There are three types of income--earned, portfolio and passive income. Most types of passive income are derived from rental/property, while other types of passive income are derived from royalties from patents or license agreements.
An income stream falling into this category is one where money is received usually on a regular basis, without continuing effort. This does not mean no effort at all; most passive income streams require great effort to start with.
Passive Activity Income- is defined to include all income generated from rental real estate investments-- regardless of how active the investor is in managing the property or properties.(Real Estate Principles A Value Approach 2nd edition pg.519)
Examples of Passive Income
* Income from rental property * Royalties from writing a book. * Earnings from Network Marketing
I don't know about you but that seems like alot of work for something that is supposed to be passive. So when you see the ads for passive income think about the examples listed above.
Lets look at the examples of passive income listed.
Income from rental property:
Ok this is one we've all heard about. You buy a house or inherit a house or a number of other ways and decide to generate some passive income by renting the house and collecting the residuals which are hopefully more than the payments and other financial obligations you have for the house. Once all your obligations are met with respect to conforming to all regulatory statutes you find a renter and start collecting your monthly rent checks, if you are lucky. More times than not the rent checks are late, the plumbing needs to be fixed and the roof is leaking. These are a small example of things that can and will go wrong with a rental property. Passive income? Hardly!
Royalties from writing a book:
Well if you have the patience,knowledge and time to actually write something that someone is willing to pay you for, then by all means go ahead and do it. Perhaps two years to write the book, another year to actually get someone to publish the book and then of course you need someone to buy the book. But once this happens yup, you guessed it passive income. Most of us can't wait that long and don't really know enough about any one subject to dedicate that much time to wait for the passive income. Passive income? Eventually!
Earnings from network marketing:
Now network marketing is not new but it is certainly gaining notoriety among the online business crowd. Online network marketing is a popular venue for those interested in starting a home based business but don't want the costs associated with the old "Brick and Mortar" approach to financial freedom. But before you can get to the point where you are generating passive income there are steps which need to be taken to help insure your success. You must first have a product to sell or someone else's product to sell, ie:(affiliate marketing). You need the right tools and business model to emulate in order to place the odds of succeeding in your favor. You need startup capital for all your advertising needs and web hosting accounts. Unless you are proficient at web authoring you will need the aid of a programmer to get you that fancy website which you hope will make you a small fortune. These, along with other necessities , (which is out of the scope of this article), are necessary for this to qualify as passive income. However, there are systems that can be setup for you which will take alot of the guesswork out of starting from scratch. Passive income? Done right it could be!
About the Author
Kevin Forrester writes on a number of different online business topics. If you want to cut your learning curve and minimize your expense Kevin recommends you visit:: http://www.MoolahMan.com
by Kevin Forrester
