LIVING OFF DIVIDENDS & PASSIVE INCOME

At periodic intervals, I post my passive income revenue and other articles about creating passive income. One method I’ve heard about was creating articles on HubPages.com. If you have decent writing skills but no technical expertise it offers a way for you to make some online income.

I was able to ask the CEO of HubPages.com and YieldBuild.com, Paul Edmonson some questions about his entrepreneurial experience and passive income.

How did you begin in online marketing?

I started in online marketing back in 1999 when I first started working on the search engine optimization strategy for MongoMusic. Since then I’ve started numerous sites that range from lead generation to niche content, been an SEO consultant and am now the CEO of HubPages.com and YieldBuild.  Both technologies are geared toward helping publishers optimize their online ad revenues.

As I’ve mentioned in how to make money on ebay, I’ve set up several Ebay affiliate sites to generate passive income. Typically you make a percentage of the sales price which ends up in the 4-8% range. However, when buying cars, you only get a fixed price which is currently about $100-$130. But if you can sell a few cars through your site every month, it soon adds up.

Well, someone finally bought a whole car (as opposed to spare parts or accessories) through one of my sites. And not just any car – an antique 1972 Rolls Royce Silver Shadow!

Of course, $130 in affiliate commissions isn’t exactly earth-shattering, but it’s the largest sales commission I’ve received from Ebay so far!  And coupled with the sale of an antique seiko watch, a few designer bags and cheap ipods, it almost pays the rent!

Several of my long time readers have asked me to post my online income. I didn’t realize that I haven’t posted the passive income and online revenue numbers since December. A few reader are just starting to make money online and are particularly curious!

So here’s a quarterly breakdown for online income only. I haven’t had time to calculate the dividend income.

Quarterly Online Income:$6,760.85

• Ebay Publisher Network: $1,874.99
  
• Linkworth: $466.72
• TLA: $1,432.38
• Adsense: $543.6
• Kontera: $61.03
• Direct Ads: $1,696.8
• RevResponse: $12
• Amazon: $129.23
• Other/Affiliate: $228

Dividend Income: No Clue

• ING Savings Account: No Clue
  
• Direct Oil Drilling Investment: No Clue
  
• Other Dividends: No Clue
  

I just ran the totals for passive income for December and I found out that it was the 3rd most “profitable” month of 2008.  The other two were October and June.

Monthly Passive (alternative, online & dividend) Income was $3,276.07.

The total online income was $2385.20 which broke the previous record by ~$130.

Here’s the breakdown of the $3,276.07:

Online Income:$2385.2

• Ebay Publisher Network: $922.6
  
• Linkworth: $471.61
• TLA: $322.93
• Adsense: $128.81
• Kontera: $26.34
• Direct Ads: $220
• RevResponse: $10.63
• Amazon: $17.38
• Other/Affiliate: $309.24

Dividend/Alternate Income: $890.87

• ING Savings Account: $102.77
  
• Direct Oil Drilling Investment: $329
• Other Dividends: $458.86 (net of foreign tax deducted at source)

I’ve been busy with Business School and it’s been an insanely hectic month. Forget about writing posts, I haven’t even had much time to sleep!

I just ran the totals for passive income for October and I found out I’ve broken my previous record for monthly passive income that I set in June.

Monthly Passive (alternative, online & dividend) Income was $3,454.99.

The total online income was $2160.67 which is lower than my record by ~$95. However, my investment in a Japanese REIT paid a quarterly dividend that pushed up my dividend income over the usual $1000/month to a total of $1259.18.

Here’s the breakdown of the $3,454.99:

Online Income:$2160.67

• Ebay Publisher Network: $644.97
  
• Linkworth: $403.83
• TLA: $277.72
• Adsense: $207.30
• Kontera: $40.20
• Direct Ads: $234.95
• RevResponse: $26.90
• Amazon: $58.67
• Other/Affiliate: $262.11

Dividend/Alternate Income: $1259.18

I made $2,884.13 in online & passive income for the month of September, 2008. After the somewhat lackluster income over summer, this was a welcome increase.

