613: 14 Income Producing Assets

0:0014 income producing assets to help you build a side hustle cash flow. What's up? What's up? What's up? What's up? Nick Loper here. Welcome to the side hustle show. Part of the entrepreneur podcast network because you're the CEO of your life. Nobody else is going to do it for you. Really important topic for you today because you know you can make money with your time. Yes, but there's a powerful unlock that comes from making money that's not directly tied to your time. Once income from assets you control exceeds your monthly expenses, you're financially free. And one way to start to build up that is with income generating assets.

0:34Income producing assets, these are things that you own or control that pay you every month, every quarter, every year. These are stackable, scalable, honestly pretty addicting, and can help you improve that ratio of active to quote unquote passive income in your personal income pie chart. Now you probably heard the saying that it takes money to make money. And to be sure, starting with money, it's not going to hurt you, but you can also create income producing assets with a little sweat equity. Now when I think of income generating assets, real estate is one of the first things that comes to mind, and that's number one on this list.

1:07Real estate can come in all shapes and sizes. We've covered on the show rental property investing, mobile homes, rental arbitrage, house hacking, real estate wholesaling, land investing, Airbnb co-hosting, a ton of different strategies, right? But a basic example would be buying an investment property and renting it out. You profit on the spread between your monthly rent and your expenses, those being your mortgage, your insurance, your maintenance costs. Now, this is a realistic way to build both cash flow and long-term wealth. In fact, not surprising, rental income is one of the most common income streams of millionaires.

1:41Here's how Dustin Heiner explained his out-of-state rental portfolio in episode 387. The way to start is to number one, find which state you're going to invest in, and then zoom into which city you're going to invest in. And the way you do that is I usually use Zillow. Zillow is a great site to get big, broad picture. Actually, it's a start. As we look through that, it's a tool for us to do more due diligence. And that's basically just making sure we're making the right investment. But you're looking at the entire state, look for population areas that have a lot more properties than not. And you zoom into that city and you get even closer and closer.

2:16And you're going to look at all the different properties in that specific city to see if they meet your criteria, how much money you have to invest, the type of properties that you want, and how much rent it's going to make. So you're making, here's a principle for everybody listening. You want to buy for$250 or more in passive income after every single expense that goes into your pocket. Because that's how I provide for my family. I have 30 plus properties now. And so we literally live off of a real estate. The next thing we do is build the business, finding the right people to actually run the business for us without us doing any work.

2:51Because with all my properties, I literally only work 30 minutes a month, 30 minutes a month for every single one of my properties and other people do the work because I built the business. Now, let me give you an example of what building a business looks like. If you're going to start a convenience store, you're not going to just get a location, open door, put a box of chocolate candy bars in the center and hope to run a business. That's essentially what you're doing if you just buy a property anywhere without building the business. No, you're not going to do that. You're going to get the gondolas, which are the shelving units.

3:19You're going to get the countertops. You're going to get the fountain machines, the cold storage, the cash registers, bank accounts, Employees, you're going to build the entire infrastructure before you put one piece of inventory into that business. And when you're doing that, you now have a solid business. Every piece of property with my 30 plus properties now, I literally view them as inventory. It's not a home for me to live in. It's a piece of inventory, just like a candy bar. So once I have the business built, every new property is like another box of candy bars inside my business. and I could just keep adding and adding and adding into that business.

3:57Does that make sense? Dustin went on to explain that your property manager is the most important member of that team to have in place. He called them your quarterback. And other players on your team might include realtors, contractors, wholesalers, bookkeepers, stuff like that. But having those team members in place to make a rental business more hands-off. Now, the most important thing, or the most powerful thing that Dustin said in that interview actually came at the very end of the call and it was him describing getting laid off from his government job, the job he thought was super secure. And in that moment, the identity shift of becoming an investor first and an employee second, because he did have to go find another job.

4:35He might've only had one or two properties at that point, not enough to live on, but he saw the path forward. He saw the way out and it took another 10 years to build that portfolio, to build up that cashflow. But it started with that really low point of getting laid off and shifting that mindset to be, I am an investor and my day job, even though it's bringing in the lion's share of my revenue right now, my day job is now my side hustle. So that's episode 387 in your archives to go check it out. Now, the biggest drawback to real estate is that obviously houses are expensive. That's why it might be worthwhile to take a look at platforms like Arrived, which make it easy to invest in income generating properties with as little as$100.

5:14I've got a direct referral link for you that I'll add to the show notes if you want to check it out. The company pools money to go buy these properties, it manages them, and then distributes the cash flow every month. Income generating asset number two is dividend stocks. So dividends are a portion of the company's profits that they pay out to shareholders. But not every company pays a dividend and some pay more than others. So one strategy is to buy shares in companies with long histories of paying and increasing their dividends. These include name brand businesses like Target, Chevron, Coca-Cola, AT &T, Procter & Gamble.

