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Top 5 Ways to Generate a Passive Income

Updated on May 3, 2012

Passive income is a rent received on a regular basis, with little effort required to maintain it.

Some examples of passive income are:

Passive income is made by income from a business or website that needs no direct involvement from a person on a regular basis. But, is anything truly passive? No, there is always some level of involvement and putting the effort forth will get you the rewards that you are searching for.

Are you planning on earning a new passive income this year?

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Rental from property;

Royalties from publishing a book or from licensing a patent or other form of intellectual property;

Earnings from internet advertisement on your websites;

Earnings from a business that does not require direct involvement from the owner or merchant;

Dividend and interest income from owning securities, such as stocks and bonds, are usually referred to as portfolio income, which can be considered a form of passive income;


Passive income is usually taxable. The American Internal Revenue Service defines passive income as "any activity... in which the taxpayer does not materially participate." [1] Other financial and government institutions also recognize it as an income obtained as a result of capital growth or in relation to negative gearing.

This list is a suburb example of Passive income. Do you know what they all have in common? The commonality between all of these is that to get the passive income to generate anything from commissions to sales. The person had to put in tremendous effort into getting it to perform.

All of these ideas on this list have to have something in common, mostly an investment in time.

1. Rental property usually requires some capital <earned money, inheritance, loan > to invest in the property that you are interested in

2. Royalties require a published work either by writing or inventing ideas that will make people’s lives richer or easier.

3. Earnings from passive income can also come in the form of websites.. You must build your website, promote, and gear traffic to. It must contain content that is viable to a mass audience or to a specific niche in which you are writing.

4. Affiliate Programs - passive income is derived from setting up a web site that resells companies’ products. The parent company provides the products, tracks the sales and gives you a commission for each sale. Find companies that offer large commissions, and will track clients for multiple sales over a long period of time (months, years, lifetime, ect), so you can get recurring commissions. Make sure they offer multiple tiers (at least 2) for sales. i.e. You still get paid if one of your affiliates makes a sale.

5. You can make money instantly by setting up a Google Ad Words campaign for your product or affiliate program. If there are not too many competitors promoting the same product and it is in high demand, you can earn a substantial passive income. Creating several successful campaigns will multiply the amount you can make.

I’ll stop here, but you get the point - In order to build passive income, you certainly have to put out the work at first. This also means that not everyone can live off some sort of passive income. There are risks involved in building certain types of income. For example, one is the person may stop collecting commissions in the merchant should go out of business. The traffic may stop coming to your websites. They have a ability to vanish overnight.

Now, I’m not saying this all to discourage you from looking into something or creating something that may be needed. But, don’t put all your eggs in one basket diversify your sources of income. And over the next few months I am going to see what I can make without putting any money up front starting here. And also keeping you updated daily on my adventures in passive marketing. So first lesson i have learned here is to don’t just build websites and collect advertisements, buy some rental properties, publish some books, buy some stocks. Diversify!


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