Here’s the breakdown:

• Online Income: $1799.92
  
  • Adsense: $214.78
  • Linkworth: $332.24
  • TLA: $241.78
  • Kontera: $$45.48
  • Direct Ads: $205.55
  • RevResponse: $28.23
  • Prosper Referrals: $25.00
  • Amazon: $58.67
  • Ebay Publisher Network: $580.58
  • Other/Affiliate: $51.59
• Savings Accounts: $127.59
• Direct Oil Drilling Investment: $387.59
  
• Dividends from Canroys: $502.09 (after tax deducted at source)
• Other Dividends: $73.51
  

The affiliate income from Ebay has been growing steadily. It’s more than doubled from August and the total revenue for this year is $1847.67. I think that’s a pretty good return for a little bit of effort (most of which took place in May). In July I added a storefront on this website which focuses on business, cheap real estate, gold coins and other income producing ventures. I recently added a Ferrari and Sports-car for sale page. I don’t expect to sell any Ferraris’ or Lamborghinis’ but I sure enjoy looking at them!

Last month I made $580 from Ebay. But the beauty is I didn’t actually sell anything. That’s right, Ebay sent me the money for referring buyers to their site.

Back in April I built several niche sites to that specifically targeted to specific niches like gold coins, iphones and ipod batteries. Several weeks ago, I also added an “investment store” on this site that sells cheap timeshares, real estate and income-producing websites.

The niche sites aggregate the RSS feeds from Ebay for related products and display them. I didn’t have to do the programming; I just bought the BANS software that does everything for me. It did cost $97 but considering that I’ve made over $1250 from ebay since May, I’d say it was a pretty good investment. I also had to pay for domain names, but Godaddy had a 99 cent sale on domains so that wasn’t much of a cost. Some of these sites rank pretty well on the search engines for certain keywords and get mostly organic traffic (that’s what search engine traffic is called nowadays).

Finally got some time to add up all the passive income for the month of August. While June was a record breaking month with over $3,300 in passive income, July and August have been pretty lackluster in comparison. July’s income was $2,115.61 and August’s total was hardly any better with $2,134.57.

Maybe I can use the same excuse that government statistians use when talking about the economy and blame on seasonal variations! But the fact is that revenue dropped due to 2 main reasons. I pre-sold annual advertising in June that rightly should have been ammortized over the year (according to Generally Accepted Accounting Principles). Also, since I was busy with my move to Los Angeles, I didn’t really have time to look for advertisers or respond in a timely fashion to those that contacted me.

A few of my readers have emailed me asking when I’m going to post the Passive Income numbers for June. Apologies for the delay; I’m going to be starting my full-time MBA at UCLA pretty soon and I’ve had to look for apartments in Los Angeles so I’ve been pretty busy since the beginning of this month.

As reported earlier, April was a been a record breaking month for me with total “passive” income amounting to $2,811.42. I haven’t posted May’s break-down but it was a lot lower at $2,330.00.

However, June’s income has broken all previous records and was a whopping $3,354.51! I’ve finally attained my goal of $3,000/month in passive (or semi-passive) income. Let’s hope I can maintain it!

This is a strong 19.6% jump against my previous monthly high in April. Since I’ve been neglecting my sites this month, I expect July income to again drop significantly. But the number of sites that I’ve created is increasing every month, so hopefully it’ll all balance out eventually.

I was so busy in May that I completely forgot to post April’s passive income summary. On the bright side, April was a been a record breaking month for me with total “passive” income amounting to $2,811.42. On the flip side, I’ve been so busy, I haven’t been paying attention to my sites and May’s income will probably be lower.

If you recall, the income for March 2008 was $2, 667.18, so this is $144 jump is a 5.4% increase. However, one of my stocks is a Japanese REIT, and it paid out a quarterly dividend amounting to about $230, so the $140 increase isn’t a real increase – it’s going to disappear for May. Besides, the jump from February to March’s passive income was 11.9%, so this isn’t as good. (In case your wondering why I’ve invested in a Japanese REIT, here’s a good posts on why Japan’s real estate is a good investment.)