5:49These boring old companies aren't likely to have explosive share price growth, but they do spin off consistent passive cash flow. You can think of it this way, like every time Coca-Cola sells a soda, the shareholders are getting a portion of the profits and they didn't have to do any work for it. Dividend investing was one thing that helped me get off the sidelines as an investor and really start to build my brokerage account. And over the course of almost 10 years now, It's grown to over$2 ,000 a month in income. Now, like a lot of things, it starts out slow, but as you feed it and give it more time, it starts to add up.

6:22Income producing asset number three is bonds. So where dividend stocks give you an ownership stake in a company, bonds are like loans that you give to a company or to the government. And in return, they promise to pay back with interest. Bonds are theoretically less volatile, but they're not particularly novel or exciting. So we're going to keep moving on. more income producing assets, including the one that let me quit my job and the other one that's earned me over$80 ,000 right after this. As a business owner, you worked hard to make that phone ring, but missing a business call, it's like watching money fly right out the window.

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8:49This Black Friday, join the thousands of new entrepreneurs hearing for the first time with Shopify. Sign up for your free trial today at shopify.com slash side hustle. That's Shopify.com slash side hustle. Go to Shopify.com slash side hustle and make this Black Friday one to remember. All right, income producing asset number four is websites. Now there is a lot to learn to turn a website into an income generating asset. But when it works, it can be extremely lucrative and extremely time leverage. For example, we've heard from Scott in episode 510 about his bird watching blog, six figure business on a bird watching blog.

9:26We heard from Shelly Marmer earning 50 grand a month from her travel blogs in episode 573. And we heard from Andrew Fiebert with his$1.2 million gift ideas site in episode 537. That was giftlab.co. So these sites are monetized with advertising, affiliate partnerships, and product sales. And the cool part about that is all of those easily scale as your traffic grows. For example, here's Shelly Marmer from travelmexicosolo.com in episode 573. I do a lot of affiliate marketing. And I don't care if it's a 10 monthly search volume. If I can rank number one in two days, and these are really high price tours, and I'm going to make$500 commission off of some of these tours, I don't care if it's only 10 people searching.

10:14So it's kind of like I tell people you have to kind of know what's your goal. Is your goal traffic or is your goal making money today? So usually people say, yeah, usually it's I want to make money today kind of thing. so you run your numbers and I do have some tours that are high ticket tours and they will bring in you know a couple hundred dollars in commission for each one so that's okay if there's 10 people searching every month and one of them buys that's$500 off one article for that month and it's evergreen content like you mentioned so that's month after month while I sleep so that's totally fine with me.

10:50Andrew Fiebert from Gift Lab had a similar strategy he shared in episode 537 going after relatively low volume keywords, but with high buyer intent and almost no competition. Our thesis is to avoid competition at all costs, which is why we have opossum gifts and dolphin lover gifts and stuff like that. We're going to take the time to write this article that nobody else has. And hopefully no one will. And nobody ever will because it's so random. Okay. So the keyword difficulty is the primary metric. Is there a minimum search? Like how many people are looking for gifts for dolphin lovers? So in the beginning, we would not do anything that was less than a thousand volume or anything higher than 10 keyword difficulty.

11:31And then as we built, we realized that we'd be ranking, say, and I don't know the number specifically for dolphin lovers, but maybe it gets like five, six thousand visits a month on a one thousand a month term. And we realized like the long tail is actually so much bigger than the head term. There were so many more keywords in search console than even appeared in Aharefs. And so we kind of looked downward because it's like, say, 300 volume. As we built the site, we learned that if it was very specific, like Dolphin Lovers, or if it had a number in it for an age, like 13-year-old boys, six-year-old girls, the conversion rates were just insane.

12:11And so we would eat almost any volume in those realms, given low difficulty. Now, if you want to start a blog of your own or a website of your own, check out my free six part video course on how to do just that quickly and affordably. You can find that at side hustle website dot com. And I also want to mention that building a site from scratch is just one option. You can go out and buy a site from a marketplace like Flippa. We've heard from guests doing this is a leading marketplace to shop for websites that are already producing income. Of course, I would only recommend doing that if you already have some operational know-how and you can kind of see a path forward to increasing the revenue there, improving the traffic there.

12:51But that brings me to the other point in that websites can actually be sellable assets. Build something up over the course of a few years, enjoy the cash flow it produces in the meantime, and then sell it. Take some chips off the table, focus on another project. In episode 426, we covered the story of my virtual assistant website where I did exactly that. over the course of nine years, in my case, actually, slowly built it up. This was like Yelp for outsourcing companies, directory plus review platform, banked a consistent few thousand dollars a month once I figured out what I was doing, and then sold it on to the next owner, where the total income, including the sales price for this part-time project, was over half a million dollars.

