Scammers often sell a simple-sounding promise that you can make money without much effort. Although there are actually legitimate opportunities to make passive income without sweat, they are not necessarily all rainbows and butterflies.
The knowledge about the attainability of passive income is what makes these scams so enticing. Fraudsters will work sedulously work hard to advertise these scams and take your hard-earned money.
Scams are often designed to replicate the passive income concept to make people think that it’s legitimate.
The good front these scammers use serves as an eligible font to make people spend thousands of dollars on programs selling the magic formula of building the money machine of their dreams. But as you would expect, that is not how things work!
Let’s break down what passive income means, so you don’t fall into the same traps over and over again.
The Problem with Passive Income
Rich Dad Poor Dad, published by Robert Kiyosaki in 1997, was one of the best financial education books on the market intended for people who are willing to educate themselves financially.
The main premise of the book is that the people belonging to the poor and middle-class work for money while rich people make money work for them.
The latter statement was technically true but didn’t print the entire perspective.
For Kiyosaki, the idea of passive income is prohibitive to people with poor credit scores and broke individuals. Although he tackles excellent pieces of advice, it just doesn’t apply to most people.
People are beginning to get drawn into the whole passive income undertakings as unemployment grows. For them, the solution it offers is too good to be ignored. Do a little now and make money in your sleep for the rest of your days.
But, although passive income sounds truly good to be true, it probably is! So, let’s take a close look at the definition.
Passive income is an outlet from a source you don’t actively participate in. By way of explanation, do nothing, and money will come instantly come to you.
The definition is loose and vague because bad actors publicized the term largely. Not even the regulators of the state can decide what passive income is, how to tax it, and what it actually means.
The online financial education industry is a multi-billion-dollar initiative that is largely based on false promises and bullshit, fronting passive income as its crown jewel. There’s no experience required— work from the comfort of your home, the right ingredients are needed, and anyone can do it.
However, in order not to be sold into fake dreams, it is important to understand how passive income truly works.
The Only Real Passive Income
Technically, there are only two revenue streams that closely put one in mind to resemble the definition of passive income: investing and real estate.
These two things are what will get you net revenue with minimal involvement on your part. The sad thing is these two segments are full of scammers too.
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Investing
When it comes to investing, you only need to buy a piece of a company (stocks or shares) and hold it until the price appreciates in value. Once it appreciates, you sell the share at a profit. This is the general premise of the complex topic of investing.
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Real Estate
Real estate also performs on the same base— buying an asset with the hopes of increasing value in the future. You buy a property and then sell it at a profit later. Basically, just another form of investment in a different setting, and that’s all about it.
Besides asset accumulation, most so-called passive income streams with little to no involvement are most likely scams.
The biggest problem with this passive income phrase is that people confuse it with revenue streams, acting like they are pretty easy to make.
Revenue Streams vs. Passive Income
Revenue streams and passive income streams are two different things. It takes a huge amount of time and effort to build a good revenue stream since no one is simply going just to hand you one.
For instance, renting. This is a good way to build a revenue stream since it benefits both sides of the coin. Properties will appreciate over time while earning rent. On the flip side, there are a lot of requirements in order to acquire a property:
- Capital to buy a property.
- Knowledge of the housing market within your area.
- Funds to make it rental-ready.
- Figuring out the best ROI or return-on-investment.
- Analysis of whether Airbnb is good in your area.
- Research on whether college students are actively darting for long-term rentals.
- Team to manage properties.
Establishing revenue steam requires a lot of involvement early on— pretty opposite of passive. Over time, involvement requirements will eventually be reduced to maintenance, but that’s a long way to go.
If you have no money, to begin with, it will take you months or even years before getting things going. You should be aware of this to avoid slipping into the same trap that people fall from every single day.
Types of Revenue Streams
Let’s split these streams into three parts for a more manageable understanding:
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Volume Based
Volume-based is the most fundamental form of revenue stream, and it includes everything you construct for a third party that markets it in your place.
One of the best examples of a volume-based revenue stream is stock websites, where people create things for others and sell them through a third party.
Each and every time someone downloads your content on the mediator, you get a cut of the fee. This business model is laboriously based on quantity, though. For instance, if you are a photographer, you’ll stand in need of hundreds and hundreds of high-quality images hosted on these websites.
The more content you have on the website, the more opportunities you have to get someone to buy your craft, making you a commission. The market is also saturated since there’s no established barrier to entry. The competition is rigid.
Low-income countries that have little to no job opportunities could be a good stream of revenue. Most websites offer about 20-60% of royalty.
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Premium Shared Revenue
Premium shared revenue is quite similar to the first model. The only difference in this type is that the focus is on quality over quantity. Imagine a “masterclass” where the industry instructs students on the sophistication of their craft in order to be industry leaders.
Identical with the example in the previous point, let’s say you are a photographer. Instead of putting up a lot of images on the third-party website to have more opportunities for earning, you go for quality images that will set you apart from competitors.
There’s no room for trash in this type of revenue stream. If you are good at something, leverage it.
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Full Ownership
Basically, full ownership means business. You craft a product that you have 100% and market it to a large audience by taking advantage of the technology.
This is a great revenue stream, but the journey of building it is completely far from being passive. But once you establish the revenue stream effectively, you could make at least $10,000 every month.