I’ve been lumping in my online income with my passive income, but it isn’t really passive. It may not be very strenuous and it gives me geographic flexibility and I don’t have to show up for work every day, but there is some effort involved. Unfortunately I’m not as clever as Courtney Tuttle, who says he has a site that makes $3,500/month with no ongoing maintance. (If you’d like to buy an existing site that generates income, check out the online businesses for sale on my business & investment store). I’ve just had some limited success with Domain Parking, buts that the extent of my truly passive online income.

Simply put, my online income isn’t really passive. It’s a lot more passive than the website and seo consulting work I do by a huge margin, but its not as passive as dividneds or royalty checks.

Is it possible to earn passive income for domains? Absolutely!  It isn’t rocket science but it does involve a little bit of work. Here are the simple steps:

1. Buy a cheap domain name.

2. Decide how you’re going to monetize it. Either through ads on a niche site, affiliate sales, or domain parking.

3. Get up and actually do the work.

Buying Cheap Domains

GoDaddy currently has a great promotion on .info domains. They’re currently selling for only $0.99 instead of the usual $9 dollars. That’s about 90% off the regular price, and I spent the past several days getting about 15 domains that I think I might be able to monetize in some form or the other.

People might feel more comfortable or might more easily remember .com domains, but if you’re targeting search engine traffic it probably shouldn’t matter very much. A lot of the domains have dashes in them (example Sterling-Silver-Rings.info, but again, for visitors coming from a search engine it shouldn’t matter too much.

Since this is tax season and this site is dedicated to earning passive income, I thought I should post something about the taxation of passive income. From the IRS’s point of view passive income is any income that you get without having to to materially participate in. Examples of passive income include rental properties and partnership returns.

Unlike earned income, passive income has great tax benefits. Earned income is subject to self-employment tax which is just over 15.5% (if you’re W2 employee, your employer pays half of this). Your passive income isn’t subject to this tax. If you own rental property, you also claim depreciation. Depreciation is the replacement cost of equipment used in a business and is spread out over its useful life. For residential real estate, the IRS deems the useful life to be 27.5 years. However, the useful life of a house could well exceed 60 years. This results in you being able to claim a tax loss which doesn’t really result in any loss to you. Because of this, depreciation losses are sometimes termed as phantom losses.

Finally I’m getting some traction with my passive income! After all, that’s what this blog is all about. The total for March 2008 is $2, 667.18, and I’m ecstatic to have broken the $2,500 per month barrier. If I can sustain it at $2,500 per month, thats $30,000 per year. While I’m not living in luxury, it’s definitely a great safety net to have. This represents a 11.9% jump from February’s passive income and it has been growing at a steady clip for quite a while now. Hopefully, I shouldn’t have a problem maintaining it.

Here’s the breakdown:

• Online Income: $1645.30
  • Adsense: $339.28
  • Linkworth: $456.70
  • TLA: $103.61
  • Kontera: $62.07
  • Direct Ads: $330
  • Prosper Referrals: $175
  • Amazon: $117.82
  • Domain Embarking: $60.82
• Savings Accounts: $133.10
• Real Estate Trust Deed: $0
• Direct Oil Drilling Investment: $270
• Dividends from Canroys: $517.71

I’ve finally broken the $2,000/month in passive income! Passive income for February 2008 was $2,383.55. Not bad considering I wasn’t even in the country!

Here’s the breakdown:

• Online Income: $$1399.29
  • Adsense: $416.22
  • Linkworth: $221.99
  • TLA: $95.87
  • Kontera: $51.36
  • Affiliate: $83.85
  • Prosper Referrals: $100
  • Direct Ads: $430
• Savings Accounts: $138.43
  
• Real Estate Trust Deed: $0
• Direct Oil Drilling Investment: $277
• Dividends from Canroys: $509.11
• Other Dividends: $59.72

As usual, I ignored any income from Prosper loans. I did however include the $100 in referrals fees. If you’ve been thinking of lending or borrowing money on Prosper, now is a good time to do it. They’re still offering a $25 incentive to new members.

