'Passive Income' is explained in detail and with examples in the Real Estate edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.
Passive income refers to money that, once it is arranged and established, does not require additional work from the person getting it. A variety of different types of passive income exist. Among them are movie, music, book, screenplay, television, and patent royalties. Other samples of passive income include click through income, rental income, and revenue from online advertising.
Activities that lead to passive income have something in common. They usually need a great amount of money, time, or both invested in them upfront to get them started. There are financial means to establishing passive income as well. You could purchase a rental property or choose to invest in a partnership or other form of company where you are a silent partner. The income that you derive from these investment activities is deemed to be passive.
Various other kinds of passive income do not need a great deal of financial investment made in them, but instead require great amounts of effort, time, and even creativity to achieve. More than a year can be required to either build up a popular website that can contribute passive income from advertising or to write a great novel. Making money from such passive income that is actually profit may take longer.
Books are a good example of how long it can take to actually make money from passive income. Publishers generally get to recover all of their printing and promoting costs, as well as any advance monies given to authors, before royalties are created and paid. Books that sell poorly could turn out to pay the author little to nothing.
Websites have a different set of challenges for their creators. There has to be more than simply good content to make money from them. They must similarly rank high in the search engine results for the necessary amount of visitors to find and go to the website. Unless a great number of visitor hits are recorded on a website, the passive income that is generated will be negligible or even none.
People are willing to put in such a huge amount of time with little assurance of results because they know that the passive income generating activity will create money for them around the clock for years to come, if it is successful. This means that passive income money is constantly being made, even when the person is asleep or on vacation. If you are able to get one passive income project up and running well, then you can attempt others. This way, you might hope to develop a few different income streams that result in a significant annual revenue which can even support you.
Many investors believe that passive income is the most superior kind that you can achieve. This is why rental properties can be so popular. Even though they can require a significant amount of maintenance work and tenant management, they can provide substantial income once several such properties are owned and made profitable.