Earn Residual Income

Residual income, also called passive income, involves a steady source of income that does not come from an employer or contractor. This can include rental income or any other business dealing in which you do not actively participate in the business but still earn money from your initial work (like book royalties or certain types of stocks). It's important to realize that even residual income takes a lot of time and effort to build, and isn't as simple as waiting for the checks to roll in. Learning how to earn residual income can help you supplement your regular income and generate profits for the foreseeable future, as long as you put in the necessary work.

Steps

Getting Residual Income From a Rental Property

1. Learn about the work involved. Being a landlord isn't as simple as just collecting rent checks every month. There's a lot of time, work, and money involved in maintaining the property and meeting the tenants' needs.
   • It's best if you're a handy person with hands-on experience making repairs, doing yard work, and working on basic plumbing repairs/maintenance.
   • If you can't perform work yourself, you'll have to pay someone else to do it. This can get very expensive, especially if it's an older property or a neglected building in disrepair.
   • Remember that being a landlord can involve 24-hour problems. Just because you're ready to call it a night, it doesn't mean there aren't problems that need to be addressed at the property.
   • Sometimes problems arise that need an urgent solution. If you can't be on call around the clock, you'll need to hire a building maintenance person who can be (which, again, will cost you more money).
   • Recognize that dealing with tenants can be difficult at times. There's always a chance that some type of conflict will arise at some point, so make sure you can calmly defuse those situations if you're thinking about becoming a landlord.
2. Do the math to see if it's worth it. It's very difficult to find a bargain price on property. Some investors were able to do this during the housing crisis, but now that things are more stable it can cost a lot of money to purchase a piece of property. If you do find a bargain, it's probably in desperate need of significant and extensive repairs, which can sink you into debt if you're not careful.
   • Decide in advance what you hope to earn off the property after expenses, then calculate how much you'll have to pay on your mortgage and taxes (to say nothing of repairs).
   • For example, say you hope to earn $10,000 each year in rental income but you're paying $2,000 each month in mortgage and $300 every month in taxes. You would have to charge approximately $3,150 in rent each month, which may be extremely unreasonable in your local market.
   • Search around online to get a sense of what other landlords in your area are charging, and decide if a property you're interested in would be a worthwhile investment.
3. Estimate the property's costs and expenses. Say you find a property that isn't too expensive. You'll need to take into account the mortgage payments, the tax on your property, and the cost of repairs and upkeep. This can be difficult to do on your own, so it may be best to enlist the help of a professional in assessing the property and determining the potential expenses you'll face.
   • Ask the bank who sets up your loan (assuming you take one out) what the terms of the loan are. Find out how much you'll be paying each month for the mortgage, how much time you have to pay it off, and what kind of interest rate you'll be looking at.
   • Talk to an accountant about the potential tax costs on a piece of property and to weigh the financial risks of owning that property.
   • Hire a reputable home inspector to assess the property before you purchase it. The building may need structural repairs, rewiring, and new plumbing, which can add up to some very expensive repairs.
   • Read reviews of home inspectors online, or ask friends who've bought property for a recommendation.
4. Find the right tenants. As a landlord, you'll want to make sure your tenants are responsible. You don't know these people and are trusting them with your property, so it's a good idea to try and get to know your prospective tenants a little bit before signing a lease. However, you'll want to avoid the opposite extreme and avoid renting to people you actually know. Renting to a friend or relative can create a lot of tension that could dissolve your friendship.
   • Try and chat with prospective tenants for a few minutes. Ask them about themselves and their work to try and get a basic idea of what they're like and how responsible they are.
   • Run a credit check to make sure that a prospective tenant isn't a huge financial risk.
   • Ask for previous rental references, and contact those landlords to see if the tenants ever caused significant problems.
   • Remember that it is illegal to discriminate against a prospective tenant over that person's age, gender, sexual orientation, race, or religious affiliations.
5. Know your tax obligations. Just because your income isn't directly coming from an employer, it doesn't mean you're off the hook for taxes. In addition to property tax, you'll have to pay taxes on the income you earn each month as rent, so it's important to know what you owe money on.
   • Any money you receive as rent must be declared in your gross income to the IRS.
   • You must report advance rent as rent that was paid in that year. Even if someone pays off the first and last years on a 10 year property lease, you must report that last year of rent as having been earned at the time the lease was signed.
   • If you have your tenants apply their security deposits to the final month's rent, you must list that money as advance rent.
   • Any fees you charge a tenant for canceling a lease must be declared as income paid as rent.
   • Any rent that is exchanged for property or services (for example, waiving a month's rent in exchange for a tenant painting the building or making repairs) must be declared as rental income equal to what the tenant would have paid for the agreed upon time span.