Canadian government takes its 15% tax on the dividends from Canroys, so the income is after-tax. You get a tax credit for this amount in the US so there’s no double taxation.

I’ve been traveling for the past month so this post is a little late. I had already posted my online income which was $778. I finally got a chance to add up my monthly dividend income from my stocks, Canroys, CDs and savings accounts.

The grand total for January was $764.10 from a dozen different stocks. Its lower than it was for December because some of my stocks pay out quarterly dividends. But overall, the amount of dividends is trending up due to the Dividend Reinvestment Program (DRIP).

A DRIP allows you to re-invest your dividends back into the stock. You don’t have to pay a brokerage fee for this, so if you don’t need the income its a good way to put your make back to work. Not only that, but many companies will actually give a discounted share price on stock purchases made through DRIPs.

I started using Kontera’s pay-per-click (PPC) contextual advertising program in December. Last month I made $92.11 from it. The revenue is directly proportional to the traffic and also is also somewhat correlated to the type of content.

Finance-related content usually results in above average per-click amounts. However, content about Paris Hilton might pay 1/10th of the amount, but you typically get 10 times more traffic, so don’t fret if you niche is low paying. Just focus on creating good content. My experience has been that the per-click amount is lower than Adsense but its a good complimentary service that runs along-side Adsense, and it doesn’t violate Google’s TOS (terms of service).

Google used to prohibit publishers from using other contextual advertising programs in conjunction with Adsense, but they’ve recently eased this to allow programs that do not have the same look and feel.

Since I’m still in India, I’m not really sure what some of my income checks are for the month of January. But I do know my online income, so I might as well provide that.

Last month I made $568.55 in online income from various sources. January’s online income rose by 36.92% to $778.

• Adsense revenue: $350.99 ( up 46%)
  
• Linkworth: $151.98 (up 15%)
• TLA: $94.69 (up 32%)
  
• Kontera: $92.11 (up 114%)
  
• Affiliate: $63.73 (up 854%)
  
• Prosper Referrals: $25 (down 66%)

Even though Prosper Referrals were down, I referred over 30 new members in January. It can take between 60-90 days to get the referral so I’m optimistic that this number will be higher next month.

Adsense revenue was up nearly 50% and is now the largest individual contributor to my alternative income (both online and offline). While I don’t know if the increase will continue, I hope I can atleast maintain this level.

Micro-lending is one of my 20 passive income streams. I currently have 45 loans on Prosper.com, lent out at an average rate of 19.55%. Even though I’ve had a few delinquencies, my capital has grown 14.5% in the 15 months I’ve been a lender. I’ve learnt a few things about lending and how to protect your principle. While I won’t explain how to lend money on prosper, I will explain how not to lend money!!

Here are the Top Ten Worst reasons to lend money to borrowers:

1. You think they’re hot!
2. You feel sorry for them.
3. They have a picture of a cute kitten or puppy (or supermodel) in their profile.
4. They’re 95 and need money for medical bills.
   
5. They’re a Californian real estate investor and are willing to pay 20% interest for a remodel.

My Passive income for December 2007 was $1,921.11.

Here’s the breakdown:

• Online Income: $568.55
  • Adsense: $240.10
  • Linkworth: $132.00
  • TLA: $71.73
  • Kontera: $43.04
  • Affiliate: $6.68
  • Prosper Referrals: $75
• Savings Accounts: $128.47
  
• Real Estate Trust Deed: $300
• Direct Oil Drilling Investment: $163
• Dividends from Canroys: $499.21
• Other Dividends: $261.88

As usual, I ignored any income from Prosper loans. I did however include the $75 in referrals fees. If you’ve been thinking of lending or borrowing money on Prosper, now is a good time to do it. They’re offering a $25 incentive to new members.

Adsense revenue was down from last month, but since I wasn’t posting often due to my traveling, that was to be expected. Hopefully I can boost my online revenue this year. Once I’m done traveling, I should be able to focus more on this.