I talked about my company and the passive income coming from it to a few people since its creation. However, most people have absolutely no clue how I can really make money from writing articles everyday. They imagine that I probably do this only for fun and that this hobby is giving me $200 a month. But there is much more than simply blogging. Way much more. This is probably why it is so hard to earn money off the Internet and why so many people quit. Building a passive source of income is not that easy 😉
It’s like investing in a rental property
I like the analogy with a rental property because it is a similar type of source of passive income. If you are looking to buy a rental property, you will probably pay around 10 to 15 times the yearly gross income (this is the rate in Montreal and its suburbs). So if you are making 1,000$ a month (so 12K a year) from renting, your property worth about 120K to 180K. You will get a steady (passive) income flow and you will have to take care of the property in the mean time.
You will probably have to invest in the property once in a while to repair something, to maintain its value or to improve your investment returns by renovation a bathroom in order to increase your rent. On the other side, you may have months where your renters don’t pay you or that one of your apartment is vacant. During these rougher times, you still have to pay off your mortgages, taxes, electricity and other expenses related to your property.
In fact, there are no real passive sources of income as you always have to work a little bit for it. I personally define passive income as a source of income earned regardless if I am awake or not, on vacation or available.
How about investing in a website to build passive income?
When you buy an existing website, you will usually pay for 12 to 24 times the monthly income. Therefore, if the website is making $100 a month, chances are that you will pay less than $2,000 for it. Once the domain is transfer under your name, you will start earning income from this website. On the other side, you will have to take care of it at the same time.
You have the possibility to invest in the website to increase its traffic, improve the design or add a forum for example. All these actions will contribute increasing your monthly income from it. As it is the case for a rental property, you may have rougher months where you loose sponsor, get dropped by Google and so on. However, the only “municipal tax” there is to pay is your server ($75 in our case) and your domain (about $10 a year).
Therefore, you have way less risk as your monthly expenses are not very high and you see a direct return on your investment. For examples, we bought a blog that was generating a little bless than $100 a month for $1,200. In 4 months only, we were able to monetize the blog so it’s almost paid off ($1,000 revenue so far).
Want another example? The latest site we bought early in January 2009 was what I call a “mini-site”. Mini-sites are designed for a specific niche in order to get highly targeted individuals. They don’t have 10 to 30 articles on them, all related to the very same topic. We bought the site at $1,300 and we already made $325 in two months. At that rate, we will be paying it off in 4 months. Once paid, it will still bring us a stead cash flow. Who cares if it drops down to $100… it is still $1,200 per year for minimum efforts ;-). This is what I call building passive income!
We would not be able to keep too many blogs. This is why we decided to go on different route and try mini-sites as they require much less work. So even if you don’t now how to create a site from scratch, you always have the possibility to buy one already built 😉
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