As real estate prices continue to climb, savvy investors looking for passive income opportunities are turning to virtual real estate.
Below, you’ll discover the potential risks, rewards and even tax advantages of buying websites for passive income.
For Galina Lipina, passive income means the freedom to do the things you love, instead of being chained to a desk.
“I’ve learned a lot about forex [foreign exchange] trading and Airbnb rentals as ways to make more money, but they are in no way passive,” says Lipina, who buys websites as a source of passive income. “I wanted to get paid for lying on the beach.”
Collecting a Check While ‘Lying on the Beach’
Lipina had a goal for herself: to find a way to make the same amount of money she brought in from her job without having to actually work.
After exploring passive income strategies, Lipina was attracted to cash-flow websites because of both the potential ROI of up to $20,000 per month and the hands-off aspect to the model.
Also, while passive income is taxable and also taxed by the IRS, in most states the initial investment can be written off. So let’s say you buy a website for $100,000 and opt for a 3-year writeoff, you won’t pay any taxes on the first $33,000 of income for three years. And any losses on passive activity are eligible for deduction offsets.
Over three years, Lipina saved up for and bought three sites (a news site, a politics site, and a sewing machine review site) through website-monetization company Income Store. Today, they provide her with all the money she needs to live a comfortable life without conventional work.
She quit her job in September 2016 upon achieving her goal: $100,000 per year of passive income.
“My only decisions were how much money to put down and which category of site I wanted,” Lipina says.
Lupina is happy to maintain an entirely hands-off approach, as many Income Store customers do, but some are more active in their pursuit of passive income to live their dreams.
Monetizing Doing What You Love
“Unlike most investors, we do write for our website,” says David Brown, who owns several Income Store sites with his wife Darlene.
The Browns already understood the potential for using a site that made money, having previously created one around their extensive international business travels.
“We wrote about our experiences and the places we liked. People came to our site, clicked a link, and we got paid,” David says.
“We were familiar with how a website could make money, but we ultimately wanted to work with professionals who knew how to maximize revenue.”
That’s what led them to Income Store.
How to Automate the Cash Flow
In exchange for a split of the revenue, the Income Store’s team will coordinate the purchase and set up and run a monetized website that generates income every month. The business is perhaps comparable to a property management company, except they service websites instead of apartment buildings.
Both Lipina’s and Brown’s revenue comes first and foremost from display ads, which pay a couple bucks for every thousand views and $7-10 per click. Additional sources of revenue include lead generation, affiliate revenue sharing, or direct-sold ads.
Furthermore, the company offers a guaranteed minimum payment to you for managing your sites. If your Income Store property doesn’t generate the minimum that they guarantee that month, they’ll pay you the difference.
Kerri and Ken Courtright, the entrepreneur couple leading Income Store
The Secret Sauce: Authority and Monetization
To whatever degree there is a “secret ingredient” to the Income Store’s success with the web properties it manages, it would seem to be raw, technical SEO know-how.
The team is well-versed in building good-looking sites with strong Google authority that get a lot of traffic. Beyond that, they specialize in turning that traffic into money for their clients.
Ken revealed some of the playbook to Capitalism.com: “Long tail keywords make it impossible for Google to not respect your content.”
Pair this with his “fresh nonstop content eventually wins” formula, and it condenses to an SEO truism: sites that are simultaneously built around highly specific keywords and are regularly updated will always have organic search traffic.
And while buying websites can pay off as an investment strategy, eventually selling them can as well.
The more authoritative that Google determines your site to be, the higher multiple you can sell it for later. For example, in 2015 Lynda.com sold to LinkedIn for $1.5 billion at 40x earnings. And just two years after launching, in 2009 Mint.com sold to Intuit for $170 million — and at that point the young startup hadn’t yet made one penny.
According to Ken, websites with established authority today stand to sell for more than 20x earnings. If Income Store clients sell an asset, they get their seed money back plus 50% of the overage. So let’s say they purchase the site for $200,000 and sell it for $1 million – they get their initial $200,000 investment back, plus half of the $800,000 upside.
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