How Architects Can Create Automated and Passive Income Streams
As a self-employed architect, your time is money, which is why it’s important to maximize your time to the fullest. You don’t want to get stuck in a pattern of being overworked and not making enough money.
One of the best ways to combat this issue is to create automated and passive income streams.
What is a Passive Income Stream?
The definition of a passive income stream relates to earnings from an activity where you’re not actively involved. There are three main categories for this, including managing a rental property, a business where you’re a silent partner, or an investment that pays interest or dividends.
The less well-known version of the term refers to residual income, which means something that earns money by itself where you don’t have spend time to earn it. In contrast to working with clients to continue paying your bills (trading your time for money), with passive income you keep getting paid whether or not you’re spending billable hours working on it.
If you trade your time for money, soon or late you reach a ceiling. There are only so much hours in a day, and you can not endlessly raise your hourly price. A passive income stream has no limits.
With any type of income stream though, you will have to maintain it and perform updates as needed. So passive income isn’t completely a “set it and forget it” way of earning money. That being said, the work involved is usually minimum, or invested up-front.
How Does Recurring Revenue Work?
The goal of an automated income stream is to create recurring revenue so you don’t have to actively work to make a living. You’re busy doing that as a freelance architect every day, since passive income is not something you can usually depend on for a steady income and should be looked at as more of a supplement.
It’s not usually a large lump sum of money you receive in one month, but instead smaller payments received over the course of time. It’s these smaller payments that can really add up over the course of the year, and provide more stability for your entire budget as a self-employed architect.
Let’s say you’re only earning $1,000 in recurring revenue or passive income streams each month. That doesn’t seem like a lot in the grand scheme of paying your housing or other bills. But when used as a supplement to your overall income pie, it equals $12,000 a year!
Benefits to Creating Automated Income
The main draw to creating streams of automated income that get deposited into your bank account regularly, is the fact that you can essentially make money while you’re sleeping. You don’t have to be in the office or on site to bring in money.
Alongside this idea there are other benefits to creating automate income sources.
- Added stability. Making a living as an independent worker often means you have inconsistent income since you’re relying on client work and architectural projects to pay the bills. Creating an automated income stream gives you and your budget some much-needed stability. If a client doesn’t pay on time, or a project runs over the deadline, any passive income you create will help bridge that gap.
- A scalable business. Exchanging time for money is not a scalable business model, but a revenue stream on a regular basis has the potential to continue growing indefinitely. The time you put into marketing, selling, or building your passive income outlet means more money in your pocket without having to do any extra work.
- Completely passive. Once you spend the time and effort setting up your income stream in the beginning stages, it will continue working for you. No matter where you are or what you’re doing, this income stream starts paying you back over time, which gives you the freedom to focus on other things. Once a good system is in place, this kind of income is completely passive.
How to Establish Passive Income Streams
Depending on the type of revenue stream you create, you may invest a bit of time in the beginning, or ongoing work to maintain what you’ve built. If you own a rental property, you will have to spend time with upkeep, maintenance, handling property taxes, and finding new tenants when the current ones leave.
If you invest money into a business, or start selling digital products, your time requirement will be a lot less once you spend that initial investment up-front. However, if you create a process that can handle most of the goings on you won’t need to give so much attention to this particular project.
A great real-world example of this is architect Pat Flynn. In 2008 he aced the Leadership in Energy and Environmental Design (LEED) exam but then found himself jobless after the economic downturn. To earn some passive income while he began his new job search, he created a course that included all of his study materials so other architects could take the LEED exam and pass with flying colors. In the first month of offering the course for sale he made $7,906.55 in automated income.
If you’re interested in establishing passive income streams as an architect, here are some popular ideas.
- Write software (SaaS). Software as a Service (SaaS, that’s right, like our http://archisnapper.com/) is a popular way to bring in passive income once you’ve invested a bit of research, and time. You don’t have to worry about distributing the content yourself but simply focus on building software for other architects and construction managers, and then using a subscription-based model for pricing. This idea is also referred to as “on-demand software” and is a very popular choice. The upfront time and money investment is huge though.
- Sell digital products. Ebooks, guides, and courses can easily be created and sold thanks to ecommerce platforms and payment systems like PayPal. No matter where your customer is in the world, they can access your ebook or guide, purchase it, and download it via the Internet. Depending on the type of content you’re producing, you can sell courses directly through a blog or website, or you can put together a short ebook and sell it on Amazon’s Kindle Direct Publishing (KDP) platform. If you sell only 10 copies of a $30 eBook a month, that’s another $3,000 of passive income every single year! This is much more easy to set up than a SaaS business.
- Offer online classes. Sites like Udemy and Treehouse offer an awesome place for you to share your skills and earn some extra money. Whether it’s basic or advanced techniques, you can teach other architects how to start a business, build mobile apps, or learn their craft. After the initial course material is created, the class will continue selling and making money with you doing anything.
- Charge commissions. Another way to earn passive income is by becoming a consultant of sorts between your clients and vendors. Clients don’t want to deal with contractors or suppliers, so you can be the middle person and charge a commission. From merchants, to materials and supplies, you can charge a small commission as a consultant to make most of the decisions and take the stress away from your clients. You will be doing this work anyway, so why not bring in extra money?
- Earn advertising. If you have a blog (which you should if you want to bring in new leads and land deals) you can leverage it to create recurring revenue. Once you’ve built up a strong readership base, you can begin marketing products, services, or even work with brands directly to earn advertising income. You can expand your blog and freelance biz even further by starting a podcast and working with sponsors to bring in extra money.
- Invest in rental property. As an architect, you have an advantage over everyone else when it comes to investing in real estate. You have the knowledge and experience to better estimate the value of a property (and thus find a good deal on the market). It’s likely you know some good contractors, you don’t need to hire an architect (duh!) and can estimate any extra costs much more realisticly than the average person. In other words: if you have some savings, you can turn your money into a passive stream of rental revenue. Use this to your advantage! If you have no savings, you can always find people with savings and propose their your (free) services in exchange for a part of the passive income. Their money and your sweat.
- Lower your monthly recurring costs. Next to growing passive income streams, you could also lower your own monthly cost of living. Again, as an architect you are extremely well placed to shave off huge amounts of spending within your monthly costs: your energy (heating, aircon, electricity, etc.,) costs. You know what the return on investment is for solar energy, better isolation or a modern heating system. You probably know good contractors that can execute the work, and if you’ve been working with them over the past few years for all your projects, I’m sure you can get a huge discount on your investment. Every investment in your own home or office, that has a ROI of 10% is a no-brainer. Compare this 10% to your current savings account and you’ll see why.
Earning a living with passive income streams will take a bit of time and is a huge upfront investment, but starting out small with a few diversified ideas right now will help you bridge the income gap of being an architect in the future.
It’s all about long term upfront investment. Then before you know it, you’re able to bring in a good amount of recurring income to supplement your finances.