I am a believer of having multiple income streams although I am not quite a practitioner yet. Side hustles require time and commitment after work which sometimes I find it hard to do.
So I tried to learn more about the passive income streams, to build. Unfortunately most popular income streams claimed to be passive are not really passive. They require an initial effort and then maintenance. Lets have a look into a couple of the most popular passive streams. In the end of this article I will also tell about the most passive stream in my opinion.
You can read especially on this website that lots of people are earning some money by writing blog posts on Medium or on other platforms. Some of those writers will also claim that this income is a passive income. But is that the truth?
I bet it is not.
First of all, writing requires some focus time only for translating your thoughts into an article, but this is really the tip of the iceberg.
An article has around one to six months lifetime only in ideation phase for me. I find a topic that I think it is worth to write about. I took a note of the topic then the idea matures in my mind with time.
Maturing does not happen by itself. Depending on the topic, I research about that, I take notes and write short paragraphs. If the article is a technical one, I try to find a business case which I can build examples on publicly, then I build the examples by coding. If it is not technical article, I read about the topic from other authors to understand different aspects.
Finally, I start to write the article itself. Sometimes publishing it directly after the writing, sometimes I also keep it as a draft like the fermentation phase of a drink, so by time I can re-read and edit it to find the correct level of acidity.
Hence an article for me takes a couple months to be published. It requires a ton of mental effort, so calling it a passive income stream does not really fit into my criteria.
And also when you stop, revenue generation will slow down. You can read my experience with Medium here:
[How being inactive on Medium affects views]https://medium.com/@canburaktumer/how-being-inactive-on-medium-affects-views-26a8a76dd827)
This is another thing I have some experience on, although we did not monetize it yet. We have a Youtube Channel with my wife, in which we have some videos about being an expat in Germany, life in Germany and our travels around.
I can easily say that, a single video takes at least 24 hours, again depending on the topic. For some topics like diploma recognition; we spend some hours researching, taking notes from our experiences and scripting (not a detailed one). After these hours comes the production, a 20 minute video takes around 30–40 minutes of shooting for us, then around 3–4 hours of editing. So we can publish the video.
But it does not end here. You need to maintain your channel, keep responding the comments, share on other social media and also be responsive on other social media. Otherwise you will lose your audience quickly, which takes months to build.
Result: not a passive income.
This can be the worst example to a passive income stream. Courses have hours of video content on a very specific topic with a very specific purpose: to teach someone on the topic.
First of all to build a good course, you should be a good teacher and you should be an expert on the topic you teach. There are lots of -sorry for the wording- garbage courses on the internet which only aims to make money to their publisher and not to teach students.
I already mentioned about the vide production times, on top of that with courses you should be responsive too. And another point with courses is if you are building a course on technology, lets say on AWS, you must keep it up-to-date. Otherwise you will not be able to gain new students, as the course becomes outdated.
Writing newsletters is much like blogging with a twist, you subscribers expect to receive the new issue with provided intervals. Let’s say weekly. If you miss the deadline, they will be upset, they will unsubscribe and you’ll lose audience and the money in the end.
Applications, themes for web sites, templates for Notion.so etc. we can group all these digital products in the same bucket.
The world is changing fast, digital world is changing faster. So any digital product will become outdated in a short amount of time. To keep the products in a marketable shape, producer has to keep them up-to-date with the technology. If it’s a Wordpress theme for example, one should follow the new versions and change lists to keep the theme working as intended.
In the end, this category will need a continuous effort as well.
Unless you are writing a novel, a story or similar. It will have the same constraints as digital products above. Technical books, how-to guides will require your time to keep them updated.
On the other hand if it’s a novel or story. Then it will be a valid book for a longer period of time. Still one needs to keep doing marketing, talk about the book to drive sells.
And finally, writing a book is a tiring and a long process. So like blogging and newsletters, it will require an extensive initial effort.
Rental properties also very close to passive income if you are lucky. For example I am a long term tenant, in my previous home I stayed for 8 years, and current home 5 years and counting. All the work my landlords has to do is
(1) collect the rent,
(2) pay the taxes,
(3) tell me the new rent when it’s increase time.
Why I don’t count renting out a rental property as a passive income then? Because the initial investment is usually a big amount of money, and earning that amount is never an easy or passive process. Also if you are an unlucky landlord, your tenants will change a lot leaving you with lots of operations and revenue loss during the process.
In a few articles on the internet, I saw consulting is listed under passive income. And I was like, really? I mean REALLY?
I worked in a couple consulting organizations, these were software consulting jobs. And I can easily tell you it is not passive at all. A consultant is charged for the hours it worked, so any passive hour is a revenue loss.
Also, if you are consulting alone you are responsible for your own marketing, finding new leads, following up with the payments etc etc. It’s a long and tiring process.
The most passive income in my opinion
is dividend stocks or funds.
I should be honest stocks and funds also require some work, they are not completely effort free. What I am doing is, I book one or two weekends in a year to
(1) read reports from my portfolio companies,
(2) research new potential companies,
(3) reshuffle my portfolio,
(4) file income tax report. All of these usually require less than 4 days in a year for me.
Even if I stop doing the first three, my portfolio will continue to generate some revenue for me. And for the last one, I can actually delegate this job to a professional and be completely passive.
Apart from my effort, this companies and stocks are being managed by professionals so I don’t need to think about them really and the dividends actually are reinvested into the same portfolio, so the portfolio grows itself.
One important note about the paragraphs above is, I am not an investment consultant or finance professional. So nothing I wrote stands as a financial advise.
Scalable income is the word we are looking for
any side income that I consider should be a scalable income. Scalable means with a constant effort, the income should be able to grow. Or income growth should not be directly related to the effort required. Looking at the above options I can list the scalable income options as
Consulting or the renting on the other hand can not be scaled as well. You can not charge (or should not) two customers at the same time, because your hours are as limited as all other human beings. Or you can not rent the same place more than one tenant at the same time, you can rent it consecutively but to scale you need to invest into more units. So a single unit does not scale at all.
As said in the beginning, I am a believer of side incomes. But I think “passive income” is false marketing.
What do you think about those income streams. Which income streams you believe in. Let me know in the comments.
Thanks for reading so far. If you like my articles you can follow me to get notifications when I publish.