The ULTIMATE Beginners Guide to making Passive Income Step-By Step

What's up, you guys? It's Graham here.

So let's talk about probably one of the most in-demand, most asked for, biggest topics on the history of the internet and YouTube, and that is making passive income. Now, I've said it before, and I've said it again, passive income is really one of these buzzwords that everyone wants but very few people actually achieve.

So I'll be discussing exactly what I consider to be passive income, the types of passive income that you can generate, whether you're starting with no money whatsoever or whether you're starting with like billions of dollars. Why so many people fail at making passive income, and I'll share with you guys exactly how I was able to scale up from making $3,950 per month in passive income in January of 2017 to now making over $10,000 a month in passive income just eighteen months later.

So let's get this out of the way and discuss my passive income because I like to teach best by example. My passive income is broken down into two categories. The first type of passive income is earned by the money that I invest. The second type of passive income is earned by the time that I invest.

Now, the money that I invest mainly comes in the form of rental properties. Over the last seven years, I bought real estate, renovated it, and rented it out. And over those seven years, I've been able to increase my net cash flow, this is in my pocket, in my bank account after all expenses, to about $4,650 every single month. That also doesn't include $1,600 every single month that goes into paying down the mortgages, and that is pure equity.

So now what that means is that after seven years of hard work, saving, and investing, I'm able to make $155 a day in consistent, predictable, reliable passive income regardless of whatever I do day to day. That is the power of investing your money and leveraging that to really do all the heavy lifting for you.

So now let's talk about the second way that I made passive income, and this is one I'm just super excited about, and that is investing my time. For the last nineteen months, I have spent 30 to 40 hours every single week in addition to working 30 to 40 hours every single week as a real estate agent making these videos for you guys to watch.

Now, even though I'd venture to say that 80% of my YouTube ad revenue comes from videos I posted within the last 30 days, 20% of my ad revenue comes from videos I posted months ago or sometimes even videos that are over a year old. This means that I can put in the work upfront for it to pay off for months or potentially even years later.

Even if my videos just average 50 cents a day, which by the way, for some perspective, I have some old videos out there that are older than 6 months old that are still making $15 every single day, and I also have some videos out there that make like 2 cents a day.

So let's just say on average 50 cents per video as a whole for the entire channel. That means if I have 200 videos out there, that's $100 a day in passive ad revenue regardless of whether or not I post any more videos or put any more work into the channel.

Now speaking of time, my other source of timed passive income comes from my program, the Real Estate Agent Academy, which focuses on teaching real estate agents how to grow and make money in the business. This is something that was super intense to make. I basically locked myself in my house for a month straight, not doing anything just so I can film it, edit it, and have it done by the end of the year.

This is something that I dedicated a lot to, to making it the best possible program I could. But once it's set up, I began casually mentioning it in videos where I focus on making videos for real estate agents. Now even though the income on that has fluctuated from month to month, it averages anywhere from like $2,500 on bad months to over $7,000 in good months.

So offering something like this, which is a very intense upfront one-time commitment for potentially years of income as you go forward, is another way of investing your time into making passive income. So when you combine my net rental income with the 20% of YouTube ad revenue from old videos combined with the program sales of the Real Estate Agent Academy, that's easily $10,000 to $12,000 every single month regardless of anything else that I do.

In order for something to be passive income, it really needs to be something that's not dependent on how much time you spend on it beyond just setting it up and getting it running. Now, obviously, some tinkering here and there is expected just to make sure everything is running smoothly. But beyond that, it should really be something that tends to run on its own.

All right, so anyway, I've rambled long enough about me. Let's talk about you because that is most important. Now, like I said, passive income is broken down into two categories: the first category is money you invest; the second category is time that you invest.

It's also very important to realize that passive income is never free. Let me say that again: passive income is never free. Unless you win the lottery, in which case, you know, just don't sue your nephew if you do that. Just count your blessings there. But beyond that, you're either going to need to spend your money making passive income or your time making passive income.

So what you'll need to do right now, the first step of making passive income, is go and look at your bank account. That will determine which route you want to take. Can you invest the money to buy passive income, or instead, will you simply have to spend your time creating it?

So if you look at your bank account and you decide that you have the money to be able to buy passive income, first of all, congratulate yourself for being in the position to be able to do so. But also, this is fairly simple and straightforward.

So when it comes to buying your way to passive income, for the most part, you can see anywhere from a 3% to 10% annual return on your money. That's pretty predictable, reliable, and consistent without going too risky on your money in your investment where it could just like dry up at any month.

And that means that for every ten thousand dollars that you invest, you should be able to buy yourself the equivalent of three hundred to one thousand dollars every single year in passive income. So this means that if you want to buy your way to your first $1,000 a month in passive income, that is going to cost you anywhere from one hundred and twenty thousand to four hundred thousand dollars.