13:32So websites as an income-producing asset. And even before that, it was a side hustle a website, a comparison shopping site for shoes, in my case, that let me quit my job. It was three years, nights and weekends. Let me build this up and then call it quits at the day job. But income producing assets, this is powerful stuff. Remember the formula when income from assets you own or control exceeds your monthly expenses, you're free. And I feel like getting to that point should be everybody's priority. All right. Asset number five is equipment and vehicles. Now under this category are things that you can buy once and rent out over and over again.

14:06For example, we've done episodes on photo booths, on portable hot tubs, on mobility scooters, even people renting out their cars. One of the fun recent examples was from Lenny Tim in LA, who was earning around $3 ,000 a month renting mobility scooters and wheelchairs. He had these priced around$75 a day. So the breakeven window was pretty quick. A brand new one is about$1 ,500 right now, a little less, a little more, but I actually bought mine used and I look for about 500 bucks. I go on Facebook marketplace or any other local marketplace, and I'm looking to get it for about 500 bucks. So as you can see, I pretty much got my money back within one, two, three rentals.

14:51Yeah. I'm thinking, yeah, if it's 250 a week plus 75 delivery, like a couple of weeks later, I'm in the black on this unit. How many do you have at this point? Right now, I only have seven. So I say only, I mean, that's a pretty serious fleet. Yeah, it's not bad. I have seven right now and I make it work. I could definitely have a lot more, but I just keep it completely a side business. The other thing Lenny did that I thought was interesting was to validate demand before ever plunking down for that first scooter. He put up the website and waited and waited, I want to say years until he was getting a consistent stream of booking requests.

15:28Now, you probably don't need to wait that long, but he was minimizing his risk by validating it first. You know, you get enough calls coming in or enough requests coming in over email to say, okay, I think there is something here and I'm ready to go out and give this an actual go in the real world. So definitely make it a low risk investment. So that's episode 564 in your archives to go check it out, renting out mobility scooters as an equipment rental business. And there are marketplaces that specialize in renting out cars, RVs, camera gear, boats, pools, baby gear, lots more. Rich Dad Poor Dad talks about the importance of spending your money on assets instead of liabilities.

16:06And I don't know that anyone intentionally seeks out to, you know, just blow their money on a bunch of liabilities, like lighting it on fire. We buy stuff that we think makes our lives better in some meaningful way. But I think the important reframe here is how can you buy stuff that can spin off cash consistently, not just banking on some speculative future appreciation. And this type of physical product rental business is one example of that. So that's income producing asset. Number five, equipment and stuff like that. Number six on this list is digital products. It could be a book, it could be an online course, it could even be something as simple as a printable file, a spreadsheet or a checklist.

16:43And what I love about these income generating assets is you can create it once and sell it over and over again. Here's how Emily McDermott described her downloadable spreadsheet business on Etsy in episode 560. I realized, wow, I'm onto something here and this keyword research thing is really working. So I continue to use it to identify other spreadsheets within my niche and that would serve my target audience. So for example, I made a debt payoff calculator. I had a monthly budget spreadsheet, a budget by paycheck spreadsheet. And all of these terms were long tail keywords. And they were picking up traction really quickly on Etsy, which was excellent.

17:25But where my business really took off into six-figure territory was when I decided to bundle a variety of these products into one higher price product that gave the customer an overall discount. So they were saving money. But because I had to find my target audience, I knew what they wanted. I had a good idea of what they wanted. And I knew they'd be a person who was looking to make a monthly budget. They were looking to pay off their debt and they were probably looking to organize their bills. And if I could just take all of those existing templates plates, plop them all together into one Google Sheets file, sell it for a higher price, which at the time was around$20 a file.

18:08That is where my business really took off. Okay. So people kind of recognize the value of, well, I'm probably going to want all five or six of these different things individually. So I'll just get the higher price things. You increased your average customer value in that point. Exactly. And I think a lot of times people get intimidated and they think, Like, well, I could never sell a spreadsheet. I'm not good enough at it. Or I could never sell a$20,$30,$40 spreadsheet because I just don't have the advanced skills. But it's really not about the advanced level of your skills. It's about solving a pain point that a customer is experiencing.

18:46And it's also about offering them a complete transformation. Because at the end of the day, that's what people are buying with any digital product is a transformation. They want to go from point A to point B. And I can also almost guarantee you that they don't want to look at something all that complicated either. They want to see an easy solution that they can easily use too. I love me a digital product side hustle and love Emily's call to solve a pain point and offer a transformation. Lots of digital product examples in the archives, including that episode with Emily, which is number 560. We had Becky Beach on last year talking about how she would prompt ChatGPT for digital product ideas in her niche and then continue to use the tool to help build it out, adding in her own input and insight along the way, right?

