Passive income is income you get without trading your time for it every month.
It comes from something you already have: a property, savings, a share of a company, something you created. But it doesn't arrive on its own: someone works to produce it, and it can rise, fall or stop.
The short lesson on passive incomeWhat it is
They all have one thing in common: the income depends on an asset, not on your hours. What changes is who does the work and how much it varies.
Rent from a property
Paid by whoever lives or works there. Someone has to find tenants, collect and maintain the property: you, or an agency you pay.
Interest on savings
A CDT, an account or a fund pays you for lending your money to the bank. It's the steadiest on the list and usually the one that earns least.
What a CDT isProfits from a company
If you own part of a company, you get your share of what it earns when it pays out. The company does the work; you don't decide how much it earns or when it pays.
Royalties on something you created
A book, a song, a course. The big work came first; afterwards it has to stay relevant to keep selling.
What it isn't
The four ideas that most confuse people starting out.
It isn't money without work
Someone runs the asset: you, or someone you pay out of the income. The passive part is that you don't trade your hours for each peso.
It isn't a fixed salary
It varies with occupancy, sales or rates. A month without a tenant or a bad year for the company shows.
It isn't a second job
Driving for an app or selling from a catalog in your spare time is extra income, but active: if you stop, it stops.
It isn't a promise of a fixed return
If someone promises you a high income that can't go down, be wary. All passive income depends on how the asset does.
How much of your expenses it covers
The useful measure isn't how much you receive, but what share of your expenses your net income covers. A made-up example: someone who spends 4,000,000 pesos a month and has three sources.
| Source | Capital | Net a year | A month |
|---|---|---|---|
| A rented studio apartment | 240,000,000 | 4.5% | 900,000 |
| A CDT | 30,000,000 | 9.0% | 225,000 |
| A share of a company | 20,000,000 | 6.0% | 100,000 |
| Total | 290,000,000 | 5.1% | 1,225,000 |
Together the three leave 1,225,000 pesos a month: they cover 31% of the expenses. The net return is what's left after each source's costs (management, maintenance, months without rent), before income tax.
To cover the full 4,000,000 pesos at the same average return (5.1% a year), it would take about 947,000,000 pesos. That's why almost no one lives on passive income alone at first: it's built piece by piece, over years.
How it's built
Slowly, and in this order.
- 1
First, a cushion
Save a few months of expenses somewhere you can reach quickly. That way you don't have to sell an asset at a bad time.
What liquidity is - 2
Invest what you won't need soon
A property or a share of a company can't be sold overnight. Only put money there that can sit still for several years.
- 3
Have more than one source
If one source stops, the others keep going. Mix assets that don't depend on the same thing.
What diversification is - 4
Reinvest at first
While your salary covers your expenses, reinvesting what you receive grows the capital, and the income with it.
What compound interest is
Frequently asked questions
What is passive income, and what are some examples?
Income you get without trading your time for it every month, because it comes from something you already have. Examples: rent from a property, interest on a CDT, profits from a company you own part of, and royalties on a book or a song.
How much money do I need to live on passive income?
Divide a year of expenses by the net return you expect. With expenses of 4,000,000 pesos a month and a 5% net return a year, it would take about 960,000,000 pesos. That's why it's built piece by piece.
Is passive income taxed in Colombia?
Yes. Rent, interest and dividends go on your income tax return, and interest and dividends can also carry withholding tax. For what you'd pay in your case, ask an accountant.
Is driving for a ride-hailing app passive income?
No. It's extra income, but active: it depends on the hours you work and stops when you stop. Passive income comes from an asset, not from your time.
Can passive income stop coming in?
Yes. A property can sit without a tenant, a company may not pay out profits, and interest rates fall. Having several sources and a savings cushion softens the blow.
Projects you can take part in
Private real estate and energy projects you join with a share. Each project page shows its projected figures, its risks and how long your money stays in.
Project in Construction
Project in Structuring
Project in Structuring
Project in Operation
Project in Structuring
Project in ExplorationCasa Lago
La Pintada, Colombia
This project is currently under study. We will notify you when it becomes available for participation.
Keep going
- What is passive income?The short lesson, with the coverage formula.
- How to calculate a project's returnBefore counting on an income, measure what the thing producing it really earns.
- How to compare a CDTThe most common passive income: what you keep after taxes and inflation.
Educational content. It is not financial, legal or tax advice, nor a public offering of securities. The example's figures are made up. Every investment carries risk and its results can vary.