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How Can I Make Passive Income Online?

We were talking last night, my partner and I, considering what we want to do in 2010 when his current contract comes to an end  and the obvious question came up – do I make enough passive income online for him not to work anymore.  The short answer is not quite – but we are getting close. What’s more I am definitely now of the opinion that it would be a huge financial risk for me to go and get a job now compared to my making money online – and here’s why.

Earning Passive Income while crossing the Nullarbor
Making Passive Income while crossing the Nullarbor

Passive Income in the Real World

Every month no less than eight groups of people pay me – they are tenants in various properties we own in New Zealand.  I hire a property manager so I count that income as passive – every month money goes into our account at home. There is a catch though – every month money goes out of that account too – usually just a little more than went in – all going well it will balance – but if you have a month where you need to replace not one but two hot water cylinders – it does not!

We didn’t plan it that way – but we couldn’t control all the variables – the most important variable is having a tenant – we have an excellent occupancy because we bought the right houses, tenants aren’t the problem. The issue is interest rates.

We bought the last time the interest rates were low – and have weathered our floating rate go from 6.9% to 10.45% and now back to 6.45% –  when you multiple that out with borrowings of just shy of $1,000,000 – it turns out to be quite a few thousand dollars a month – small in the scheme of things but large in absolute terms (BTW if the figures look wrong to you I am talking New Zealand dollars and interest rates).   Yes I know fixed rates reduces your risks but in NZ you can only fix for a maximum of five years – so over the 9 years we’ve owned most of the properties the low fixed rates ran out on us.

So in the real-world property is a great way to make passive income – but it has its risks, and for us the main risk is the leverage that you need to use by borrowing money.  The main way to control that risk is of course to pay some of the mortgages back. So its likely now that when we go home we will downsize our home and also sell our worst performing rental to reduce our outgoings to be comfortably less than our income – we will drop from a LVR of 60% to about 30%.

So what on earth does my adventures in  property investment have anything to do with

How to Earn Passive Income Online ?

Well its about not just the basic question about how to earn income online.  Well this is no secret:  my preferred method is to build silly little niche sites and make money while I sleep, drive the Nullarbor or sip gins by the beach!

Because really that’s the only way I know that you work now – get paid later. Sure there are lots of other ways to make money online – I’m looking at building a Legitimate Online Business to help with the expenses – especially if my partner chooses to stop working – but that sort of business does require a bit of customer service and support – not too much, but some.

Obviously there are lots of ways to make income online which aren’t passive – but are still better than a) working for someone else and b) having to get dressed in the morning. Into this category I put activities such as freelancing (be it web design or writing), selling things (either by drop shipping or from your back bedroom), and building a flagship blog in order to become a Trust Agent and kick start your book deal or speaking career.

But if you chose the right keywords (properties) and have more rather than less (diversification) you can make a very nice income from silly little niche websites.

But some people will even say that its almost impossible to build a significant business with just passive income. I disagree. The main reason people end up as tied up with their own business as they were when they worked in corporate hell – is quite simple – personality.

You Need The Right Personality To Earn  Passive Income

Let me explain, I used to think one of my strong personality traits was a negative thing, in fact so negative it wasn’t something I ever mentioned at job interviews – even when prompted to list my failings. It was a big secret, which I kept quiet – but now I’ve come to realise this personality trait of mine is in fact a huge advantage.

So what is my deep, dark secret? Well I’m lazy – yup bone idle. Give me the choice of working or playing I’d rather watch TV, or sleep, or go swimming.  You see my main motivation with this online income thing, is the actually the same as it was with the property investment. Its to make passive income, because I can’t be arsed working.

With property its easy – so long as you have a good credit record, a mortgage free valuable home and two secure jobs – the bank will offer you three times what you are asking for (good thing we didn’t take it we would have been in serious trouble with the interest rates). After a few years lots of people get out of rentals: its too much hassle – the tenants ring up at all hours complaining about broken light bulbs or leaking taps, the houses need painting etc. etc. But being lazy I had set it up right – I’d found a property manager first, found out what sort of property they had the least problems managing – and bought properties that fit that criteria.

We’ve never had the problem – the tenants don’t call us – I doubt they know who we are – they deal with the property manager. Property is entirely passive income if you have the right property manager, the right properties and the right level of debt.

