Is Residual Income Really Possible Or Are People Like Tim Ferriss Full Of It?

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Over the years, there has been an extreme growth in people seeking residual income opportunities – especially with the evolution of the digital age and popular books such as Multiple Streams of Income by Robert Allen and The Four Hour Work Week by Tim Ferriss.

However, some still feel like it’s just something too good to be true. Some say these opportunities require more work than expected, while others claim they are just fraudulent. So, is it possible to find systems and processes that can create income for you while you’re napping or going out with your friends? After all, isn’t that what passive income is all about?

In this article, we will explore the basics of residual income – what it is, its pros and cons, and the best residual income ideas you can venture into.

Let’s learn how you can make money without having to work for 8 to 10 hours per day.

What Is Residual Income?

By definition, residual income refers to a type of income source that earns regularly and predictably through diminishing and minimal effort. In other words, it is passive income.

Let’s break it into these two key components.

First, residual income should be a predictable and regular income stream. The amount of money that comes in through this venture should be consistent. Finding a one-time money grab is not a form of residual income stream. There might be times when your cash flow might be a bit erratic, but at the end of the day, the value is consistency in profit.

Second, building your residual income has to lower the level of effort you exert as time passes. The goal here is to put in the effort upfront to generate a system or process that continues to deliver profit as you slowly step away. If you put 40 working hours per week into this opportunity in the beginning, the goal is to reduce this time commitment while continuing to reap consistent benefits. Ideally, your system will create growing profits over time.

One misconception, however, is that many people have the impression that once you have established a residual income system, you no longer need to do anything and the money will keep on pouring in. The truth is, you will still have to manage and do some work if you want the best output. Technology changes, the competition landscape alters, and customer demands morph, and you need to tweak and adapt your system to stay relevant.

For example, Richard Branson owns 400+ residual income startups and companies. He doesn’t run the day-to-day operations, but he reviews and analyzes their numbers each day to keep track of their performance. And often, he (or his team) gets involved to ensure the residual operations continue to produce the expected returns.

Pros and Cons of Building Residual Income

The road to residual income is slow and long but can be very successful if appropriately managed. If you are planning to pursue this path, you should understand its pros and cons.

Pros

• Flexible Time: The good thing about this strategy is that you do not have fixed office hours. If you feel more productive at night or have time over the weekend, you may work on these during the most suitable times. In short, you control your schedule.

• Steady Source of Income: This is probably what drives people to residual income. Just like what has been mentioned above, you don’t have to exert too much to earn once you have established your business or system.

• Diversification: The more varied your business collection is, the more stable your income will be. In the residual income setting, it’s easier to diversify since you can create multiple businesses that focus on a variety of industries, tailored to different customer types, in multiple geographical locations, and in multiple languages. This creates unlimited combinations of diversified opportunities.

• Ability To Pursue Passion: You pursue your passion in whatever field you want as long as you set it up through a residual income approach. This is easier than spending the majority of your time inside the office or working on topics that just drain you of energy and emotion.

• No Limitations On Success: Unlike traditional jobs, the money you’ll receive does not have caps (e.g., salary grades); instead, your profit level will depend on your effort, the supply/demand for your product or service and the overall performance of your business.

Cons

• Taxes: Your entire business income will be added to your current income to determine your tax rate. The higher your profit, the higher your required tax obligation. Finding a good accountant is critical in devising tax mitigation strategies. Owning a business can have great tax advantages if properly managed.

• Capital: You can venture into various avenues for your residual income business. The lone downside, however, is that you may require upfront money to start these, and in some cases, it can be pretty high. Various options do exist to assist, such as business or home equity loans, angel investors, raising capital through friends and family, and a myriad of other options. Each has its own benefits and drawbacks.

• Higher Risk: Your income will be more unstable, especially early on. Compared to being employed in a traditional company. Not to sugarcoat it, there is no certainty that your business or system will be successful. You can pour a lot of time and capital and not get the benefit you are looking for. Often, entrepreneurs will start their ventures while still retaining their regular jobs to mitigate the risk and soften a potential financial impact. At the end of the day, we all need money to pay off our bills.

