Passive Income Hoarder - The Wealthy Accountant (2024)

When it comes to passive income I have an edgy side as the title indicates. Multiple streams of income showing up in your account regardless what you are doing is a powerful force to have on your side. Losing your job is only an issue if your job is the bulk of your income. Business owners know the loss of one client out of hundreds is no more than an annoyance. You can harness the same force in your finances.

Before I list the sources of passive income I have, let me share a short story that happened to me recently. Certain sources of passive income are offered to small groups only. I was fortunate enough in my business to have one of these sources. Mr. Money Mustache, a personal finance blogger named Pete, gave me a plug, including a plug for this new source of passive income. I did not expect a lot. When the numbers were finally tallied I was surprised. The revenue was much higher than I calculated. I shared the info with Pete along with traffic data. He responded with an email saying, “Welcome to the world of passive income.” It started me thinking about all the sources of passive income I have and how passive income cements my finances regardless of the economy or my business.

You can harness the same passive income empire. Below I will outline many of my sources of passive income with a few ideas I don’t use. With a small amount of effort you can build $4,000 of passive income per month; more than enough for a luxurious lifestyle. Keep in mind what I call passive income is different from what the IRS calls passive income. Some of my sources of passive income are classified as earned income for tax purposes. My definition of passive income is something you do today that generates a steady stream of income with almost no effort for those future payments.

A Passive Income List

Interest
- Bank interest: In today’s interest rate environment I do not consider the small amount earned from bank interest consequential.
- Prosper and Lending Club: P2P lending offers high rates of returns, as much as 12% consistently. Once you open an account you can set up automatic reinvestment of income. A true “set it and forget it” investment. The whole process self sustains. (I’ve stopped recommending Prosper and Lending Club and stopped investing there myself over multiple concerns. As of this update note I use PeerSreet, link listed below.)
Dividends: Dividends are easy to get addicted to. You can reinvest your dividends in more shares (easy to do with a dividend reinvestment plan and mutual funds). Reinvested dividends mean you have more shares every quarter. It is like a pay increase four times a year. Index funds are great for reinvesting dividends or living off the income stream. I also receive dividends from my S corporation.
Rent income: I no longer own residential rental real estate, but receive $30,000 per year in commercial rental income. Residential rental properties are more forgiving, yet the right commercial property will generate a significant amount more than residential compared to the value of the underlying property. It is common for good commercial real estate to throw off enough rent income every seven years to pay for the property in cash. My property receives enough rent every six year to buy the building, cash.
Speaking: Speaking engagements are earning income for tax purposes and is not completely passive in nature. My attitude is anytime I get paid to talk, something I do whether I am paid or not, is free money. I am always amazed when I speak for an hour or two and they hand me a check for several thousand dollars. If you are interested in speaking for profit check local speakers bureaus. Focus on one area you are well versed in. As you can guess, I talk taxes and financial planning a lot.
Land contract: Once upon a time I owned well over 100 residential rental properties. Like so many things I do, I burnt out from overdoing it. I still have a land contract. Here is how it works. I bought a repossessed home from Veteran’s Affairs twenty years ago, fixed it up, and sold it for a tidy profit: 10% down, 10% interest, 30 year term, no balloon. They never refinanced and I pray to whatever god will listen that they don’t either. Ten percent is a nice income stream secured by a piece of real estate with only 20% loan to equity at this time.
Personal lending: I have been known to lend money to businesses and people I know and trust. The loans are always secured and short-term in nature. Funding the transaction can come from cash flow or I can create a wrap-around loan. Wrap-around loans are where I borrow the money at a cheaper rate than the interest rate I am receiving. The nice thing about the wrap-around is no capital investment is needed; it is all free money.
Blogs: I write two flash fiction blogs which bring in about $22,000 per year (don’t tell me you can’t make money writing fiction online), a variety of tax and personal finance writings around the web which brings in small amounts, a content farm I no longer write much for (HubPages; Google: KeithTax) with several thousand in revenue trickling in, and this blog. The Google and Amazon affiliate programs are a monthly source of passive income. Other third party affiliates pay more, but can be seasonal in nature. Blogs are a fast growing segment of my passive income portfolio.

Passive Income I Don’t Use, but Could

Airbnb: I could always rent my home when I am away, take in roommates, or remodel a guest house for additional income. I don’t, but I could.
Turo: I could always rent my car when not in use on Turo for extra income.

There are many more passive income opportunities if you keep your eyes open. In business and in the blogs there are literally thousands of affiliate programs that offer massive payouts. A small number of sales from these affiliate programs are more than enough to fund a luxuriant lifestyle. If you are like me and can’t help yourself, you can work a part-time or seasonal job, run a bed and breakfast, or start a business. There are so many ways to earn enough to cover your daily living needs for a few hours time per week. You then have plenty of time to follow your bliss or dreams and live the life you want to live.

Why Passive Income is so Important

Even if you listen to the news poorly you cannot miss the raging debate on income inequality. Blah! Yes, there is income inequality and it is worse now than 50 years ago. The truth is where the income inequality is coming from. Fifty years ago people saved more and invested their money. A large part of people’s income in the past came from passive income: interest, dividends, capital gains, and rental income mostly. Today people spend every dime they have and invest nothing. Income inequality is explained in large part by the lack of passive income compared to the past. It does not take much to start a passive income machine, but it does take something. The 1% is doing so much better because they kept investing in passive income: primarily dividends and capital gains (also taxed at a lower rate than wages and other earned income). If you want to stick it to the 1%, save and invest. Keep the stock in your portfolio where you get the dividends. Then the rich can’t have those shares and the accompanying dividends; they belong to you.

Passive income is also important to get comfortable with. Your retirement years will be funded in large part by passive income; get used to it. Whether you retire early or work until you can’t, passive income will play a larger role in your life the older you get. Your body will not cash the check your mind demands as the years add up. Since passive income will play such a major role in your later life, why not start early?

Getting Started

For some passive income you will need seed money. Seed money comes from savings: either spend less or earn more to build your war chest. Passive income from blogs requires almost no seed money. Blogs do take time to build a following, however. The nice thing about many blogs is the income keeps coming in after you generate enough content. As I write this blog post, an article I wrote in January 2010 on HubPages, is flying high. I wrote about Tony Robbins back then and Tony is back in the news today so my traffic is out of this world, along with the income; looks like a bonus passive income month for your favorite accountant. It seems there is always something doing well these days with all the content I’ve written over the years.

Passive income opportunities are everywhere in today’s society. The government’s distress at the low labor participation rate could be a renewed lifestyle by the middle class breaking away from low paying jobs to a passive income lifestyle. The world will not end if we all get our share of passive income. Machines and technology will produce more and more goods and services cheaper and cheaper. We really have it made. The labor participation rate was significantly lower in the 1950s and the 50s were considered an economically great time. Let’s go back to the days where we lived within our means, survived fine on one income, enjoyed plenty of passive income, and enjoyed life with family and friends. What an awesome opportunity and way to live our lives.