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A Discussion with a Friend
I'm going to be thinking about some fun passive
income stuff for you - maybe us. I'm so ready to tell my boss to
take his big bucks, none of which I see, and have a lovely life.
We'll see, hopefully I can stop trading time for dollars soon.
Anyway, I'm going to attach some of our passive income biz's for you to
look at and hopefully be inspired by that are outside of the real estate
world, which is kind of over saturated now anyway. Wouldn't it be
great to be able to hang out more often? Perhaps on Hawaii?
One practice that AJ got
us in the habit of thinking about was "How many New
Deals Per Week" are we looking at? This was the metric he used for
meeting girls (NPPW - New People Per Week) as he was
looking to meet his soul mate. For a time it seemed that
we were just asking advice from everyone. What did you
do? How did you do it? How's that going?
After that we would then *Google*
everything to get the contrarian perspective if we
couldn't see it on our own. For every 50 things we
seemed to look at, about 1 had some merit to it - maybe
even less. So in spite of what Robert Kyosaki
(Rich Dad, Poor Dad) may indicate, it's not easy, but
looking back 1 1/2 years later - we're glad we did it
because we're much closer to our goal of being able to
hang out with each other 24 hours a day / 7 days a week.
Half of our Los Angeles houses' mortgage is covered
through our passive income sources. We'd like to
quadruple that income through other virtual or passive
income means so that we can more easily split our time
between Los Angeles and a house purchase in Canada or
France.
Global Entrepreneur News
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The businesses:
www.VoiceInformation.com is
a technical company that sells a service.
This site is mostly passive income after the initial website is created which is a bit of an undertaking.
We answer email questions from prospective clients when they don't understand something.
We get a few emails a month from the site I'd say. After much research,
we began using the product to replace our live answering
service which was costing us $200 a month (the replacement
virtual service runs us $30 a month). We were so
pleased with the virtual service that when we found out we
could resell the product, we jumped on board.
The
Voice Information virtual service is flawless
and its added so much value and visibility to our business.
We now can retrieve our voice messages from our laptop from
anywhere in the world. Plus we can now keep a
permanent record of voice mails. I wish I'd had this
service when my Grandma was alive. I would have been
able to keep all of her voice mails then. Anyway, we
could not in good conscience represent a lame or problematic
service or product so we're absolutely thrilled and proud to
be resellers for these folks.
Since we started using the virtual answering service I've
helped property management firms implement the service in
place of their after-hours or standard live answering service.
I one case this amounted to saving the company $2,400 a year
with the potential to save upwards of 25k a year once all
the properties implement the virtual answering service.
And now they can be resellers of the product and resell to
their own properties, which each function independently
responsible for their own return on investment.
Offering tenants virtual office capabilities through the
Voice Information service fits in the real estate world
perfectly. Not all tenants want or need physical
space, but they do need the ability to receive calls from
anywhere in the world and to look like they have a global
presence. The service provides one more cash flow
opportunity to property managers as we approach a new
generation of technically savvy people in today's global
marketplace. I feel proud that I can not only offer
people a great service but that the service can pay for
itself and then some! I doubt very many other employees
/ or sales persons can say their client will earn income by
using their product.
You'll also
notice on the site that we carry advertisements from Google.
These ads generate about (can't say as per Google
contract) dollars for us right now. They continue to
grow as we build out our sites and content.
http://www.google.com/ads/ Plus there's now a
pay-per-search feature that we haven't had the time to add
to our sites that will generate income as well.
AJ has created intellectual
property as a software engineer. We have started three sites
for three different books that are in the cooker. Some of
the sites that we have created that earn income:
www.Vinfo.com ,
www.Tekguard.com ,
http://www.VFEdit.com ,
http://www.WedNights.com,
www.FunLA.com,
www.ComLA.com,
www.InfoMiss.com
www.Gitzi.com,
www.Parallellives.com
(under construction) and about 35 more others.
Our web
ventures focus on Intellectual
Property because of some of our concerns regarding
Robert Kiyosaki's real
estate strategies. For example,
John T.
