So why do I think Passive income from affiliate marketing is better than passive income from real estate? Well first, what is passive income? Passive income as defined by Wikipedia is:
income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it.
The way I define it is if you can walk away from your job or your business for a few months and find that you are still doing well financially, then you are making passive income. Some of the most common forms of passive income include stocks through dividends, rental income through real estate or other property like cars, royalties through sale of merchandise or music, and in the case of affiliate marketing, affiliate commissions from the 24/7 run of a website or YouTube channel. This is basically a money tree. once you water it for a while, the tree won’t need you and will be able to reap the harvest of the money for an indefinite period of time.
But what I want to focus on is comparing passive income from affiliate marketing in comparison to passive income stream from real estate. Now, this isn’t meant to bash real estate in any way. If you enjoy investing in real estate, keep on doing so.
Real estate requires a significant down payment just to be able to get into the investment vehicle. Typically, these down payments are 20% of the total asset price (this varies based on supply and demand in the market) or 3% of the total asset price if you are a first time home buyer (let me know if this can be applied to rentals). So for a rental property costing $100,000+, you should expect to pay $3000 or $20,000. This is a significant amount of cash to part with and like all investments, there are no guaranties that the investment pays off especially if you are investing for the first time. Also, don’t forget the debt servicing on the remaining loan amount ($1000-$2000+ every month), cost of a property manager, cost of insurance, cost of amenities breaking down, and things like property taxes. All this can really add up
With Affiliate Marketing on the other hand, the only investment that you need are a website, a hosting platform, and a domain name. All of this can range from around $500 to a little over $1000 per year. If you want to know all the things you will need to start a business in affiliate marketing, you may click here. The yearly cost of operating a business online is much cheaper than even the monthly mortgage on a rental property.
No bad tenants
While you may get some awesome quality tenants with real estate, you will inevitably run into someone that is far from your ideal tenant. They may always be breaking the stuff in your rental unit, they may drive your other good tenants away, and avoid paying the months rent. These are the tenants that clearly don’t want to understand that you have business expenses. As a real estate investor would tell you, eviction of this type of tenant is warranted but problems occur when you realize that the process of eviction takes months. Honestly, you are better of with the tenant paying you late then starting the process of eviction which may cause you headaches.
My website on the other hand, I do not have to deal with bad tenants and the default on rent payments. I get paid “rent” every month based on my referrals. The beauty of these referrals is that they can easily cover more than the expenses that I incur on a yearly basis. This is unlike real estate rentals where the rent has to be paid every month to cover just the monthly expenses. While I don’t have to fix toilets or sinks, every once in a while I may have to fix minor navigation issues. This takes me only a few seconds whereas a toilet can take a few hours.
I am going put in the work anyway
Unfortunately, a lot of people who are excited to start investing in real estate tend to overlook the work part of the equation. I certainly can’t blame them especially if the goal of doing so was to make passive income from the rental checks. After all, the reason you wanted it was so you don’t have to work, right? While that certainly is the end game and has been done, the fact of the matter is there is still some work to be done and a lot of moving parts. The work you put into a rental property can take months before you can put a tenant in the property.
If you are in the affiliate marketing business, you are also going to be doing rehab work on your website. This is in the form of building out your pages and building out your content. As you put out content and your website matures, you will start to see income flowing in. But just like real estate, it can take months before you start seeing profits.
If I had to choose between doing rehab work for affiliate marketing or doing so for real estate, I would do it for affiliate marketing just because it requires less capital. In fact, you don’t need to take on a bank loan to start working on the business.
My business can be up and running faster
With rental real estate, buying a property can be a long process and may not close for six months depending on your agent. Various issues may come up between buyers and sellers of a property and there always needs to be constant communication. So on top of rehab work and getting the property to officially change hands, there is time lost.
Affiliate Marketing on the other hand allows me to find property (the domain name) and immediately buy it on the spot. This does not take any time at all and can be done in a matter of minutes just by going on the domain registrar and making a purchase. Once I have the property, i can start building out the property and filling it in with affiliate links and banners for rent revenue when people visit. In fact, it is possible to start making money immediately if you tell someone about your website. I should emphasise that while this is not common, it is possible and a lucky sale has been done by some people.
I am not affected by natural disasters
In the event that natural disasters such as the recent floods in Houston occur, my business is safe because it is all online and accessible from any computer. With rental real estate, if your properties get flooded or some natural disaster occurs, you lose your income on your rental property and you may possibly have to give it back to the bank.
(Side Note: I pray that all the people in Houston are safe and I pray for those who have been affected by the recent floods.)
While i like affiliate marketing better that real estate especially when it comes to making money, this post is not meant to be a slight against real estate. It is just my personal views and one which makes the most financial sense to me. If you enjoy investing in real estate, then continue to do so by all means.
Thank you for reading.
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If you have any questions, feel free to leave a comment. If you are an real estate investor that has tried affiliate marketing, I would love to hear an unbiased opinion from you if you have one.
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