Now totally understand that that is quite the large range of numbers, but you have to consider that investing, for instance, in leveraged real estate, which is going to take a lot of time upfront to set up and a lot of time to manage, compared with all of your other options, is going to yield a much higher return than, for instance, investing in index funds, which is going to be super simple. You can do it in a matter of minutes, and it requires no work whatsoever.

Anytime you're buying passive income, your return that you make is directly correlated to the amount of time needed to set it up, the barrier to entry, and how risky that investment is to make. Arguably, real estate takes time to set up, there's a high barrier to entry, and it's never really 100% passive. Even with a property manager, it might be more like 98.5% passive versus, let's say, an index fund where you can pretty much spend 3% of your portfolio every single year virtually risk-free by doing no work whatsoever, completely passively.

Your return that you get is directly correlated to the amount of work needed to set it up and run it. So since this video is meant to be a guide on how to invest, if you're going to buy your way to passive income, these are the steps you need to take.

The first step here is to decide how much risk you want to take. Are you okay that some years will make you more money than others? The more risk you take, generally, the higher the return that you'll see. But conversely, you can also see months or even years that make you even less money than what you anticipated.

Now, the second thing to consider is how much time you want to spend managing your passive income. Do you have the time to buy real estate? Do you have the time to manage tenants? Do you have the time to even speak with a property manager? Or instead, do you want absolutely no responsibilities, want to not think about anything, and still make money?

This will ultimately determine what you invest your money in to make passive income. The more hands-off you want to be, generally speaking, the lower the return that you're going to see.

Then number three, once you've determined how much risk you're okay taking and how much time you want to spend managing this passive income, you can then make the appropriate decisions to decide where you want to invest your money.

Now for those of you that don't mind a higher risk and a higher time commitment but a higher return, owning real estate and using it as an investment property by renting it out is, in my opinion, probably one of the best options out there. Now, since my entire channel is geared around doing that, I'm not gonna spend my time mentioning that. I do have dozens of videos out there; I'll put the best one in the description for you guys to check out if you want to see that.

There's also plenty of other opportunities out there like peer-to-peer lending, crowdfunded real estate. I mean, the list really goes on. It's as simple as doing a Google search; that's really going to tell you all of the options out there instead of me just mentioning them for like an hour straight.

Now, of course, if you want a lower, safer, more laid-back passive return, always index funds are my favorite. This means that instead of picking just like one or two individual stocks, you're investing in the entire market or entire sector as a whole, and that is how your return is generated. With this, you can usually average a pretty decent long-term return and then from that spend about 3% to 4% of your portfolio's value annually, sit back, relax, and take it easy.

Also, other things like CDs, annuities, and bonds provide a very safe, consistent return, albeit it's a much lower return, but a return nonetheless that is entirely passive. It really just comes down to how much money you want to make, how much risk you're okay taking, and how much time you don't mind spending setting it up.

But now let's discuss the time aspect of making passive income. Because chances are, if you don't have the money to invest and buy your way to passive income, you have your time. And generally speaking, investing your time creating passive income is often the most lucrative form of passive income that you can make.

The reason for this is because usually the types of passive income that you can set up with your time, get it up and running, are also businesses that are easily scalable, which means that you can scale up your business to insane numbers regardless of the amount of hours that you put in upfront.

Now, it goes without saying that spending your time creating passive income can often take you weeks, months, or even years to start seeing a return on your time. Once you do start to see that return, it could last a very, very long time.

Now it's very important to realize that when you make passive income from your time, you are paid in direct proportion to the amount of value that the other person receives. Which means that if you cannot show other people your value and they never even see it, you will not make any money, and you will not get paid.

Using your time to create passive income is just as much about providing real-world value as it is marketing yourself to the people who will actually use that value. It's really that simple.

Some examples of spending your time to create passive income could be writing and selling eBooks, or it could be creating a program or a course teaching someone how to do something. We all know there's a lot of those around, isn't there? You can also even make money by licensing your photographs or music that you make. Maybe you can make money by making YouTube videos like I do. You could even be doing affiliate marketing. For instance, I have some Amazon affiliate links in my description that on average generate anywhere from $80 on a bad month to as high as $200 a month on a great month.

Now, I have to say, probably one of the most difficult parts about making passive income and creating it using your time is really just making this first few dollars until you've started to make any sort of money whatsoever. It becomes extremely easy to get discouraged when you've spent weeks, months, or maybe even close to a year without earning anything in return.

But once you start to see something, I don't care if it's like 50 cents a day or like a dollar a day; when you start to see something coming in for your time, you start to realize that all of a sudden you've created this money seemingly out of thin air by using your time to set something up. And then from there, it's just about replicating what's working and scaling out.

Trust me on this one; it's really just the first dollar that is really the most difficult. If you know you can make a dollar, you know you can make ten dollars. When you know you can make ten dollars, you know you can make a hundred dollars. When you know you can make a hundred dollars, you know you can make a thousand dollars, $10,000, and $100,000. And then it just scales up from there.

