If you’ve ever heard the term residual income and wondered what it means, here are a few thoughts to consider. Residual income is passive income, that one keeps getting even after the completion of his or her primary income-generating activity. Examples of residual income come in the forms of residual income from rental/property income, royalties, income from the continuing sale of merchandise, and others.
So what exactly is residual income? It’s basically an income that you can keep receiving for the rest of your life, much the same way that long-term mortgages and life insurance payouts are retained for the life of the person who is paying them out. One important difference is that while these types of investments usually come with a lower initial cost, the payments continue to come over the years without much additional cost. And the type of investment typically doesn’t require any risk whatsoever.
For example, consider this situation: You have a home which is earning you a steady income. However, over time, perhaps due to wear and tear or other factors, your home may be worth less than when you purchased it. If you’ve held onto your home through the years and haven’t moved since buying it, then you’ve got a very good chance of still being able to receive a payout on your home equity. But this isn’t the only scenario in which a person would be able to benefit from a personal residual income. Let’s take a look at another one.
Let’s say that you own a business which, for one reason or another, is not doing very well. You may have invested all of your savings into the business and, as a result, the business isn’t doing very well at all. At this point, you might want to consider getting another stream of income. You can do so by creating multiple streams of income. The great thing about this is that your previous efforts will still be contributing to your new venture. So your risk tolerance level isn’t going to be as high, which means that your chances of seeing success are much higher.
Another scenario where a residual income allows you to make more money is if you’ve already got a good amount of cash flow coming in. In order to get a good cash flow, you need to have some investments that are earning you a return. One of the best ways to have multiple streams of income is to invest your money in something that will have a decent rate of return. Your main objective here is to finance something yourself so that you don’t have to rely on a third party to do the work for you.
When you have a passive or residual income, however, you aren’t working for yourself. Instead, you are working for the person whom you are working for at the time. Your goal should always be to create a net profit for that person. If you are doing a job which is only creating a net loss for you, then you should quit and find something else. Creating multiple streams of income with passive and residual income allows you to do so.
If you have a lot of property to invest in, then you can create multiple residual income streams by earning rental income while also managing the investment. With a single stream of income, it would be hard to manage the investment. However, when you have multiple streams of income coming from different sources, it becomes easier to do so. For example, let’s say that you own rental property which is renting out to tourists on an annual basis. By investing in the rental property, you will be able to earn rental income and at the same time secure your own interest in the property should you decide to rent it out.
Another way that you can create a residual income stream is to invest in some royalties. There are many ways to generate royalties. The easiest method is to simply get some books written about your niche topic and sign them to as many publishers as possible. This provides you with a royalty for each book sold. Should you choose to sell physical products as well as digital products, you can take this a step further and develop your own website to sell your products and collect royalties from every sale you make. All of these methods allow you to build a residual income stream.