19:34Accelerate the content creation process. I built a few online courses over the years, plus some digital workbooks that make pretty consistent sales. Actually, one of my first successes in selling digital products was putting a couple of e-books for sale on Fiverr before the platform made really the full transition to being a freelance marketplace. And that was a fun way to get started. And in the case of spreadsheets or workbooks, you may already have the foundation for that product on your hard drive. Maybe it's something that you're using for work. Maybe it's something that you're using in your personal life.

20:05Maybe you could polish it up and put it out there for sale. So probably not on Fiverr anymore, but definitely Etsy. Maybe teachers pay teachers. Maybe it turns into a course for Udemy. Lots of different options. And one rule to keep in mind is like Emily said, think of that customer transformation. How are they going to be or feel different after buying your product? Hey, order my XYZ spreadsheet template so that fill in the blank. I know that is something I could probably do a better job of communicating for my own products, but something to keep in mind. So that was number six, digital products.

20:39Number seven is royalties. Royalties, another common income stream among millionaires. And look, you don't have to be Taylor Swift to earn them. How this income generating asset works is you earn a small amount every time your work is used or purchased. For example, I have self-published several books now and earn author royalties every month from Amazon over$80 ,000 in total since 2011. Definitely adds up. Create something once, get paid for it over and over again. I remember still my first royalty direct deposit for$42.47 or something back in 2011 and just having this moment of this is the coolest thing in the world.

21:17Like I put my thing up for sale on the world's largest store and somebody bought it. Like this moment of being like a professional author, obviously not enough to live on, but it was something and it has continued to pay royalties or quote unquote dividends ever since. So I'm really excited about that. One of my favorite side hustles. Now, another way to earn royalties is through product licensing. In this model, you sell your product idea to a larger company in exchange for a percentage of future sales. For example, Nate Dallas and his brother licensed this card game inspired by Pictionary to Mattel.

21:53And the duo, they didn't have to design it, they didn't have to sell it, but they found somebody else who could, Mattel in this case, and they split an eventual$300 ,000 in royalties over the course of 10 years. And here's Stephen Key from InventRight explaining the basics. It doesn't require any capital. You don't have to set up a company. And there's so many companies out there that need us creative people. So they're looking for ideas. And every year, there's just more and more opportunity for us to submit ideas to companies and let them pay us royalties for everyone they sell. So that's the basic business model is saying, hey, I am the idea guy who we just had on the show, and I'm going to turn around and essentially sell that intellectual property to some company who can turn that into a product and make money off it.

22:39Absolutely. You're basically renting your idea to a company. Okay. And they're going to pay you on everyone they sell. So you don't have to start a company. You don't have to worry about manufacturing or raising money or do any of those things. And what's really great about it, Nick, it's really speed to market today, right? If you start a company, raise capital, all those type of things that you need to do to be successful. It takes a lot of time and effort. When you license an idea, you find that perfect partner that has relationships, distribution, money. They can put your product on a shelf extremely quick.

23:12Steven went on to explain that 5 % of gross sales is a pretty typical product licensing agreement, which may not seem like a lot. But if you think about the distribution and economies of scale that some of these larger brands have, it can really add up, especially for something with super low startup costs. I mean, you're basically taking something for free from your brain and getting paid for it. And Stephen had some great tips on how to approach companies with your ideas. But one thing that was surprising to me is that a lot of companies already have a process for this. They're really open to crowdsourcing product ideas from people like you and me and paying us for them.

23:47I was curious, like, well, what's to stop them from just taking your idea and cutting you out? It's like, no, no, no. This is a well-defined process that people have been doing for generations. For example, if you look up Hasbro submit ideas, you'll find a structured program called Hasbro Spark that lays out how it all works and how to submit your proposal to the company. So be sure to check out that full episode with Stephen for more on how it all works, which I'll link up in the show notes. And of course, books and product ideas aren't the only things you can license. You can license pictures or photography.

24:16You can license music like we had Kathy Heller on the show years ago. She's like, hey, I moved to L.A. I wanted to be a rock star. I found some commercial success in almost reverse engineering what songs people wanted to hear. Oh, they want something bouncy and upbeat. And like, shoot, I can create that kind of jingle. And she did really well with that. You can get licensed or earn royalties for voiceover work, where not only can you get paid upfront as like almost a freelance basis, but you can also earn licensing rights when your work is used. And you can even buy future royalty rights on sites like Royalty exchange.