What is Passive Income? A Guide to the Reality of Passive Income

That’s not to say that passive income isn’t worth acquiring. It can give you greater flexibility and freedom and bolster your financial stability. 

However, before you pursue passive income, it’s important to get a clear understanding of what that entails. This article clarifies what passive income is, provides examples of passive income, and gives pointers on how to realistically acquire passive income.

Once a property is rented to a tenant, you don’t have to do much beyond collecting rent. Hire a property manager or property management company, and you don’t even have to worry about landlord tasks like building maintenance. However, you first need to acquire a property, get it rental-ready, and keep it that way. That upfront prep work requires an initial investment of money and effort.

Although totally passive income might be a myth, it can still be a practical and worthwhile way to increase your earnings. Here are a few passive income ideas you can use to start building your wealth.

You can also look into short-term forms of passive investment income. Peer-to-peer lending is one example. Online platforms connect you to people who need a loan, for example, to start their own business, allowing you to act as a lender. The returns you get with interest can make this yet another cash flow source. 

You might even invest in a business long term, essentially buying a piece of it so you can collect profits.

You don’t always have to buy an asset to generate passive income. You can also create your own income-generating asset. For example, if you have niche industry knowledge about a topic, you might share it via a podcast or YouTube channel, which you can monetize. Platforms like Udemy, Skillshare, and Coursera also make it easy to sell courses.

Social media is another example of how you can leverage a creative endeavor to make money. If you already have a significant active following, you can use it to generate money through things like affiliate marketing.

Finally, the most common example of passive income is rental properties. If you buy a property, you can rent it out long term, collecting monthly rent payments that contribute to your overall earned income. Alternatively, you can focus on short-term rentals, using platforms like Airbnb to find tenants.

At this point, it’s worth noting that any money you earn via passive income is taxable. Rental income needs to be reported on your income tax returns or you’ll risk getting into hot water with the IRS. 

However, note that you can also write off many of the expenses related to your rental property as a result, such as advertising costs or maintenance and cleaning fees.

As you can see, a passive income strategy is never 100% passive. These income streams take time, energy, and money to set up. 

Another benefit of such passive activity is that it’s scalable. You can start small and then go bigger — for example, by buying or renting another asset that generates passive income.

While you won’t get money for doing absolutely nothing, passive income opportunities offer distinct benefits (e.g., greater financial freedom, earnings flexibility, and scalability). 

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What is Passive Income? A Guide to the Reality of Passive Income is a post from: I Will Teach You To Be Rich.

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