Reed's analysis of Robert T. Kiyosaki’s book Rich Dad, Poor Dad
(documented here)
summarizes some of our overall concerns. In an interview in
the February issue of Fortune Small Business, Kiyosaki is
quoted as saying "Right now it's really hard to put a deal
together because every amateur in the world is in it". The
interviewer asks what about the readers? The ones who are
taking his advice and jumping into real estate at exactly
the wrong time? "I'm a professional," Kiyosaki coolly
explains. "I make money when the market is up, and I make
money when the market is down. Now can they do that? That's
another story."
Practicing the "How many New Deals Per
Week" landed us in the middle of a truly amazing, completely
passive income real estate limited partnership. Being
limited partners meant that we only had to provide a certain
amount of cash to join the deal - but all the paperwork and
responsibilities were someone else's. Basically a
friend of a friend who was a very sophisticated appraiser
went into business buying and converting apartments into
condos. They were looking to turn the condos in 6-18
months for a substantial profit. This group of
investors needed
additional capital because normally a bank will not give
loans on anything under 3 years because they can't realize much
profit for the effort. It's also a relatively small sum of money (in
the 10 million range) for a bank to bother with for the amount of inexperience
that the investors bring as a group.
A couple of the key factors that
made us interested:
1. We were guaranteed up to 20% before the people that set
up the deal made their money.
2. We were paid 7% annually on a monthly basis until
the condo's were all sold, which beat
any bank deposit.
3. In conversation we found out the principals made 100
offers before settling on the property, which meant they had
to have looked many hundreds of properties. That indicated
to us that they did their due diligence in finding this one.
4. The principal investor that was a good friend of a good friend with a significant
pedigree behind him (meaning we didn't figure he would skip
town with our investment money.)
So this is the essence of what
we've been working on, instead of goofing off and drinking
beer (as much). We hope that by this, we are taking care of
the important stuff and creating the means to hang out with
each other more.
Net Present Investment Value of
Our Time:
We want to compute the answer to this question: "At what hourly rate are we making money for every tens hours we work at
our day job, versus putting that ten hours into something like an affiliate program that generates recurring revenue?"
It goes something like this:
1) Every ten hours worked hourly at $40/hour, has a Net Present Value of $400.
#2) Recurring revenue of $10/month discounted at 6% interest, has a Net Present Value of $483.21.
If one of us is doing #1, and could be doing #2 (while
the other works to keep food on the table), then we are losing money every month (from a
ten year investment standpoint).
Now here's the REALLY interesting part:
#1 will never grow in income after the initial payment - it's a one shot deal. #2, however, may grow (in addition to interest paid) by some amount. (It may also shrink, which is part of what makes this tricky).
This has been REALLY BUGGING us for a while now, and I've never seen anyone explain it clearly or provide examples.
Both of us working hourly "feels" like a losing proposition, and we want
to be able to explain why and back it up with math.
Simple summary: It a better deal to spend 10 hours
finding or building a $10/month affiliate program than working for $40
per hour.
Let's see if we can put some more facts behind this.
(Side Note: This write-up is partially inspired by a recent email
on "The Infinite Banking Concept", a ridiculously simple concept floating around as "revolutionary".
Our Grandma would laugh herself silly on that one).
The Gurus:
The guru's will always try to push their next thing. We have a lot of friends who have done
[LM] and they're nuts.
We get the most good out of having dinner discussions with JF, BC and other folks who want to float ideas or have transparent discussions. The small and select group consists of sound, reasonable, experienced people, who also get advice on their thing in return. We talk about investments, our business goals, business ideas or plans, etc.
There's a lot of give and take and it does prove quite helpful. The key elements that we find useful among those invited are people that will be transparent and people whose opinion/business sense or judgment is fairly sound.
Like anything that motivates, the hard part is keeping the fire lit. I've read reviews on-line similar to what
we've just said. It seems that the [Guru TR] series is a good one to get you going but that
[Guru TR] is big on selling you the follow-on series which are also much more expensive.
Additional Resources:
1) The
FTC has started a Web site to educate
consumers who use the Internet to find
work-at-home business opportunities. We hope to leverage
their findings and use this site to help identify worthy
passive income opportunities.
2) An excellent summary of recent self-help books:
http://www.foldedspace.org/archives/004245.html
3) Concerns about recent foreclosures from MSNBC,
"U.S. housing boom a bust for many" [Archived Article]
4) Net Present Value
Calculators:
www.investopedia.com.
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