Passive Income Series: PART 1 | PART 2
What Is NOT A Passive Income Model?
There are many so called “financial experts” or “gurus” online that will tell you of passive income ideas, that are, in reality, anything but passive income.
It’s important to understand this because the last thing you want is to pursue what you believe is going to generating passive income and financial independence, only to find, in reality, that they are and will continue to be time and capital intensive to operate.
Examples of these include
– Vending Machines / Laundromats
Just because something is ‘automatically dispensed’ to consumers does not make it a Passive Income model.
Although potentially viable investments in certain circumstances. They are not Passive.
They require a substantial amount of time spent on either fixing or restocking machines. Sure, you could pay someone to do this, but that does not fit the model of Passive Income, as it is a significant, ongoing, capital expense.
– Real Estate / Rental Properties
Successful Real Estate Investment, Development or Renting involves a tremendous amount of work. The properties will need to be managed and you will be required to manage a wide range of tenant issues. As with our first example, you can outsource this but again that requires an ongoing capital expenditure.
There is one way you can successfully generate a passive income from property, and we will show you in detail how you can do this later in the series.
– Paying of Debt
It is good financial sense to pay of high interest debt as quickly as possible. But this is not a passive investment and fits none of the criteria of passive investments – systemisation, scalability, unlimited income potential – nor any of the benefits.
– Re-mortgage
As with paying of debit, it is potentially a good idea in the right circumstances. But it is NOT a Passive Income model.
– AirBNB / Rideshare
Of course, you can rent out unused space in your house or drive your car for Uber and make a profit. But they all require Active Effort
You also need to factor in the additional costs and depreciation of your assets to generate passive income.
What Criteria Do We Need To Classify Something As Passive Income?
Right, we have cleared up what does not constitute passive income. So what criteria do we need to look for in a model to be considered a Passive Income opportunity?
In it’s truest sense, we want our opportunity to meet most, if not all, of the following criteria:
– Recurring Payments
Passive Income is income that requires no effort to generate on a recurring basis
– Systemisation
A truly effective Passive Income stream derives from a systematic process. It is key that you can develop, perfect and repeat process to deliver income.
– Automation
Provides the ability to rely upon automated systems or outsource the necessary upkeep to remain truly passive
– Scale & Leverage
After developing an approach or system that successfully generates income, the same system must allow to grow quickly through the introduction of automation and systemisation, allowing you to scale the process and income generated.
– Income Potential
The potential to earn income should not have any constraints. It has the potential to continue to grow limitlessly. It is a base quality that separates Passive Income from a traditional job.