The media recently spun into frenzy when it appeared that we may get a peek at President Donald Trump’s tax returns.  Liberal superstar and MSNBC show host Rachel Maddow teased fans that were anxiously waiting for her to reveal hidden secrets buried in a trove of financial documents – it was an epic fail (SERIOUSLY).

However, if any observer took a close look at the pages released from Trump’s tax return, then you quickly notice an interesting fact; he made over $150 million in 2005, but almost entirely from passive income – royalties, business income, capital gains and investment income.

I have a long-lasting fascination with passive income from my adolescent years when I launched my first candy business.  As a middle schooler, I provided sugar craving kids with a daily fix, while recording decent profits.  But I recognized inherent risk, teachers and school administrators preferred I focus on the books, not sneaking blow pops and lemon heads to neighboring classmates.  So I recruited student workers, equipped them with supply every morning, and then counted the money at the end of the day – it was my first experience in generating passive income.

The official definition of passive income – earnings an individual derives from a rental property, limited partnership or other enterprise in which he or she is not materially involved.  It’s the Holy Grail for any current or would be entrepreneur, but there is a multitude of ways to produce coveted passive income.

Affiliate Marketing and Referrals

I developed a “Circle of Friends” referral program for Wharton Gladden, a boutique investment banking firm.  The referral program targeted accountants, contractors, real estate brokers, attorneys, engineers and a wide range of professionals who often serve business owners.  Compensation was modest ($500 – $1,000) and the only hurdle for the referring partner to get paid – the firm had to close a transaction with the owner.  Anyone with a large network of business relationships can earn a decent passive income just by referring clients to the firm – much better than picking up a part-time job and far less actual work.

If you own a website where you promote your services or products; then consider affiliate marketing, another strategic way to make passive income from referring customers to a company.  You can embed a promotion on your site that markets a product or service, for which you will be paid a commission or bonus each time a sale occurs.

Other ways to earn referral compensation is to utilize internal programs at your company that offer a bonus for referring a new employee or new customers – leverage the program to earn more income.

Partnerships

Have you been searching for that perfect company on Wall Street to buy shares?  Well perhaps you may want to alter your focus and consider a small business that needs capital for expansion.

The best way to generate an outsize return on investment is to find a company that has not fully matured and may need an angel investor that believes in future growth.  Do not loan the money to the business; instead make an equity investment that can yield passive income for your portfolio.  The entrepreneur will be responsible for the day-to-day grind, while you act as a silent partner and benefit from any profit upside.

Investment Income

The stock and bond markets are by far two of the best investment vehicles available to create passive income.  Rookies may find value in consulting a professional, but sophisticated investors often choose to go independent.  There are endless methods that can be deployed when investing, but simpler ideas to consider – use a robo advisor or buy into real estate investment trusts, high dividend stocks, mutual and index funds.

If you have strong liquidity, meaning cash in the bank, then direct real estate investing may be suitable.  Hard assets spawn passive income, but real property also has many tax benefits in the form of depreciation write-offs, tax deductible mortgage interest and the opportunity to sell assets without paying an immediate capital gains tax.

Royalties

Franchising and licensing are concepts that provide the lowest barriers to expanding and scaling up a new business model – it allows an entrepreneur to circumvent tedious fundraising by securing upfront capital for growth.  Both concepts fuel hyper-growth, but also trigger a stream of royalty payments for the business owner – another interesting form of passive income.

One more idea is to leverage your intellectual capital into writing a book about a particular area that people want to explore.  The process is time intensive upfront, but can be a great way to foster passive income once you move into distribution.  After the book is published, it becomes a complete passive venture that makes you money while you’re sleeping – that sounds fun, right?  If you’re an amateur, then you may have to put in some work to promote the book; however if you sell the book to a credible publisher, then you will receive a percentage of each sale made for many years.

Sell Products Online

I have a friend who recently made the decision to sell his house, most of his possessions and relocate to Coastal North Carolina where he is now pursuing a longtime passion – photography. 

He spends countless hours at the beach taking photos of wind surfers, eye catching nature and the occasional perfect sunset.  Sounds more like a vacation, not a job.  The best part is that all his photos can be sold online to willing customers around the world, once he uploads the photos to a reputable website such as Shutterstock or iStockphoto, then he waits on the money to start rolling in – not to mention each photo can be sold multiple times.

However you don’t have to be a professional photographer to reap online rewards, you can sell just about anything online (make sure it’s a legal product) – software, music, instructional videos, eBooks and homemade crafts – any of these items can provide a six figure passive income and help you build wealth. 

If you try any of these ideas and experience success, then I would like to feature you – please leave a comment or contact us with your story.  Good luck building wealth for your business, family and community.