Real Estate has been the number one wealth builder for a long time and for good reason. It works.
Investors buy real estate assets, lease them out for passive income and sell them for profit when they appreciate in value over time. It’s a great strategy for long-term wealth building.
An online business is also a great wealth building and cash flow strategy.
An online business that includes blogging, content marketing, product development and affiliate marketing is not much different than buying real estate assets with the goal of renting them out to create monthly cash flow.
It can also be a great strategy for building long-term wealth.
With an online business, the initial cash investment is much less but there are many similarities with real estate investing.
Passive, residual income is every entrepreneur’s dream and goal for the most part.
Money coming in while you sleep, right?
Below is one of my favorite graphics circulating the internet recently.
It really got me thinking and shifted my perspective especially when I started earning money from blogging and affiliate marketing.
When the $50, $100 and $500 dollar checks started coming in on a monthly basis, I didn’t think it was that much until I saw this table.
$500 a month is like having $120,000 in financial investments paying you around 5% in interest.
This blew my mind as I never really thought about it in this way. It really shifted my thinking about building an online business and helped me think about it in a more serious way.
What does it take to get $500/month in positive cash flow on Real Estate properties
Real Estate is very capital intensive. It costs hundreds of thousands to millions of dollars to buy a property.
Not a lot of people have huge cash reserves in the bank earning them interest. Even people getting into real estate generally have to borrow a lot of money to buy their first income generating property and this makes it challenging to get into real estate investing.
It is possible to make $500/ month in positive cash flow with one rental property but it can be challenging depending on the market you are investing in. Especially today when real estate prices are at an all-time high in a lot of markets around the world.
It takes money to get into real estate investing and at the very least, you need some form of down payment to use for leverage to get a mortgage.
Real Estate not always cash flow positive
I know in Vancouver, it is near impossible to find cash flow positive properties and the main driver for real estate investing there is asset appreciation, not cash flow. Some landlords actually have to subsidies their renters, injecting more money into their properties rather than getting money out monthly.
Depending on your Real Estate market, it has gotten much harder to find cash-flow positive rental properties lets alone once that can pay $500 per month.
A quick read through this thread on bigger pockets shows that if you can get over $300 per month, you are doing good. Some do much better than others but it’s not always easy.
Lost opportunity of down payment capital
Something a lot of real estate investors don’t take into account is the opportunity cost of the down payment. If we look at the residual income graphic above, the capital you need to put in to your property.
A $50,000 down payment has an opportunity cost of around $220/month as you could invest this in the stock market and make 200 to 300 a month there without having to find a property, get a mortgage, find tenants and manage your property.
These are all things that need to be considered when getting into real estate investing and trying to create cash flow from rental properties.
Online cash flow generation is similar but much less complex and risky
Similar to real estate, where the goal is to build and manage a portfolio of physical assets, building online businesses is about building digital assets.
Like I mentioned above, an online business can include blogging, content marketing, digital product development and affiliate marketing.
What is a Digital Asset?
In the finance world, an asset is defined like this.
An asset is a resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit. Assets are reported on a company’s balance sheet, and they are bought or created to increase the value of a firm or benefit the firm’s operations. An asset can be thought of as something that in the future can generate cash flow, reduce expenses, improve sales, regardless of whether it’s a company’s manufacturing equipment or a patent on a particular technology. Source: Investopedia
When most people think of assets, they think of stocks, bonds, land or equipment. However, digital assets also fit in the above definition.
I own and control all of my digital assets and they all provide future benefits that increase the value of my business through improved reach, improved sales and increased cash flow.
A digital portfolio looks something like this
All of these colorful boxes represent the different digital asset types you can invest in both time and money. They generate traffic to your main asset, your website but they can also generate cash too depending on the value of the asset to the audeince or customer.
All of these digital assets can be developed, monitored and improved over time, increasing their value and potential cash flow.
Some of these assets create traffic that needs to be monetized and some of them are products with a dollar value. It all depends on your business model and the niche you’re in.
You can track keywords, link sources, visitors, conversions, stickiness, evergreen value and more for each of these assets.
For some, I can even tie a dollar value to the asset in terms of the cash flow it produces.
Some digital assets perform better than others and the decision is to either leave them alone, make them perform better by optimization or repurpose them for something else.
An example of a $500/month passive cash flow generating digital asset
One of my digital assets; a blog post about Instagram automation continues to generate hundreds of dollars a month in revenue.
The blog post features a list of SaaS software tools that people can use to help with their Instagram marketing and some of them pay me a commission for referring customers their way.
This is one 3000 word piece of blog content. All I invested in this was my time to research it, the time to setup affiliate relationships and the time to write it and promote it.
I monitor this digital asset using Analytics and the Search Console and make tweaks to capture more organic traffic and increase its cash flow.
Remember, this is just one digital asset. One blog post. Imagine the cash flow opportunity when you have hundeds of posts or digital assets. It takes time but just 10 blogs posts like this one have the potential to generate over $5000/month.
Other examples of cash generating digital assets
The example above was about using affiliate marketing products to generate revenue. This is just one simple easy to implement example you can do.
Here are other digital assets that can be designed developed and promoted to generate monthly cash flow and residual income.
- Sell your expert advice in a book for a niche subject
- Teach online through webinars and or video training
- Build a membership site for a niche subject
- Build a software product that you can sell for a one-time fee or a monthly fee
- Create private label product and sell it on Amazon or using a sales funnel
- Build an Amazon Associates store and resell Amazon products
There are lots of ways to create digital assets that cost much less than real estate assets with the potential for great monthly cash flow.
I wrote a great post about 20 online entrepreneurs generating monthly revenue of over $500 with their online business.
Like any asset, quality is where the value lies and the higher the quality of your digital asset, the better cash flow and return on investment you will get.
If you are considering starting an online business, I have lots of great content on this site.
Here are a few posts to get you started.
- Start Here – My gettings started page
- You need THIS mindset if you want to make real money online
- How to find your Million Dollar Business Idea
- How to start a blog in 6 easy steps
- The Apps I use to run my Businesses
If you already are building an online business, I hope this post helps you take this viable business opportunity more seriously and the next time start creating a new digital asset, approach it with an investment mindset so that you get the most ROI for the time and effort you are putting into it.
Crappy digital assets, provide crappy cash flow returns.
Let me know your thoughts in the comments below. Would love to hear what you think.
Last modified: March 22, 2018