I am a huge proponent of investing in real estate for passive income.  But there is a little-known analogous source of passive income that exists on the Internet that will knock your socks off. 

This little-known or, perhaps, little-used method is buying and holding domain names and websites for cash flow.  I’m not talking about buying blogs (too much work to generate unique content to be considered passive income) or buying online businesses (very expensive) or even flipping domain names (too speculative). 

Rather, I’m talking about buying websites that have user-generated content and leveraging the traffic that that content attracts into ad sales.

How It Works 

Usually, buying physical, tangible property as an investment requires a detailed process.  You scout various properties.  You determine their income potential.  Normally, you try to find bargains, or properties that aren’t at their peak potential for generating cash flow.  Your goal is to buy a property that can generate a consistent income month after month. 

For example, maybe an apartment building you find is poorly-managed and, thus, half vacant.  If you bought it and improved its management or made some improvements in the common areas, etc., you can attract more tenants or better tenants and even increase rental rates. 

The same process can be applied on the Internet:

1) Find a website with user-generated content.  

2) Determine its income potential.  If it is a highly-trafficked site and doesn’t have enough private ads (or none at all) or affiliate or referral ads in certain spaces, its current owner has not maximized the site’s income potential.

3) Based on your income projections and your budget, make an offer to buy the website.

Simple as that.

Yaro Starak’s $1,675 Per Month

I have searched endlessly for a testimonial that explains how to go about this process effectively.  Only recently did I find one on Entrepreneurs-Journey.com.  The blog’s owner, Yaro Starak, provides a stunning recap of how he acquired several niche websites that now generate $1,675 per month in passive income.

Yaro wanted to use his blog income (about $2,000 to $4,000 per month) to reinvest to accelerate his income growth . . . but without increasing his workload.  (Something we all want.)  Yaro decided that forums were perfect examples of user-generated content sites.

He checked out SitePoint and found an auction for several sites that were producing $1,000 per month.  He bought the sites for $12,000.  

100% Initial Return on Investment

Now think about this for a second.  Yaro invested $12,000 in a group of websites that generated $1,000 per month.  If he didn’t raise a finger and left things as is on the websites, over 12 months he would make $12,000 ($1,000 x 12).  Thus, he had just achieved a 100% annualized return on his $12,000 investment.  

I challenge you to find an instant 100% ROIanywhere in the off-line world.  (I don’t hear you, mutual fund lovers!)  And on a monthly basis, Yaro would make a 10% return on his investment.  Again, that’s a heck of a deal. 

Maximizing The Investment      

Obviously, Yaro didn’t intend to buy these websites and sit on them.  He had a friend oversee the sites and make some administrative changes during the months after his purchase.  Yaro also focused on growing the income generated from the sites: 

1) The sites only had AdSense and Linkworth on them, so Yaro implemented a page for private ad sales.  That move quickly produced three sales for $150 per month, or $450 total. 

2) He used Text Link Ads to produce an additional $50 per month. 

3) He used Auction Ads to bring in $50 - $100 per month. 

With these simple moves, Yaro achieved over $1,600 per month in passive income from these sites.  At this point, his ROI had grown to a whopping 160%.  ($1,600 x 12 = $19,200, and $19,200/$12,000 = 1.6 or 160%) 

Future Plans

Yaro believes he can increase his passive income from these sites to as much as $5,000 per month with a few more changes (some involving content).  He wasn’t planning on selling them yet because of the positive cash flow the sites were generating.

This form of online property investing is a much easier way to make money than real estate investing.  Obviously, what works for one person might not work for another.  But if you have money to invest, buying user-generated content websites for cash flow is a lucrative and easy way to make serious passive income online.        

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