Is Passive income real?

Today, we'll run through, is passive income a real thing? I wanted to share today's topic because I've seen so many blog posts, podcast episodes and YouTube videos showing you how you can create different passive income streams.

95% of the advice out there is showing you how to do things that are not passive. They're simply not passive income. You have to do things actively to maintain that income. What kind of things?

Well, that's what we're going to discuss in today's episode. I'll also discuss what is actually passive income? What is an example of real passive income?

Is it possible to earn passive income instantly with this option? I’ll also debunk common myths and misunderstandings about passive income. People believe they’ll make a specific amount of money with minimal effort, but the reality is quite different.

I want to save you from headaches and heartbreak by guiding you in the right direction. Let’s dive in.

Many internet coaches and gurus claim that it’s possible to create passive income. They say you can generate residual monthly income by doing something once and then earning it on autopilot. They provide various examples, such as creating a blog, podcast, selling online courses, or digital products like software or e-books. They also mention affiliate marketing as a potential passive income stream.

You’ve likely heard this term, “passive income streams,” countless times. However, I’m here to clarify that it’s not entirely accurate. Passive income means investing your money and possibly your effort, and then generating a regular income from that investment without any further involvement.

All the examples I mentioned — podcasts, blogs, affiliate marketing, digital products, courses—are not truly passive. They require significant time and effort to build, especially an affiliate marketing blog, which can be time-consuming and demanding.

While we understand that investing time and money is necessary for passive income, once it starts generating monthly income, you can’t simply stop working on it. You can’t stop publishing blog posts.

You can’t simply cease publishing podcasts, maintaining your digital product, or even responding to customer service emails. Everything I mentioned and what many people have discussed as Passive Income requires continuous maintenance, consistency, and the commitment to your current actions.

Yes, you set up the system, built an asset, and invested time and resources.

However, to ensure that your investment doesn’t wither and fail to generate passive income, you must continue to maintain it. Even if you don’t add new content to your blog, if it’s earning you ad revenue, or if you create an ebook, such as a book, that generates passive income, even if you don’t modify, edit, or improve it, you must invest time in marketing it to reach new audiences. You can’t simply stop marketing.

Marketing is an investment, whether it’s through content marketing, paid ads, or public speaking. The key point is that you can’t simply sit idly and expect something to sell on its own. If you’ve noticed, I’m passionate about this because I genuinely believe that many people are providing incorrect information.

It’s unfair to label something as passive income when it’s actually a lot of work.

I understand this firsthand because I run a podcast and a blog.

I own a software company, and many people claim that these things are passive income. However, they require significant maintenance, effort, and continuous improvement to maintain and grow that passive income.

Even a simple blog needs updates to ensure relevance, that all links are working, that embeds are functioning correctly, and that you manage comments, emails, inquiries, and community feedback. Remember, this is a business, and you can’t simply build a business and neglect its maintenance.

That doesn’t exist. A business isn’t a living entity that demands your constant attention. So, let’s address the question we posed at the beginning of the episode.

Is there such a thing as passive income? Yes, there is. It’s called an investment.

For instance, if you’re an angel investor in a company, you may not manage its daily operations. Your involvement is minimal, if any. However, if the company grows and generates profits, you’ll receive a dividend on those profits if your investment proves successful.

And that could become your monthly income. But it doesn’t happen overnight. When you invest next month, you won’t receive a check in the mail immediately.

The reason behind this is that the company needs to grow, and it requires time to achieve that. It also needs funding to fuel its growth.

Therefore, they seek your investment. Even if you invest today, you won’t likely see significant benefits for another 12 to 24 to 36 months, or even longer, until the company becomes profitable enough to pay you a dividend. Of course, if the company is acquired or sold, you’ll receive a percentage of the ownership stake you invested in.

In most cases, you’ll receive a lump sum, and you’ll reap the benefits. This is essentially a form of passive income in one lump sum. Another form of investment is the stock market.

Alternatively, you could invest in an index fund, such as the S&P 500. The idea is to put your money in there and leave it untouched, allowing it to grow through compound interest. This is the essence of passive income.

With the S&P 500, for example, you won’t be able to live off your earnings immediately. You want your investment to compound. You want to allow the power of compound interest to work its magic. You shouldn’t take any profits you make over the years or even the first year or two and withdraw them without allowing yourself to benefit from compound interest.”

So, many people who invest in something like the S&P 500 or stocks put in money, forget about it for about five to ten years, and then they might withdraw some monthly or yearly earnings to supplement their income or live off, depending on their initial investment. Some people receive passive income from real estate investments. However, it’s important to note that this can be a bit tricky because it’s not entirely passive.

For instance, if you own an apartment building with six apartments and collect rent from all of them, along with mortgage payments, insurance, and a property manager, you can potentially achieve a level of passivity. The property manager will handle most of the tasks, and you’ll only need to occasionally receive emails with requests for approvals on quotes for repairs or replacements.

If the total rental income exceeds all the costs, including mortgage payments, insurance, and property management fees, it constitutes passive income. You’ll generate a profit every month with minimal involvement. This is especially true if you have someone managing the property for you, allowing you to travel the world while the company takes care of it and deposits your funds in your bank account.

Of course, if the property’s value increases, it’s also an investment in itself. Additionally, you’ll earn residual income from the rent. Therefore, these scenarios are closer to passive income. However, any venture that requires active promotion, marketing, selling, maintenance, or regular attention is considered a lot of work and is not truly passive.

This job demands constant effort and cannot be neglected. Therefore, it’s unfair to label it as passive income.

To conclude today’s blog, I want to emphasise that all the concepts I discussed today, such as building an online course, developing software, creating an e-book, starting an affiliate blog, or any other similar venture, are viable business models. They are not inherently bad and should be considered when starting a business.

Got a burning question? Reach out on our social channels or email me at michael@purpleyak.co.uk

Thank you so much for reading.

Take care.