Residual income ideas

Let's look at three methods to make residual income which will skyrocket you to financial freedom.

If you are dying to quit your job, live the life you deserve or just simply want to have more freedom to do what you want, then you will like this chapter. Residual income is income you generate passively. So, the money continues to come your way no matter if you're not working or even sleeping.

I'm not going to lie to you and say that it's easy to get a residual income stream setup, but it is worth it. Because once you have this residual income stream setup, you only need to passively maintain it.

Online Businesses

The first method of making residual income is by running an online business. This can be making money from ads while your blogging or making money from your YouTube channel. You can also set up your own e-commerce site or sell other companies products and get a commission, which is also called affiliate marketing.

Another popular way of making residual income is from receiving royalty checks by selling physical books, eBooks, music or photos. 

Even though you can make money with these ideas, there is a ton of competition, because online businesses are very popular and people underestimate how hard it actually is to make a decent amount of money from these ideas.

With all the competition it also means that the online markets are flooded with mediocre products and services. So even if you come on the scene with the best product on the market you won't stand out. 

This is when you have to think about how you want to advertise your products or services to rise above all the other mediocre products and become the leader in your field.

Let me emphasize that having a product or service alone is just half the work. You also need to get visibility by advertising, whether this is social media marketing, PPC marketing or word of mouth marketing is up to you.

It's always good to do some competitive analysis and see how your competition is promoting their products.

Another problem with online businesses is longevity. Many of these businesses can be here today and gone tomorrow, because the competition just pushed you out of the market, your products or services became obsolete or you could not keep up with technological or advertising changes, not allowing you to get all the necessary exposure to stay relevant. 

So, it's not set it and forget it, it's said it and maintain it.

Anything that is not considered passive I left out of the list. So, freelancing and consultancy only works while you are physically present, if not you won't get paid. This defeats the purpose of making residual income.

Real Estate

The second way to make residual income is through real estate. I'm not talking about flipping houses because that takes too much work to buy and sell. It's also not passive.

The focus should be on income properties which cash flow. Meaning that after all expenses are accounted for you come out with a net profit.

Your tenants are paying you rent monthly. With these rent payments you pay down the mortgage (if any), home insurance, taxes, capital expenditures, etc. If you buy in the right location hire the right property manager and run your numbers, you can have a nice stable income.

You won't break the bank by just buying one property starting out and the more properties you buy and take a mortgage on will increase your debt amount. This accumulation of debt will also hinder your process of getting approved for additional loans.

This is when you have to get creative with financing your purchases. Private lenders or portfolio lenders could be two options to try out.

The rent payments allow you to generate residual income and the more properties you own the higher your residual income could potentially be.

There are also many tax benefits associated with doing real estate. This is not a method of making a ton of residual income fast, but it is stable and grows nicely with each additional property. Many millionaires owe their riches to real estate, also giving them the flexibility and freedom to travel and be their own boss.

A great way to start is to buy single-family homes, duplexes, triplexes or quads. These are considerably cheaper than commercial real estate or apartment complexes.

You can start with residential real estate or try your hands at franchising and commercial real estate once you have the skills and money saved up.

Dividend Paying Stocks

The third method and if you have been paying attention to my book, you know what it is: making residual income through dividend paying stocks.

There are a group of companies that pay some of their net income out as a dividend to shareholders. Not all of these companies are worth investing in, though. So, analyzing a company's performance is highly recommended.

The beauty about investing for dividends is that you are creating a nice stream of residual income that should grow faster than inflation. Companies increase their dividend payments and by constantly buying the right dividend stocks and reinvesting those dividends to buy whole or partial shares you supercharge your dividend income.

Just keep in mind that you will have to pay taxes on your dividend income depending on the type of investment account you're using.

It's also very easy to start, because you don't need to have a ton of money. You can start by just buying one share of a dividend paying company.

Many of the wealthiest individuals on earth have dividend paying companies in their portfolio. Guys like Warren Buffett, Charlie Munger and even Bill Gates.

Now, the last two methods of making residual income, real estate and investing, I call those old money, because they have been the pillars of generating and maintaining wealth.

Online businesses, however, can be tricky. One month you could be making a lot of money, but the next month could be the total opposite. If you want to play it smart and safe, you should diversify your income streams, so you have money coming in from different sources.