• Low Starting Income: One of the biggest concerns when developing your streams of income is the long period for the stream to grow. Most residual opportunities take time to get off the ground. This is the main reason why people in business quit their residual income journey in the earlier months of establishing it. They underestimate the difficulty, length of time, and commitment required. This has to be viewed as a long-term game, and successful individuals are the ones that hang in there.

• Lack of Social Life: Entrepreneurship and business ownership, especially for small businesses focused on residual income, can be lonely. It is critical to make a conscious effort to develop outside social networks and establish meaningful relationships.

Best Residual Income Ideas

Residual income relies on generating steady income from one or multiple sources. Here are various ideas on the different ways to build your income stream.

Renting Out Apartments, Rooms, Or Houses

Do you have a spare space you don’t use while away? Or do you live far away from your permanent home and stay elsewhere for work? If that’s the case, then you might want to consider renting out your rooms, houses, or apartments by posting it on websites like VBRO and Airbnb. According to studies, there is a rise in demand for finding lodging through online platforms. This is to lessen the hassle and stress in looking for accommodation.

Although active work is still incorporated in this revenue stream, like hiring house cleaners or booking renters, the money that goes in is passive. With the explosion of popularity, many businesses exist to support property owners using these platforms, which help automate the process and reduce the time worked.  Many owners claim to profit $10,000 per year or even more from renting out their apartment through VRBO. In large cities, owners make a profit even renting out parking spots!

Remember to inquire about the guidelines for renting out your place in your municipality, city, or even your condo board. Some cities have strict bylaws against this, and some condo boards do not allow owners to offer less than monthly rental periods.

Purchasing A Rental Property

This venture requires more capital than the first one. Most individuals prefer this option since real estate has been proven to be an effective and long-standing investment strategy for decades. Start by scouting for places for sale and determining the best way of turning those properties into several rental units. After doing so, all you have to do is find tenants and then start receiving your monthly payment from them.

What hinders individuals from diving into rental properties is the large upfront money required. As mentioned, it takes a lot of money to purchase a rental property. However, with the emergence of multiple online companies, investing in real estate has become possible and more affordable. Listed below are some of the companies’ programs you can start with.

• Roofstock: This company focuses on single-family rentals. Once you have invested in one, you can sit back and relax, as the property manager will handle all the day-to-day operations.

• RealtyMogul—RealtyMogul is a crowdfunding solution that lets you invest in professionally managed, well-leased properties. Once you have invested, you become the owner and will receive monthly income and appreciation in the property.

• FundRise – FundRise lets you invest in the Real Estate Investment Trust  (REIT) without going through the rigorous application process. What’s good about this company is that it enables you to invest for as little as $500.

There are a myriad of ways to get into real estate investing, from real estate-focused mutual funds, REITs, and real estate companies (purchasing their Corporate Stock) to partnering with angel investors and creating joint ventures, joining a local Real Estate Investment Club, or finding a company that sells fractional ownership of properties. There is something out there for any budget and any risk level.

Invest In The Stock Market

Placing your money in the stock market can go a long way. You may choose to course through mutual funds, work with a financial advisor, manage your own portfolio by handpicking your desired group of stocks, or even do your day trading to try to “play” the market. You can invest in a retirement account to shelter tax (for example, RRSPs and TFSAs in Canada or IRAs and 401Ks in the US). You can invest directly in stocks (with or without dividends), bonds, foreign Exchange, gold and other precious metals, derivatives, commodities, penny stocks, etc. Although you’ll still earn money passively, understand that there can be significant risks to your capital when dealing with these markets.

One of the most significant advantages of investing in the stock market is that it’s easy to learn and easy to do. The main con, however, is that you have to put in a tremendous amount of money before you reap its significant benefits and that the risks can be high for novice investors.

If you are still a beginner in this field, you might want to broaden your knowledge by reading one of the best stock market books out there. It is entitled The Intelligent Investor, which Benjamin Graham authored.

