Any income that is earned not on account of active participation in business, but on account of work undertaken at some point of time in the past, or because of possessing the uncanny ability of being able to leverage work undertaken by others, is referred to as passive income.
Thus, income and benefits received for an extended period of time, as a result of a one-time active participation in business, comes under the purview of passive income. Passive income, both residual as well as leveraged, can be earned without any personal involvement on the part of the recipient.
Building Passive Income
Opportunities to earn passive income are a potential gold mine for people who would like to earn money without being constrained on account of a job that requires their physical presence.
Contrary to what people may feel, passive income streams can be wonderfully rewarding, especially when one is earning on account of having invested time and effort into developing an idea that continues to reap rich rewards in the days to come.
Interest and Dividend Income
Money in savings account and similar interest-bearing accounts earns interest over time and is a common source of passive income. Owning dividend-bearing stocks also offers passive income opportunities. However, interest and dividend is generally not a significant source of the same.
The owner of an asset can enter into a long-term lease agreement with a person who is interested in using the asset. The latter (lessee) then rents the asset from the owner (lessor) and pays a rent to the lessor.
The lessor of the asset thus receives income with minimal effort. If the owner of the asset actually invested time and money in procuring the same, the income can be classified as residual income since the revenue that is generated can be attributed to a one-time effort.
Franchising a Business Model
This is an excellent passive income opportunity that involves developing a successful business model and franchising it. Here, the franchiser gains by exploiting the talents and the effort of the franchisee, although the initial credit for developing the idea goes to the former. Franchise outlets are excellent leveraged passive income sources.
Passive Income Online
Internet Affiliate marketing results in the host allowing the advertiser to promote the latter's products by providing text and banner links. If the host had good visibility, there is a high probability of people who visit the host's website, clicking on the advertiser's links.
Every click on the advertisement earns the host a commission. PPC or pay per click advertising is thus a wonderful strategy.
Income from Royalties
Patents are granted by the US Patent and Trademark Office (PTO) to protect ideas, inventions, or methods of operation, and have a term of 14 to 20 years.
These confer upon the inventor or the possessor of the patent the right to prevent others from using or selling the invention/idea without the prior permission of the former. Inventors thus earn passive residual income from their inventions.
A copyright is an intellectual property that protects original literary work, architectural work, computer programs, and works of fine art by granting exclusive rights to the creator to distribute the work.
Since copyrighted works that have been created after 1st January, 1978, have a copyright protection that lasts during the lifetime of the creator and for an additional 70 years from the date of death, the owner of the work is entitled to receive royalty income from people who are keen on publishing the copyrighted work.
Commissions from Renewals
People who are engaged in selling annual renewable term life insurance policies can earn commissions on a yearly basis if the insured renews the policy, provided the policy is not a no load term life insurance.
People with excellent networking skills and contacts in their line of business, can earn money by referring their clients to businesses engaged in providing complementary services.
Most passive income opportunities begin with a good idea that germinates into a potential money making strategy. The initial investment in terms of time and money is thus a prerequisite for all potential passive income streams, unless one has a rich uncle who leaves a bundle of dividend yielding stocks or an estate that can be rented out for oodles of money!