Difference Between
Passive and Residual Income

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This site explains that both passive income and residual income are beneficial because each can bring about financial freedom and a superb lifestyle. However, some would speculate about their differences. Others would also want to know the distinction between active and passive income, but that is another story.

Which one is better? Here are some quick distinctions between passive and residual income:

► A residual income model requires more time to generate sizeable profit than a passive income business.

► In some cases, passive income generators are riskier than residual income.

► Usually, residual income businesses are more affordable than passive income.

► Passive income systems can be More Lucrative than residual income.

From the above comparison, each of them has qualities that supersede the other in terms of time, risks involved, cost and income levels. Residual income businesses are suited for individuals with lesser investments, but require more time to build. Others might opt to passive income investing, which are more expensive.

Now, passive vs residual income by example:

1. Real Estate.

Residual - Building an apartment block and having it rented on a regular basis.

Passive - Buying an apartment block and hiring a watchman to supervise the tenants and the apartment’s maintenance.

2. Adsense Businesses.

Residual - Establishing an information website with high CPC Google Adsense ads.

Passive income - Buying a high ranking and high CPC Adsense ready websites.

3. Leveraged Marketing (Direct Selling, Network Marketing and Multi-level Marketing.

Residual income - Creating a network of consumers having products shipped to them on auto pilot.

Passive income - Building a network of LEADERS to promote the products and the network marketing business opportunity.

4. Affiliate marketing.

Residual Income - Becoming a publisher and marketing goods or services on automated websites.

Passive income - Becoming an advertiser and building a network of publishers to market the advertiser's goods or services.

5. Publication.

Residual – Selling famous books on the internet via virtual stores or eBay.

Passive – Becoming an author of a famous book.

Both Residual and passive income home businesses generally make you earn money while working less, because they are automated.

With residual income, a person needs to plan and develop a system that, in time, can earn PASSIVE Income.

With Passive income, on the other hand, one who has enough money can invest a self sustaining business that can generate PASSIVE income. This business model is turnkey, complete with engine and wheels. Ultimately, between passive and residual, passive is better.

However, it is my view, that although they have different starting points in generating wealth, both active and passive income business have the same concepts and at the end of the day, return the same form of profits which are passive. This means that a residual income business can evolve into a passive income business.

Entrepreneurs who have earned substantial amounts of money can buy readymade passive income businesses. Good news for the poor ones for they can still wind up rich by building residual income websites from scratch. They just need to work for while. Then, after earning significant residual income, they can apply automation, thus, making those sites as fully functioning turnkey website business