Online income is similar. You can make yourself a slave to your online income business as easily as you can a real-world business. For a long time i.e. 20+ years I said I didn’t want a business. I’d worked for small businesses where the owner took less out of the busienss than he paid me, worked longer hours, never took a day off. I wasn’t delighted about working for someone but at least I chose the right profession, got well paid, normally had a choice of jobs and really should have had it made.

But I couldn’t outsource my real world job – so it was still an issue with my laziness – I still had to get out of bed in the morning and get dressed – that wast he problem.  Obviously I needed to own my business – but I didn’t want to work stupid hours – in fact I wanted to work as few hours as possible.

So now I need to set up a genuinely passive income online. That’s an income where the customers don’t call me – they don’t even kow who I am – they buy from me and they move on. That’s what I like about making passive income online. Some of the A-listers dont’ really believe that its possible – but they have a disadvantage – you see its important to them to work hard in a driven manner – but that’s not important to me at all. I don’t need to work to be important – I need to work to make money. If I won $5 million tomorrow in lotto – would I keep on building  websites – LOL don’t be stupid – I’d put in the bank and live of f the interest! Well I might keep this passive income online website going just to have fun calling out the scams, but that would be purely for entertainment – not work or anything.

Other Lazy Onliners

Phil @ I Need Money Now

Roland @ Online Income

Shane @ Freelance Writing

agrande @ MLM Leads Guide

32 replies on “How Can I Make Passive Income Online?”

I love this post! I’m glad to read about your honesty, and that laziness is something that factors into all my decisions too. That and wanting to know I’ll have a greater level of freedom in my future. In many ways I do end up working harder online than I would in a ‘real’ job, but I’m hoping with time I’ll find the balance and the time to work much, much less.
.-= Web Career Girl´s last blog ..Getting My New Sites Set Up =-.

I too have noticed that with online business I am thinking about it 24/7. Each time I come accross a website for any reason, I check their backlinks and see if they rank for any keywords to determine whether there is an internet marketer behind the website. Though I have also noticed that when I have a day off my job, I am less productive than the other days. When I only have 3-4 hours to do MMO in the evening, I can write 6 blog posts, a similar amount of ezines and start a few support sites. When I have a day off, I can do half of that in 12 hours.

Ps. Thanks for the link Lis:)
.-= Phil@Earning Money´s last blog ..Make Money With A Game Plan =-.

I struggled when I first went full-time with IM – it was a “kid in the candy shop moment” – where to start with all this free time and of course I wasted it – I have got a lot better and do more todo lists now than I ever did when I had a job LOL

Sometimes it feels like work – when I’m getting links – but sometimes it feels like a game- how can I find better keywords than anyone else out there? And it keeps changing this Internet thingy – which is even more fascinating!

I feel you 🙂 I am one of those people who can’t be bothered to go to work in the morning, and I don’t really even want to work. Not online, not in any way. But since I see that it is possible to get in to that situation by working my ass off right now, I can do it for the hope of moving to a paradise island an sipping Cuba Libres on the beach some day. If (when hopefully) I start making a decent income online… well a really significant income… I am looking to expand it to real life passive income also – rentals. Before I started my online journey I had a “dream” of buying propery and renting it out and when I had enough property I could outsource the customer service and the light bulb changing to someone else – making it truly passive.

ps. I like the fact that you are one of the few who don’t live in the US – I am always one of the first people reading yout posts 🙂
.-= Phil@Need Quick Money´s last blog ..Make Money With A Game Plan =-.

Its funny the time zone thing – I usually update late at night my time – but then I end up with a lot of coments waiting for approval in the morning. This one i did early morning my time – now people may wake up to in about 8 hours – will see!

Hi Lis, just a quick note, some of the links in your post don’t work, they return a page load error for me, SY

I like this post. Even though I’m different (or maybe not) in the laziness department. I’m as lazy as anyone can be as far as doing things I don’t want to do … but I can not abide doing nothing … even reading or watching TV get boring. A sports … let’s say golf? I get so bored in the front 9 I seldom ever finish 18.

I was once in the rental income business too … ok as far as profits went, especially after taxes came into the picture, but the most boring of all … worse than watching paint dry.

But running a little empire of mainly passive keyword sites? Nice. All I could ever ask for if I want something to keep me busy, there’s along to-do list for every site … but no one to force me to do a damn thing.

