What is passive income?

The terms passive income or residual income are used to refer to income such as dividends that you go on receiving without having to repeat the work or investment that you initially made.

The great advantage of a passive income is that it continues accruing all the time. Unlike a job where you get paid for the hours that you actually work, the passive income, once it's been set up, will continue whether you are asleep, on holiday or working at your day job.

For example if you sit down and compose a hit song or write the next blockbuster novel, you only have to do it once and you keep getting paid every time a copy is sold, borrowed from a library, played on the radio or downloaded. This is a passive income from intellectual property and along with income from investments, shares and interest is one of the most 'hands off' ways of making money.

That's great if you have the talent to write hits or the money to buy shares or purchase property to rent out. But what can the rest of us averagely smart, averagely paid mortals do to start earning a regular income without having to work full-time for it?

In practice, a 100% passive income is almost impossible to achieve, but there are ways in which you can generate useful extra earnings with a little effort to get started followed by occasional intervention to keep things turning over.

How to create a passive income

It's everyones dream to have 'unearned' money coming in all the time but in the real world unless you are super talented, rich or lucky, it's unlikely to happen. So assuming that you want to start from scratch, how can you create a residual income with zero investment (or comparatively little) and no great skills?

All you need is the right idea and some time and effort to set it up. Creating a passive income will involve you in a lot of work at the set up stage, but when you have the business up and running, it need take no more than a few minutes when you can spare some time.

How to create an online passive income.

Web sites

Just like this one! This site and thousands of the others that you've looked at provide their owners with a steady income stream from advertising and product sales. If you build a website that is sufficiently different and interesting to start pulling in visitors, it can build into a nice residual income stream and the advantage is that you don't have to keep working on it all the time. You'll need to put the time in to create the site originally but once it's up and running, you can confine yourself to occasional updates. Or you can go down the route of forums where content is added all the time by users and you don't need to do anything other than moderate the content from time-to-time.

The key with creating a website or a blog is to write about stuff that you are interested in. If you actually enjoy what you are writing about, be it fashion or football, updating becomes a pleasure rather than a chore. Your enthusiasm or knowledge on the subject will come across to your readers and make for an interesting and entertaining read leading to more visitors and more sales!

Don't forget that there are also off-the-shelf web based businesses such as dating agencies and sales and franchise sites which can be puchased as 'white label' sites and easily customised to suit your particular requirements. A little time spent researching the options in this area can pay big dividends if you hit the right niche market.

More on earning money with a website

E-Books and self-publishing

If you've come this far looking for ways to make money, you're almost sure to have looked at selling e-books. It's another area where hype abounds and the gulf between promised and actual sales is huge. Many e-book sellers rely on selling the 'publishing rights' to other potential sellers rather than selling e-books to the end-user.

Take a look at the titles available and you'll find that they are either out-of-print and out-of-copyright works that have been digitized or books that are so badly written that you couldn't even give them away for free! Most E-books available for resale are in a classic catch 22 situation. They are either so bad or obscure that no-one wants to buy them or they are out of copyright and you can get them free anyway from sites such as project Gutenberg.

There is some market for how-to books but you need to research carefully to ensure you're not paying for information that's not already freely available in the public domain.

To make any real money with e-books, you need to write your own or add some value to stuff that's already out there. There are some niche markets where this has been done, one example being in the digitizing of vintage car manuals and technical information. If the market exists and you can spread the word, you can make money this way by distributing on CDRom via eBay or via downloads from a web site.

If you've managed to create something that's sellable, you could also consider self-publishing for Kindle. This is a great example of how much the web has made life easier for the prospective author.

No more do you need to send off manuscripts to publishers and literary agents - publish it and if it's any good, wait for the money to roll in!

Create an offline passive income

Creating a residual income in the real world is going to take a bit more effort and investment but it's still possible.

One of the most popular ways is with a round of coin-operated machines. The market these days is very tightly regulated for any kind of machine which offers a prize or contains an element of gambling. It's not the easiest market to get into if you're outside the business but if you're interested in this, the best place to start researching it is on the gambling commission's website.

Non-gambling types of coin operated machines such as condom machines or vending machines don't require a licence and are not subject to restrictions on where they can be located. You can either start building up a round from scratch or look at buying an established round which is already generating an income. If you do this, the usual caveats to buying any business apply.

What about MLM?

With an MLM (multi level marketing) selling system, you receive income from sales of the product plus a percentage of sales made by anyone you recruit - your 'downline'. It sounds great on paper but the MLM world is full of broken promises...

More on MLM

Ideas for making money with your computer

Find out about franchises