Semi-passive incomes are great. If you succeed, you will no longer need to exchange time for money. Your income can outgrow the time you actively work.
Last updated: Dec 2020
What’s the difference between passive and semi-passive income?
Semi-passive incomes are not entirely passive incomes because they often require some sort of continues check-ups, strategy, administration and etc. But, once you’ve built up your semi-passive income(s), you’ll have more freedom to peruse your ideal life. You won’t need to sell hours of your life for a salary.
Hurdles in building semi-passive incomes
One hurdle people face when pursuing passive income is that they may need a start capital to get started. You may be one of the lucky ones to have parents or people willing to give/lend it to you. But if you haven’t, you may need to save up from working a regular job. Perhaps you even need to start working on semi-passive incomes that don’t require start capital and work your way upwards.
I will start from expensive-early-investment down to no-early-investment-needed types of incomes. I will write a summary of each, some things to think about and some possible challenges.
The four examples of semi-passive incomes I’m going to write about are
(1) Renting out real estate, property or housing room
(2) Investing in Stocks & Bonds.
(3) E-commerce selling digital products & automating the process.
(4) Using SEO & Advertisement in products, websites and social media.
1. Renting out real estate or housing room
One popular way to earn a semi-passive income is to rent out your real estate, property, or parts of your property (like a room in a house or apartment).
The key is that the people or company that rents the place from you is paying more than what it costs you to own it. Thus the amount they pay beyond your own costs to own the property is what you earn.
Regulations & moral
You should be aware that some countries have regulations on how much you can “overcharge” and earn through this method. And some people may also question whether it’s morally right. Especially when most of the world’s cities are facing a housing crisis already with too expensive living costs.
One challenge with getting started is that you often need a down payment to even get a loan to buy the property. This can be hard to get especially if you’re young or already have a lot of loans. Another challenge is that you will need to deal with problems that can arise with difficult tenants; some may destroy your property or not pay their rent on time (or at all).
Administrative work like bookkeeping, accounting and etc can be time-consuming too. The last two challenges can be dealt with by hiring professionals to do them for you, but that may take a large cut of your profit.
2. Investing in Stocks & Bonds
A more common way to earn a semi-passive income is to invest in stocks & bonds. The good thing is that it doesn’t require much capital to start with. However, it does requires a lot of capital invested in order to live off of your investments.
The best thing about investing in the market is the possibility of compound interest. Compound interest allows your money to grow on its own year after year (Read more about compound interest at Investopedia). The picture below illustrates how money grows while invested vs not invested.
The biggest risk with investing is that it’s fully possible to lose all the money. Perhaps you don’t know what you’re doing, or perhaps a global economic crisis will happen. Who knows.
Another challenge is that there’s a lot to learn about investing in the market. Especially to make strategic and educated decisions. However, many people today invest without much knowledge. And they’re still fine, but my advice will always be to learn as much as you can. And learn before you start investing a large sum of capital. Or you can even hire someone to do it for you.
There is an endless amount of free education today on investing in the market. You can find it on the internet, on the websites of well-educated finance people or in your local library. A word of caution: Don’t trust everything you read on social media, a lot of people give specific investment advice (like buy this stock, or sell this one, etc) without any evidence at all.
3. E-commerce Selling Digital Products – Automated
The market for e-commerce has hit it big in the past few years and will most likely continue expanding in the future. Selling digital products through your e-commerce is a proven way to earn semi-passive income. You still need to do the initial work of coming up with a brand, build/create the products, upload them somewhere and do the SEO & marketing to get people to notice and buy your products. Once your brand or line of products gets consistent sales you can expand your revenue even more by investing in marketing, creating more products or selling more expensive products.
The best thing about selling digital products is that you only need to create/build your product once and then you can sell the same product over and over (compared to physical products where you still need to actively work to make each new piece of product).
Sell on a platform
The platform you sell on is important. The best way to make e-commerce a passive income is to set up the process to be as automated as possible. One way is to sell through market places like Etsy where you upload your files once and they take care of the listing, payments, delivery of products and etc. Other pros are that you can use their search engine to rank high and that the people browsing these sites are already looking to buy products. The cons to market places like Etsy is that they take fees for their services and that you compete with other sellers on the same platform.
Sell on your own website
An alternative is to get your own web hosting, domain and upload an e-commerce website yourself. There are plenty of tools to help automate the process. The pros are that you don’t compete with other sellers in the same way and that you don’t pay fees to the market place. The cons are that it costs to host your own website and that it may be a lot harder to drive sufficient traffic to your own website.
The active part of working with e-commerce is that you most likely will need to register as a company, pay VAT, do bookkeeping and etc. But this is again, something you can outsource and pay a consultant to help you with.
Some examples of digital products to sell are downloadable & printable files, e-books, software and digital files like sound, video, graphics components.
4. Advertisements [SEO]
Placing an advertisement on your own website, blog, in your products or on social media channels like YouTube requires no capital to get started. One thing it does require though is for you to work with SEO and marketing to drive traffic and users to view the advertisements.
Hard initial work
The initial work is not passive at all, where you need to create content that people search and look at. One way to get around this is to hire people to create the content for you, but this can be expensive but it’s a good way to delegate away the work. There are a lot of freelance writers for example with a good grasp on SEO.
Advertisement can be more or less automatic for example with Google ads where you just place in the ads once and then don’t need to anything. But ads can also be partnerships with other companies, which pays more but requires more active work.
Having content on a website, blog or YouTube that ranks high in the search results of different search engines can bring a lot of traffic for a long time. This allows you to earn the passive income that isn’t tied to you actively working.
If you liked this post about the semi-passive income and you’re interested in more ways to earn money you can check out my post about online income jobs (for designers).