Earning Income Through Affiliate Marketing

1. Learn how affiliate marketing works. Affiliate marketing allows you to earn cash by promoting a third party's product or services. Any time someone clicks on your link to that third party's website, you earn a percentage of the sale (think of it as a commission) if that visitor makes a purchase.
   • You must own your own website or blog.
   • Your website/blog should have a lot of web traffic. Your success as an affiliate marketer depends on having a lot of visitors click on your link to purchase the third party's product.
   • Affiliate marketing does require work on your part. You'll need to drive traffic to your site, make a compelling pitch for the product (some affiliate marketers do this through product reviews), and get readers to click the link.
   • You'll also need to update your blog or website with new content on a regular basis. That content should (ideally) drive even more traffic to the third party's website.
2. Set up a blog/website. In order to get started as an affiliate marketer, you'll need your own means of advertising those third party products: either a blog or a website. Because creating and maintaining a website takes more skills and time, it may be easiest to get started with a blog.
   • Choose a blogging platform. There are many free and easy options, including WordPress, Blogger, and Tumblr.
   • Alternately, you may want your own unique web address that doesn't include "wordpress.com" or "blogspot.com". This can make it easier to access your website directly, but it will most likely cost money to create a self-hosting blog.
3. Design your blog. Once you've created a blog, you'll need to design it and make it your own. As you put it together, think about the color/style of font, the background color, the arrangement of content, and the overall appearance of your page.
   • As you design your blog/website, think about what kind of audience you might draw and what types of products that audience is most interested in.
   • Keep your audience in mind as you design the layout, visual presentation, and content of your blog.
   • Try to separate your blog into well-defined sections. For example, you might have a section for recent posts, a section for most popular/most read posts, and a section for archived posts that are organized by month and year.
   • Include a personal bio that explains your blog and lists your email address or other form of contact information. This will allow visitors/readers to address your posts, and it will also make it easy for marketing representatives from the merchants you represent to reach you.
4. Find a merchant/retailer or affiliate. Deciding whom you will partner with is one of the biggest decisions you'll make as an affiliate marketer. You can reach out to individual merchants/retailers online by email, or seek out an affiliate partnership program in which third parties help you find someone to partner your blog with.
   • The best way to earn money as an affiliate marketer is to work within a popular and lucrative specialized field.
   • It's not necessarily a requirement that you have a working relationship with the merchants/retailers you decide to work with, but it certainly helps you start a conversation with that merchant.
   • If you advertise products you're familiar with, you can post thorough and in-depth product reviews, personal testimonials, and build trust from your readers on your authority and experience.
   • Find out how much you can expect from your commissions. For most start up blogs, anywhere between 15% to 20% of each sale is a good commission.
5. Produce interesting content. Once you've got your blog set up and your merchant/retailer/affiliate connection is established, you'll need to produce content for your blog. You should update your blog on a regular basis in order to keep readers interested and returning to your site. Some bloggers are comfortable with making new posts every day, while others make blog posts one to three times a week. Find a schedule that works best for you and go from there.
   • Check up on which of your posts are most popular with readers. Then try to tailor your future posts to find other aspects to those popular topics.
   • Embed your links within organic content. If you just post spammy ads, no one will want to visit your site.

Generating Income Through Stocks

1. Investigate each company you're considering. Putting your money into a company's stock is essentially an investment in that company's wellbeing. If the company is poorly managed, or if their products/services are declining and the company is sliding towards bankruptcy, you'd do well to avoid that company. That's where doing your research comes in.
   • Read through the company's website and find articles about the company's performance over the last few years.
   • Check into the company's financial statements and track their gains/losses through the last few years as well.
   • Look into how long the current president or CEO has been in office. A recent shakeup in management could lead to policy changes, changes to the company's business model, and ultimately loss of profits.
   • Try to find a company that has had stable growth without a lot of management changes in the last few years, but also consider whether the company will still be relevant a few years into the future.
2. Consider utilities stocks. Utility stocks are generally considered a fairly sound investment. Unlike stock shares based on a specific company or industry, utilities will always be in demand at a fairly stable rate no matter what is going on with the rest of the economy.
   • Utilities stocks tend to be more stable than other more volatile stock options.
   • If you're young and want to watch your stocks grow over many years, you might only invest three to five percent of your total stock options. If you're retired, you may want to invest 10% or more to see a faster return.
   • Invest whatever works best for your portfolio. Talk to a financial advisor about the best options for you.
3. Look into healthcare stocks. Similar to utilities, healthcare is an industry that will always be in demand. As the population ages there will be an ever-increasing demand for medical care, and new technological innovations push the healthcare field further and further into the future.
   • Healthcare companies tend to have strong financial management, and typically see steady profits.
   • Do your research before investing in a healthcare company. Check for reports of any pending mergers, risk of bankruptcy, and other factors that might affect the value of your stocks.
   • Consider seeking advice from a professional financial advisor before investing in these or any other stocks.

