Passive Income Strategies
January 21, 2019
Author: Bianca Yang
One of my goals for this year, perhaps before I graduate in June, is to set up a passive income strategy generating $500/month. I think $500/month is going to be a fairly tough goal, based on what little I’ve seen of other people’s reported passive strategies. But $500/month ($6k/year) is large enough that it actually feels productive.
Below are a couple of the ideas I’ve had:
- Selling high margin products through Amazon FBA
- I have a friend who makes > $100k selling on Amazon and his own website. It takes him, as he says, maybe an hour a week packing boxes in his underwear.
- The struggle here is finding the right product(s). Given my previous, lackadaisical attitude towards market research of any form, I’m not sure how well I’ll succeed in doing the FBA research.
- This seems to require to require far too much initial, in-person, effort to be really attractive for me. I guess, once it’s set up right, with you just taking a cut of profits while other people run the show, it can work out nicely.
- Sure, ads are easy to add to anything. I could add ads to this website with fairly low effort. But do I really want to have a bunch of clickbait or ugly ads on this beautiful, hand-crafted website? No, I don’t want to waste your people’s time with something so crude.
- One other way to get ad revenue is through YouTube. I once debated the idea of starting a channel where every day, a new one-minute video of me counting 10 numbers would be posted. For example, Mondays would be English, Tuesdays Russian, Wednesdays Chinese, Thursdays review English, etc. Each week, we would advance another 10 numbers, so by the end of the year, we’d have counted to 500. It’s not much effort on my part, but I also don’t think it’s particularly effective as a YouTube income producer.
- Affiliate Marketing
- I played the role of salesman for Kanberra Gel two summers ago. I would give samples to Uber drivers, in the hopes that they would prefer our all-natural, tea tree oil air cleaner over the tree-shaped, soap-smelling air fresheners they normally used. It was kind of fun, kind of nerve-wracking, mostly exhausting. I have since tried to avoid any kind of salesman or campus ambassador positions, because I don’t think those roles really fulfill me.
- Selling designs (t-shirts, stickers, etc)
- This could turn out nice, but I think the expected value here is very low. It’s likely a volume game, and I’ve already said I don’t really want to work on marketing or selling my stuff, so that pretty much means I’m going to suffer low-volume, low-revenue if I pursue this idea.
- Investing (stock market, real estate)
- This is probably the most obvious of the passive income strategies. I used to be very invested (haha) in investing but eventually acknowledged the truth that I really didn’t enjoy thinking about the stock market and gave up. Maybe one day, I’ll take it up again.
- I think real estate investing has a limitation of requiring relatively high starting capital base, so I may not be able to really pursue it for some time. More on real estate and owning land later.
- Rental property
- The most classic rental property is to rent out house space, through AirBnB or Craigslist. But I think people should consider renting out every other piece of property they own. For example, car sharing through Turo. Other forms of rental could be renting out kitchen equipment, like a KitchenAid standmixer, or blender for some hourly rate. What about renting out your bike, scooter, backyard, front yard, tool bag, etc? As a college student who doesn’t have much space or frequent need for some of the above things, I find the idea of rental household equipment pretty valuable.
- Here is where I begin thinking about monetizing my ideas more than physical manifestations of my ideas. The most obvious royalty-based products are music and books. Maybe one day I’ll have enough wisdom to put in a book and share with others.
- Stratechery isn’t royalty-based, but it’s a neat way to monetize all those smarts Ben Thompson’s got in his head.
- Vending Machine
- I think this is largely a real estate game. You have to find the places with good traffic with hungry, anxious, bored, etc people with no other options. You have to make sure the rate of vandalism is low enough that you aren’t going to lose sleep over broken front panels or stolen goods. But, if you have the capital and connections to acquire a machine and get it somewhere good, this probably isn’t a bad passive strategy. You could probably pay someone to collect the money for you at some point.
- (Subscription) Software
Passive income doesn’t have to be 5 min each day for 100K a year. As long as the hourly rate is above some minimum, like $500/hr, and the yearly commitment is below some maximum, like 200 hours (10% of 40hr/week yearly work rate), your strategy could be considered passive income. With that definition, perhaps there are even some side jobs that would qualify as passive income. For example, giving talks, or occasional consulting jobs.
My goal with this passive income endeavor is to FIRE (Financial Independence Retire Early). Sure, with a software developer’s income, it’s “easy” to achieve FIRE (where’s the sarcasm text modifier), but the easiness is still modulated by the size of the capital base you need to accumulate. I’ll need to do the calculations to figure out how much money I actually need to be happy going forward.
I mentioned above that I would talk about real estate later. Now’s that later. I also mentioned in my previous post that I would talk about things people find repeated value in. This idea is currently very rough, but I was thinking about how people can repeatedly enjoy using a piece of land yesterday. For example, think about the repeated value of a park, a mall, a basketball court, a soccer field, your backyard, a pool, etc. I guess I want whatever I create as a passive income generator to be reusable. If it’s subscription software, I want people to continuously use it. I want people to continuously seek out my rental property. I want people to continuously look for my t-shirt designs. I want people to frequent my franchise. If it’s investing, …, I suppose I want whatever I invest in to have that repeated value quality to it.
Maybe the above paragraph is a bit stupid, because everything, from shoes, to your desk, to your clothes, has repeated value. Things get consumed and need to be replaced all the time. That’s just part of the cycle of life. We fight hard, work hard, do things every day because flow and happiness are elusive. We need to go out and search, to seek our flow each and every day. Maybe that’s what I was thinking about yesterday, over that mediocre bowl of ramen.