after we established it.
After saving enough income on the online business, we could venture on traditional passive income businesses like rental real estates or any other models that you mentioned.
Would you agree that this would be a great wealth building strategy?
I’ve been thinking of starting a vending machine business with my son (he’s almost 10).
@Conrad
I never thought about the small candy machines, I was thinking pop and chips… Great idea!
Good post! Be careful that you don’t buy a business that is losing money or not making enough money for how much you paid for the business. If not, you may have just bought yourself another mortgage (assuming you can’t pay cash for the business).
Online marketing is the best way to go. I started back in 2003 with 3 jobs making only 12k a year. Now I’m up to over 150k/month and it’s good. Within the next year, I should have it up to 500k/month with over 20 independent contractors doing all the work that I don’t have to manage. I have one guy that manages it all and trust is key. It’s hard to find good people. Believe it or not though, I found him on craigslist! If you want to get started…a good place to being – flippa.com
Vending machines would be a great idea at my place of employment. It is composed primarily of women, and we tend to like chocolate…. a lot. Hmmm…. Will have to check out the details for this!
Very interesting, I’ve been looking into many different sources of income. I was thinking going the route of the internet, but I’ll definitely consider some of these options as well.