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

residual income

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 people still feel like it’s just something that’s 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 process 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 which earns on a regular and predictable basis 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 an income stream that is predictable and regular. 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 that 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 be something that lowers the level of effort your exert as time passes by. The goal here is to put in effort upfront to generate a system or process that continues to delivery profit as you slowly step away. If you are putting 40 working hours per week into this opportunity in the beginning, the goal is to reduce this amount of time commitment while continuing to reap consistent benefits. Ideally your system creates growing profits over time.

One misconception, however, is that many people have the impression that once you have established a residual income system, that you no longer need to do anything anymore 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, competition landscape alters, customer demands morph, and you need to tweak and adapt your system to stay relevant.

For example, Richard Branson owns 400 plus 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) get 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 go down this path, you should understand the pros and cons that go along with it.


  • 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, then you may opt to work on these during times most suitable for you. 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 on multiple languages. This creates an unlimited combinations of diversified opportunity.


  • 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.


  • Taxes: Your entire income from the business 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: There are various avenues you can venture into for your residual income business. The lone downside with this, however, is that you may require upfront money in order 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 it’s 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 and the 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 like those focused on residual income can be lonely. It is critical to make a conscious effort to develop outside social networks and establishing 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 that you don’t use while you are 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 there is still active work incorporated in this revenue stream like hiring house cleaners or booking renters, the money that goes in is passively. With the explosion of popularity, many businesses exist to support property owners using these platforms which helps in automating the process and reducing 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!

Just don’t forget to inquire in your municipality or city or even your condo board for the guidelines regarding renting out your place. 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

As compared to the first one, this venture requires higher capital. Most individuals prefer this option since real estate has been proven to be an effective and long-standing investment strategy for decades now. 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 receive your monthly payment from your tenants.

What hinders individuals from diving into rental properties is typical 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 became possible and more affordable. Listed below are some of the programs of the companies you can start with.

  • Roofstock: This company focuses on single-family rentals. Once you have invested in one, all you have to do is sit back and relax since this 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 then become the owner and will receive the monthly income and the appreciation in the property.


  • FundRise – FundRise lets you invest in the Real Estate Investment Trust  (REIT) without having to go through the rigorous process of applying. 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, real estate companies (purchasing their Corporate Stock), 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 own 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 dividend), bonds, foreign Exchange, gold and other previous 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 was authored by Benjamin Graham.

Sell A Product Online

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

To be considered a passive income stream, what you can do is to 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 he or she has decided which one to purchase, he or she 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 manufactures is critical to make this work. You also need to understand that you own the customer relationship and therefore you sometime need to be the intermediary between the customer and manufacture 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 in a niche topic? You can bank on these skills by publishing eBooks. The residual income will come in from all the royalties from the book sales. 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 that are published on websites like Amazon Kindle Direct Publishing are becoming a trend recently. Since these creations are efforts on your own accord, the process is quicker as compared to pushing it on a traditional publishing route and significantly less costly.

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 is 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 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, the app is available to the market. With a bit of marketing to help your app stand out for 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 further explore some of these opportunities, you may try reading this book by Anthony Johnson 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 have the choice to 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, 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!

C. James

C. James is the managing editor at Wealth Gang. He has a degree in finance and a passion for creating passive income streams and wealth management.