When you do a Google search for "residual income business" you will find all sort of super-duper offers that promise you to make millions over night without the need to do any work. Now, also if that sounds very tempting, there is one, little problem with that – it doesn't work like this! Let's take a step back and look at what these words actually mean:

Residual – is something left over at the end of a process, according to Wikipedia. So, residual income is the income that is "left over" at the end of setting a business up. Residual income continues to come in after the process of setting up a business is over. You could call it also "passive" income, as it continues to flow with only little maintenance work on your part necessary.

Income – is what "comes in", the amount of money you earn or gain. Normally it is meant to be the "raw" income, before business expenses and taxes are calculated. Here lies the first "scam trap", when so-called business opportunity providers promise you high returns on something, you don't know will cost how much in investment and maintenance costs. For example the well-known "place ads on Google scam" that tells you to place Adword ads on Google to promote and earn with affiliate products does this without telling you, that you might end up paying more for the ads then you get in return for affiliate sales if you are not careful.

Business- comes from "being busy" or refers to the state of being "busy" in order to achieve something, for example a profit. "He is busy to gain new clients for his business", would be a good example. So to make money, you actually have to get busy, something what a lot of the "super-duper-wonder-program" promoters don't tell you.

So, after that is out of the way, lets have a look at some warning signs of false and scammy residual income businesses:

1. Warning Sign
It sounds too good to be true. If something sounds too good to be true, it is not true and the only person earning residual income with this, will be the person that sells it to you!

2. Warning Sign
Somebody wants your money, most of the time even a hefty sum. Before paying anything upfront ask not only what you get in return for your money, ask also who is the seller? Is it an established company with all credentials in order or a fly-by website set-up to collect money and then to disappear? Do always do your research before parting with your hard earned cash, the more money is involved the more thoroughly your research should be.

So, which residual income businesses are out there that actually work and are not a scam? Actually quite a few, here one offline and one online example:

The best known offline business with which you can gain residual income, is obviously the real estate business. The idea is that you invest in property and then rent it out, that is where the income comes in, if you forgive the pun. How residual this kind of business is in the end, depends on how much maintenance your property needs, how often your tenants change and if you can and want outsource certain tasks related to the property. If you have some cash to spare, now is a good time to invest in real estate as prices are low. Do your research and try to determine what the future of a certain location is most likely to be and decide if you want to do all the related work yourself (less residual) or if you want to outsource it (less cash).

A good online business for gaining residual income, that requires far less investment, is the setting up of niche websites around certain needs and products. And, no, I don't mean any "adult" needs and products, I mean just everyday problem solutions for normal people just like you and me. The idea is that you build your website in a niche area in which you have experience and about which you know lots about. Fill it with good, useful content and earn money with advertisement and /or affiliate product sales from it. Once the website is set up and receives traffic, your income runs pretty much on auto pilot, apart from the occasional software updates and backup tasks. Setting up your own website might sound a bit daunting at first, but it is actually quite easy. For starters you can set up a niche blog at Googles Blogger Blogspot, which is free. And start to make money with Adsense and Amazon products displayed on it. The one most important step is to find your "niche".

So, what is this elusive niche actually?

A niche is a market segment that has a certain demand but a low level of competitions. For example: Dog supplies is not a niche, personalized dog collars are. So how do you find now a niche? There are a few steps that may help you:

  • Write down what fields you are knowledgeable in and use the Google external keyword tool to determine which keywords people use to look for information in these fields.
  • Evaluate your income possibilities by looking at how much other people are willing to pay for advertising geared towards this keyword.
  • Check the strength of the competition by checking the first ten search results for page rank, domain age, keywords in url etc.
  • Rinse and repeat until you found a potentially profitable niche with low competition.
  • Buy a domain name, with your niche keywords in it, and build a site around in this niche market.
  • Alternatively, if you don't want to spend any money, use Googe's own blogspot service to build your website or blog for free.
  • Write content for your site and promote it until you have reached a healthy level of visitors and sales / advertisement earnings.
  • Rinse and repeat with a new niche. Over time you will build up a business by having created a portfolio of valuable websites that provide you with residual income with little or no maintenance work involved.

Sounds complicated, afraid of the learning curve? You can always join The Keyword Academy for 1$ and learn how to do it with the help of their wide range of videos, ebooks, webinars, forums and their great keyword and traffic tools. For more information see authors info ;-)