And for Phil … I’m US born and raised but I now live over on Lis’ side of the world. The Philippines. Nowhere on Earth is paradise, I don’t think, I’ve lived in a number of countries, but this place comes close.

Sitting on the beach would bore me to death, but there are plenty places here where you can sit on the beach, “cheap as chips”, and watch the waves roll in. And since I have to really work to spend more than $1200 USD per month, I don’t have to worry about keeping so many sites alive that it tires me out.

Recession? Not for me. Mortgage? Licensed slavery. Most people worrying about jobs today are only working to make other people rich, while they waste their own youth staying poor … not for me.

I just woke up from a nap before I read this post, made some money while I was sleeping, now it’s time to walk over to the next block where my wife is nattering with her mom and fetch her home to have dinner. I’ll make money while I’m eating and talking over my day with her too.

Tomorrow we’re going for a drive to a nearby beach resort where we own a lot to talk to an architect about the house we plan to build … with no mortgage, by the way, I’d sooner have a house with no roof than submit to bank slavery, ever again … but then that’s just me.
.-= Dave Starr´s last blog ..Military Retirement — Special Six-Part Series — Part 1 — 20 Year Retirement =-.

I must get to the Philippines – I hear so many happy stories from expats there. I totally agree – there are too sides to having great lifestyle – and eilminating all the unecessary crap really helps! I should clarfiy we have mortgages on the rentals – there are tax benefits to that – but we have never had a mortgage on our own home

As I said, when I was in the rental property game I made paper money because of tax and depreciation … but these are not money, savings you can write a check on, they are tally marks that you can use to win the end game with, if the powers that be don’t move the goal posts … which is exactly what has happened in many countries.

But I am still a multi-family housing supporter, it’s one form of ‘semi-passive’ income one could get into very well here here in the Philippines, even if you have to finance part of it.

I agree 100% on not having a mortgage on your residence … most of the current real esatate crisis has been caused by the mistaken idea that the home you live in is an asset rather than a liability.

But I also feel there are so many ways to earn, again ‘semi-passively’ that the major problem is more people not letting go and doing it … holding ourselves back in other words.

Feel free to come and visit the Philippines any time … I recently came across some figures on tourists/visitors that surprised me … Australians and Kiwi’s are very high on the visitor/expat list, far higher than their actual numbers might suggest … see: Philippine Retirement — Who Are All Those Foreigners, Anyway?

There are pluses and minuses to everywhere one can possibly live, so each person has to make their own decisions (and even after you do, you may well wonder why you decided what you did LoL). One thing, though, remains certain … it pays to keep an open mind and I was pleasantly surprised at some of the comments here … the world may indeed be becoming a bit smaller.
.-= Dave Starr´s last blog ..More About Those Pesky Points =-.

We sneak in under the radar you know – often with a UK passport – at least the Kiwis do – I remember returning to London with a ski group who I thought all of us were Kiwi or Australian – at least 50% of us walked thru the UK passport line – you get that with immigration LOL!

I think people lack imagination – we have been “trained” to go to school and get good jobs – but look at the initiative you see in Asia – if you want to learn anything about selling hang out in Vietnam or Cambodia – I had a toddler take me by the hand and try and sell me something in Vietnam – it was hilarious – it wasn’t a setup – the kid had wandered off while mum was talking – he grabbed my arm and started saying “you come look” in acceptable English – I could see mum absolutely laughing their heads off – I played along and genuinely regretted that I had already done my shopping in that town because you have to admire the initiative.

I personally prefer a system which provides decent jobs and welfare for people – but it does nothing for our entrepreneurial ability !

Great post – I’m motivated by my basic laziness too. I just want to spend all my time doing the things I enjoy, and not care whether I’m making money or not. It’s ironic really – despite being naturally idle, I’m happy to spend a few years working MUCH harder on my online business than I would in any job, knowing that the eventual payoff will be a much easier life. Though my plan for when I win the lottery is the same as yours! 😀

Great post on the value of building a passive income portfolio Lis. I too have tried the property way to make money while I sleep but I never had enough to warrant a property manager so I ended up doing the repairs myself.
Believe me, unstopping a toilet in the middle of the night has nothing to do with building an income that is passive. I have actually done better with blogs in the last few months than I do with rentals.
And I haven’t had one visitor to my blogs complaining that their garbage disposal is plugged up with the toy truck their little darling son tried to crunch.
.-= Agrande @ MLM Leads´s last blog ..MLM Lead List =-.

