How To Create Passive Online Income

Passive income is the topic du jour in the personal finance blogosphere lately.  Quite a few bloggers have written in detail on the virtues of creating alternative streams of passive income, and several others have called into question just how passive many of these alternative streams really are.  If you have to actively work to maintain them, the argument goes, you are simply trading one job for another.

For all the rhetoric surrounding passive income, there are relatively few sources of alternative income that are truly passive.  My definition if “truly passive” is simple:  it’s okay that an alternative income stream requires a bit of work upfront to get the ball rolling, but once an income stream is up and rolling, it should require absolutely no further intervention.  A few common sources that fit the bill are investments in things like equity income funds, index funds, or even CDs at the bank, but these income streams all requite large amounts of capital to get started.

Passive Online Income Fits The Bill

Income-generating websites are a good fit for two important reasons:

1. They often require very little if no on-going work once up and running (fulfilling my primary requirement)
2. The upfront capital requirements are negligible:  $10 for a domain name and $6 per month for a web host and you’re good to go.

Now it’s important to note I am not talking about blogging, here.  Blogging is a huge on-going commitment and while it probably has the greatest long-term profit potential, it most certainly isn’t passive.  I’ve finally reached a point where I earn a respectable per-hour income from my blogging activities ($15-20 per hour, roughly), but for months and months in the beginning I worked for literally pennies per hour.  It will probably be another year or so yet before my per-hour income from blogging reaches a level equal to that of my full-time job (if it ever does).

Niche Mini Sites For Passive Income

A niche mini site is a small, tightly focused website designed to be the ultimate resource for its niche.  Strong, focused content is useful for attracting inbound links over time, which will increase your site’s search engine authority.  In my experience, it takes around 20-30 hours to produce a quality mini-site capable of producing a decent income of between $100-200 dollars per month.  That may  not sound like much, but look at it this way:  $100 per month would generate a yearly income of $1,200.  If it took you 30 hours to build, launch, and market your new site, that $1,200 equates to $40 per hour in the first year alone.  Fortunately, mini sites in most “evergreen” niches like Spanish, finance, or acne can have a profitable life-span of many years, if not decades (who knows where the internet will be in 20 years?)  Spending just 10 hours per week working on web projects should be sufficient to launch approximately one mini site each and every month, or 12 sites per year, yielding a monthly income of between $1,000-2,000 per month after the first year.  Could you use an extra $2,000 per month?  I sure could.  And please believe me when I say these numbers are extremely obtainable if you work hard at it.

A Mini Site Example

My Spanish language site, Learn Spanish On Your Own, is an example of a niche mini site focused on the tools and techniques required to learn the Spanish language.  As you can see, it’s not much to look at (it was the first money-making website I ever created), but is full of valuable content such as grammar tutorials and a step-by-step learning guide from beginning to advanced Spanish.  The site is sprinkled with contextual advertisements and product reviews (the site’s real money-maker) to generate income.  All told, this site took me approximately 40 hours to build (it was my first, remember) and currently generates around $300 per month.  While the site isn’t entirely passive (more on that later), it requires very little on-going work for me to maintain that level of income.

You may have noticed I added a blog to the site about 6 months ago.  At that point, I was reliably generating around $100 per month from the site and realized I had just scratched the surface of its profit potential, so I made the decision to invest more time into the project.  You will probably have a similar experience:  some of your niches will prove to be more profitable than others and you may decide to devote more time and resources to those successful projects at the expense of the failures.  While that particular website won’t be “passive” anymore, you will probably be able to dramatically increase that project’s profits with only a moderate amount of work.  To me, that’s the real beauty of the multiple-niche-mini-site mentality.  If you build 15 or 20 sites and they average $100 each without having to spend any additional time on them, that’s great!  More likely, however, you’ll discover some of your sites generate far greater income than the average and others generate very little.  Building niche sites is a great way to test the profit potential of many different unrelated niches with no financial risk.  Then, you can focus on the projects most likely to increase your income substantially.

Tomorrow, I’ll give more details on how to go about building a niche mini site, using Learn Spanish On Your Own as an example.