Finding Other Ways to Earn Residual Income

1. Earn book royalties. If you've written a book, you may be wondering what kind of residual income you can earn from the royalties. The specifics will depend on the contract you agree to sign with the publishers, so it's important to be aware of what rights you can and can't invoke during this process.
   • Only give your publisher the specific rights that group will need for the book at hand. For example, if the publisher primarily works with English-language publications in the United States, you should be skeptical if that publisher tries to secure international rights to your book.
   • Grant the publisher subsidiary rights that relate only to the sale of the book itself (for example, large-print rights or book club rights). Any outside rights your publisher tries to secure, like movie or TV rights, should be off the table.
   • Have your agent argue for very specific language that details the terms of your royalties.
   • All royalties in your contract should be a specified percentage of the suggested retail price of the book, not on the publisher's net receipts. Any attempt to stray from royalties derived from the suggested retail price will only cause you to lose money to the publisher.
   • If you negotiate for an advance on the book, do not let the publisher issue payment "upon execution" (or similarly worded specifications). Make sure the advance is received as soon as your contract is delivered to the publisher, or specify a certain number of days after your contract is received in which the check must be issued.
   • Make sure that your contract requires the publisher to have your book registered for copyright within 90 days of publication to avoid any risk of copyright infringement or intellectual theft.
2. Get royalties from a song. If you're a musician and you've written a successful song, you may be able to earn royalties from the sale of that song. Once you've gotten a record contract offer, you'll need to review the terms of that contract to ensure that you receive your fair share of the royalties.
   • As the artist who wrote/performed a song, you own the rights to the master recording, and you assign rights to your music label in order for them to distribute and promote your song(s).
   • Some labels may try to acquire full ownership over a recording's copyright. It's in your best interest, financially and creatively, to maintain control by keeping the copyright and only giving rights to the label for a limited period of time (often called a license deal).
   • Never sign a record agreement that asks you to transfer copyrights or to take on a work-for-hire role. This is a bad contract that will exploit you and your work.
   • Make sure your contract specifies both digital and physical royalties, ideally based on net published price to dealer (wholesale price after distribution and merchant fees). That way you will earn royalties off of digital downloads and physical record/CD/cassette sales.
   • Radio play royalties are split across three categories: commercial radio, classical radio, and college radio. Hit songs and long-standing "standards" are often eligible for bonus royalties, depending on the terms of your contract.
3. Try peer-to-peer lending. Another residual income option that some people might be interested in is peer-to-peer lending. In peer-to-peer (P2P) lending, you essentially provide someone a loan just like a bank or credit union would. The returns you get from a P2P loan are far greater than the interest you would receive on an average savings account, CD, or bond.
   • Always go through a trustworthy P2P site, like Lending Club or Prosper.
   • The P2P site will take care of running a credit and income check on potential borrowers, then match you with qualifying borrowers who pass those checks.
   • Make sure that the P2P site you're considering will service the loans and manage the collection process.
   • To get started, you'll simply open an online account and make your funds available. Then choose the terms of the loan (usually either 36 months or 60 months), the credit risk and projected return you feel comfortable with, and the amount you'd like to invest in each lender.
   • If you're unsure about the terms of a loan, consider talking to a financial planner or accountant who can walk you through the lending process and explain the risks vs. rewards of each option you have.
4. Generate online advertising revenue. In addition to selling items or services and participating in affiliate marketing, you can use your website or blog to make money by selling advertising space. If you have a highly-trafficked website and/or highly-involved regular readers, you have a way to attract advertisers for related products and have them purchase advertising space on your site. However, this advertising will have to be related to your website or blog in some way, otherwise your readers won't be interested.
   • Use the information in the method "Earning Income Through Affiliate Marketing" in this article to build a website or blog and a devoted readership.
   • You may have to redesign your site or blog to accommodate advertising space. Try experimenting with different layouts so that you can bring in ads without losing the professional feel of your site.
   • Most online advertising is cost per click (CPC) advertising. This means that the advertiser pays you a small amount each time their ad on your site is clicked on.
5. Create and monetize an app. Mobile applications are a large and still-growing market that can provide you with a large amount of income if you know how to capitalize on it. The first and most challenging step, however, is Create a Mobile App that people actually want to use. Try to assess the need for an app by thinking of useful apps you would want or problems that can be solved by an app. Then, look for current apps that met these needs. If they aren't any, or if they aren't any quality ones, consider creating your own app.
   • After you create your app, you will need a way to monetize it. This can be done in several ways. For one, you can include in-app advertising, like banners that show up during use of the app.
   • Another common method for monetizing apps is in in-app purchases. These add additional features to the app, like unlocking more levels in a game or adding filters to a photo editing app.
   • Other apps make money simply by charging users to download the app.
   • Finally, e-commerce apps allow users to purchase items or services through the app.

Tips

• If you're pursuing income through affiliate marketing, always consider what your prospective site visitors would want to see. You should also think about what they would type in if they were looking for your product or service, and use those terms as tags for your website.
• It takes commitment and constant application to earn residual income in any field. Be patient and put in the work, and eventually it can pay off.

Warnings

• There are no "get rich" programs. There is no guarantee that you will definitely succeed, as residual income can be affected by both chance and by your level of involvement.

Related Articles

• Generate Passive Income
• Evaluate a Residual Income Opportunity
• Retire Early by Building Residual Income
• Create a Residual Income Through Affiliate Marketing

Sources and Citations

See also

• Create a Website and Earn Money
• Start an Online Business
• Email Amazon
• Know if an Online Business or Company Is Legitimate
• Start an Affiliate Marketing Business
• Make Money Online with Resale Rights
• Make Money Online
• Start a Home Based Business
• Make Money by Selling Other People Products
• Start an Online Store

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