LOL agrande I must admit it was stories like that kept me out of property for several years – I’d probably sell up if my property mangers got out of the game too – but they are ood – they actually seem to like doing the blocked toilet thing LOL. The only way property works for me is outsourcing everything !

Philippines sounds great although I have been thinking of Bali:) I am still young and if I will start seeing real passive online income I am really going to consider taking my woman and moving away from here north. If Lis is checking her Woopra she probably knows which country I am talking about;) Living expenses are high, so are taxes. Although income is ridiculously low.
.-= Phil@Making Money´s last blog ..Make Money With A Game Plan =-.

The main issue with Bali is the requiremetn to leave every 60 days for the visa run – Malaysia is much more expat friendly like that and no income tax on foreign earnings – nice

Great to see some like-minded people here. A year or so down the line I am still enthralled by the idea of earning money whilst I sleep – and like others here, I am willing to bust my balls now, working 12 hour days to build a solid passive online income which I can later benefit from by doing absolutely nothing…
.-= Roland@Online Income´s last blog ..Earning Money from eBay 1: Choosing an eBay Niche =-.

Roland I am not going to do nothing – I think I will have a blog mentioning how little I did each day – should get a lot of hate mail LOL

Yeah from your experience with passive income outside of the itnternet world, that is why I am always weary of owning houses to rent them as passive income, because you are right… sometimes the money coming in is equal to the money going out, and the actualy passive income made from that is variable for sure, in positive and the negative range, 🙁

My biggest tip I would give for someone looking to make passive income online is to stick with one thing and learn from that one thing, but don’t try to do too many things at once, otherwise your concentration and elarning is not as great as can be. At least that is from my experience.

Till then,

Jean

Hey Lis,
Always great to see another post. I really dig what you’re saying here, and as the passive income is starting to build up, I’m becoming more and more excited about the full possibilities. I mean, who wants to work when you can be hiking a mountain trail or sitting on the beach instead? Glad to hear things are flying for you. Keep up the great work!

Shane “Master” Dayton
.-= Shane@Master Dayton Writing Blog´s last blog ..College Students as Part Time Writers, Part One =-.

The passive income I want to achieve is to have enough streams of income that if I lose one that the others can either pick up the slack or that I can quickly and easily add new ways to produce income. Right now I’m in the uncomfortable position of losing one source of income and having a dramatic reduction in another.
.-= Frank Carr@Templates For Website´s last blog ..Niche Website Kit – Blenders =-.

You’ve had a nasty month or so Frank – sorry I can’t be of more help – but you are one of the best programmers out there so there must be some way you can make a bit of quick cash online? Anyone looking for technical assistance Frank is your man.

Hi Lissie,

Don’t mean to be contrarian, but I’m of the opinion (after many years of chasing it), that there’s really no such thing as truly “passive” income … at least not of the long lasting variety.

There are definitely some cash producing methods that require less “tending” than others. But for the most part, the idea of “set it, forget it, and retire to the beaches of the world” is more of a marketing slogan used to sell cheesy ebooks, and/or recruit people into borderline ponzi schemes, than it is a viable business strategy.

Over time, it’s definitely possible to leverage financial successes into additional time freedom. But I think virtually any online business is going to require some level of continuing attention.

And while I love, love, love the way you try to spin laziness as a positive personality trait, I fear that it just doesn’t hold up out in the “real world”.

… oh how I wish it were true though. I’d be a millionaire many times over already, as I’ve long ago mastered the art. 😉

Todd
.-= Todd Morris @tm Tips´s last blog ..I Really Did Meet My Wife On Match.com =-.

Todd its the ultimate paid membership site I reckon – I will gert all the lazy people to sign up – they will be too lazy to actually do anything – so I won’t have to do any work supporting them and they will be too lazy to unsubscribe so I will make free money – it should work – I’m jus too lazy to set it up 🙂

Hi Stillouthere – hmm actually yes we have been discussing it – he has some esoteric interests in which there might be some money … I’m paying others to write for me so I might as well pay him LOL

I’m lazy too, it is so much easier to explain how to earn passive income online to someone else than do it myself. I’m trying to teach my son, instead of chores he can build me websites and feeder blogs. Even paying him per website he somehow doesn’t find the time. Too bad he takes after his mom 🙂

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