Now, just keep in mind that I was the type that has never seen any type of passive income outside of real estate until about eighteen months ago. I remember back then I was seeing like 20 cents a day, 50 cents a day, a dollar a day, and I had never been more excited than earning like a dollar a day than I did back then.

Now keep in mind this was coming from someone who was earning several hundred thousand dollars a year, and I was more excited about making like a dollar and 20 cents in a day on YouTube than I was about closing a commission. Kid you not, that is the God's honest truth. I was more excited about that like dollar a day because it was the most exciting thing to me to know that I was putting something out there and just I could get paid to do something I would have just done for fun anyway.

It really just gets you so amped up and motivated that all of a sudden you're pushed even further because all of a sudden you realize that you can do something. That you can actually get paid to do something you really enjoy.

Hopefully, all of this is for enjoyment. You're not just doing this to make a ton of money and then cash out, then you know, see you guys. You know, I'll touch on that a little bit later. But it just gets you so motivated and pushes you further than you've ever been pushed before.

Now just eighteen months later, I'm on track to break over a hundred thousand dollars this year just by YouTube ad revenue. And this is coming from someone that eighteen months ago I was making about a dollar a day. Keep that in mind.

And yes, even though something like this takes a lot of time to set up and I was working 30 to 40 hours every single week just to make the dollar a day, it's very important that you do something that, number one, you're passionate about. Because otherwise, it's very easy to give up when you're not seeing the return on your time.

So it's very important that if you're going to be doing something, that you do something that you're at least interested in. You're doing something that you don't mind learning, honing your skills, testing what works, and testing what doesn't work. And this is how you end up getting those results.

And I hate to sound super cheesy on this, but it's also just as important to work on your mindset as well, to believe that you can do something. Because if you don't have that belief that this is possible, I promise that you will give up prematurely. I promise that you will quit before it gets good simply because you start self-sabotaging yourself by thinking this isn't possible, I can't do this, this isn't for me, and you will find ways to make yourself right.

Whether you believe you can or you can't, either way, you're right. Now ideally, in a perfect world, you will have both types of passive income. You will have passive income that you have bought; you will also have passive income that you invest your time creating. This gives you the ultimate exposure where one source of passive income is totally independent from the other source of passive income.

And also, when you make money from the time aspect of passive income, you can often just move that over to the buy side of passive income to give you a little bit more stability. Generally speaking, the buy side of passive income can usually be earned by your time; it's usually a lot more volatile. You could have some amazing months, and you could have some terrible months. It could have a certain lifespan on it where it won't last indefinitely, but having a good mix between the two, in my opinion, is the best course to take.

Now, even though this video is less about giving you specific ideas because let's face it, there are hundreds of ideas out there, and it would be impossible to mention them all when you can simply go on Google and type in "top 50 ways to make passive income" and just learn about it, the purpose of this video is simply to lay the framework of what types of passive income you can make and how you can go about achieving that.

Eventually, I really want you to create your own mini little passive income empire, and you can look back and maybe just thank this video if it helps. Because I was in the same position as you guys, I promise you. Eighteen months ago, I remember watching other people on YouTube talk about making passive income from YouTube and me thinking that that was incredible.

I know Engineer Truth, shout-out to you, Matt, you made a video about how you're making $10,000 per month in passive income from YouTube. I saw that video and that inspired me to even believe it was even possible to do that.

So I'm making these videos in return to show you guys that I was the type that had nothing, and within eighteen months, I'm on track to break a hundred thousand dollars this year. And just in YouTube ad revenue, I mean, it's pretty absurd, but it's possible. And that's the entire point of this video, just to show you guys it's possible.

And then once you realize you could do something, it opens up the world to what you could really accomplish and do. Just remember, the hardest part about all of this is just earning one dollar a day. I promise you, when you can earn one dollar a day, you can scale up to ten dollars. When you're at ten, you can scale up to a hundred, a thousand, ten thousand, a hundred thousand.

Just focus right now, your only goal—let's promise me this—go and learn to make one dollar a day. That's it! Come back to me, just comment whenever you've made your first $1.00, and I promise that's going to give you the motivation to continue to make the ten dollars, then a hundred, and then eventually you're gonna be ballin' pretty hard.

So anyway, thank you guys so much for watching. I really appreciate it. If you guys enjoyed a video like this, make sure to hit the like button. I spent forever putting this one together, so if you guys enjoyed it, make sure to hit the like button. Also, make sure to subscribe. If you watched at the very end and you really haven't subscribed already, why are you not subscribed? It's totally free!

Just don't hesitate to subscribe. I'm at a loss for words here because there's no reason why you shouldn't subscribe, so subscribe! Also, feel free to add me on Snapchat and Instagram, mostly Instagram now because Snapchat kind of sucks, but if you want to add me on Instagram, feel free to add me there. I post there pretty much daily, so if you want to be a part of it, just right there.

I know if I want to mention the Real Estate Agent Academy, I may as well. If you guys are interested in becoming a real estate agent and want to learn how to do that, link's in the description too.

Anyway, thank you guys again for watching, and until next time!