Sell A Product Online

Instead of putting up an expensive physical store, why not create a website and sell your products there? This setup entails a lower overhead cost since you don’t have to pay for utilities, salaries, and rent. The best way to go about this is to sell through various platforms—Amazon, Shopify, or even post on social media channels such as Facebook and Instagram.

To be considered a passive income stream, what you can do is strike a deal with a manufacturer, and they’ll be the ones to ship out the product directly to the customer. This is called dropshipping. This is how the process will go:

1. The customer starts by browsing your online platforms.
2. Once they have decided which one to purchase, they will be asked to fill out a form with their name, shipping address, contact number, and other relevant information.
3. Then, he or she will pay via your preferred online payment scheme.
4. Upon receipt of payment, you will send your customer’s details to the manufacturer and pay them with their fees (minus your cut) as well.
5. The last step will require the manufacturer to ship the purchased item to the customer’s address.

It does take a bit of time to set up the process, and finding ideal manufacturers is critical to making this work. You also need to understand that you own the customer relationship, and therefore, you sometimes need to be the intermediary between the customer and manufacturer when the customer isn’t happy. But if you can handle that level of work, drop-shipping might be right for you.

Write eBooks

Do you like writing, have a knack for creating content, and are an expert on a niche topic? You can bank on these skills by publishing eBooks. The residual income will come from all the book sales royalties. These royalties refer to a fixed amount your publisher will pay you every time someone purchases your book. This setup means that if your book continues to sell for years to come, you will continue to generate income.

Ebooks published on websites like Amazon Kindle Direct Publishing have become a trend recently. Since these creations are efforts of one’s own accord, the process is quicker and significantly less costly than pushing them through a traditional publishing route.

A tip to maximize revenue from an ebook is to partner with influencers in the niche that you’ve written about and strike deals to offer them a percentage of any sales they produce. It is not uncommon to offer 50% or more commission rates for them to advertise your ebook to their network.

Although this may sound like a lot, the benefit of an ebook is that once it’s created, there’s no additional cost. So, any sales are money in your pocket. The more influencers and sellers of your product, the more money you make. So offer them a high commission to make it work their time to speak about your book to their base. And consider that some influencers have millions of followers; it can be hugely profitable for you.

Create An Online App

Because of the rise of the digital world, more and more people are now relying on apps to help them with their daily lives. Creating an app can be a great way to develop residual income.

You don’t need to be a computer genius or even a programmer to be able to achieve this. You’ll need to pinpoint a current market problem, come up with a solution to this problem through an app, draft your proposal, hire a professional on sites like Upwork, Freelancer, or even Fiverr to build your app for you, and release it in the market.

Then, simply send your app to platforms like the Apple App Store or Google Play, and the app will be available to the market. With a bit of marketing to help your app stand out from the millions of apps already out there, you can then sit back and wait for your revenue stream to grow through app purchases.

Other Options for Residual Income

There are hundreds of other ways to create residual and passive income for yourself such as creating training courses, buying a franchise, doing online arbitrage, selling outsourced services on Fiverr, creating a service business with employees, affiliate marketing, developing a blog, etc. There are just too many topics to cover in a single post.

If you still want to explore some of these opportunities further, you may try reading Anthony Johnson’s book entitled The Ultimate Tutorial for Generating Passive Online Income. With this resource, you’ll be able to determine which is the best approach for your current goals, skills, and situation.

Remember, you can implement a few ideas at once or start with only a simple one, so you’ll have the chance to get the hang of it first.

Deciding For Yourself

If you haven’t figured it out, the answer to the question in the headline is yes, you can really earn a lot of residual income. But be warned: entering the life of a residual income is not as easy as it seems. Before you decide to venture into this kind of life, make sure to study its technicalities and draft a comprehensive plan for yourself. Remember that residual income does require work, and actually, it’s pretty heavy lifting upfront.

However, the upfront work can create benefits that last a lifetime!