What is passive income?


Quick Answer

Passive income occurs after a person has expended time, effort and money into an expenditure, according to About.com. Book royalties are an example of passive income, as are pensions and rental payments from real estate.

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Full Answer

Creating passive income frequently requires high-quality and intense work up front, explains Bankrate. Passive income also comes with risks. For example, a person who intends to earn passive income via a rental property may see the market for the property drop or end up with tenants who seriously damage the property. Along the same lines, a person who writes a book may get little passive income if the book does not sell well.

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