MLM Residual Income Series Part 3: What’s the Difference Between Residual Income vs. Passive Income?

In part three of this series we will discuss the differences between residual income and passive income. These two terms are often used interchangeably, but in reality they are not the same thing. There are some similarities, but there are also some big differences between residual income and passive income.
Before I move onto part of the Residual Income Series.


I highly suggest you stop right here and read my previous to articles regarding residual income.



What's the Difference Between Residual Income vs. Passive IncomeWhat is Passive Income?


First, let’s take a look at what passive income is. Passive income basically includes any money that you make without doing any work. Often times this money comes from investments of time or money that you have already made. With passive income the person does not have to be directly involved with the money they are making. For example, if you buy a rental house you will get passive income from the rent or if you have invested in a stock you will get passive income when the stock goes up.


What is Residual Income?


Residual income includes payments that you will receive after a sale. Usually these payments are agreed upon in advance and will continue long after the sale. A good example of this is royalties that someone gets for a movie or book. They only write the movie or book once, but it can continue to be sold and resold again and again, which allows you to continue to make money from your work. Residual income is common in MLM network marketing, as you can make money from sales you have already made or from people you have already recruited. Residual income can eventually turn into passive income over time, as you can eventually earn money without doing an extra work.


Methods for Earning Residual Income


Now that you know the differences between passive and residual income, it is time to learn about some of the most common methods people use to earn residual income:


-Selling products online: This is one of the most common ways to earn residual income. It usually involves a fee that has to be renewed each month or week, which will allow you to continue to make money after the initial sale.


-MLM Network Marketing: With MLM network marketing you will recruit representatives to go out and find new customers. You will get paid a percentage for every sale that they make, which allows you to make residual income even after the recruitment is finished.


-Affiliate Programs: Affiliate programs often fall in between passive and residual income. Although much of the groundwork has already by lain by the parent company, you might will have to do some work to take advantage of it.


If you can get to the point where you are earning either passive or residual income (or both) then you know things are going right.


Making residual income with MLM marketing will take some time, bit it is definitely possible. In part four of this series we will get into more detail about how to make residual money with MLM network marketing. If you want to know more about to earn a residual income, click here to learn more.



To your Success,

Nate Leung

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Nate Leung

Nate Leung

CEO & Founder - Automated Profit Method
Hi, I'm Nate! I am the CEO and Founder of, and Automated Profit Method, Author of "Virtual Entrepreneur: Live Free With the Business of Your Dreams". I help ambitious online entrepreneurs build wildly successful businesses that they are most passionate about. Step by step I show you how to build a business from scratch with the right strategies and systems in place, you can earn the income you know you deserve and have the kind of life you have always dreamed about. Ready for your business to support the kind of life you want to have? Contact Nate here.
Nate Leung
Nate Leung

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20 Responses to “MLM Residual Income Series Part 3: What’s the Difference Between Residual Income vs. Passive Income?”

  1. Daniel Fernando

    I’m impressed, I must say. Rarely do I encounter a blog that’s both equally educative and engaging, and without a doubt, you’ve hit the nail on the head. Thanks!

  2. Dario Finlay

    Hello There. I discovered your blog using msn. This is a very neatly written article. I’ll make sure to bookmark it and return to learn extra of your useful info. Thanks for the post. I’ll definitely comeback.

  3. Kristie Englund

    I love how much you share and give value. I know residual income is the key to lifestyle but you sharing your personal insight and how much today is other peoples efforts that you have helped and lead really got me even more excited. Thanks.

  4. Ron Ferguson

    Great overview, Nate. I invested in real estate when it was hot, I flipped houses a few years back & lent private money to a friend that was financing short term deals (7-30 days) back a few years ago. That’s not even passive because I felt like I was constantly reviewing the deals my money was going to guarantee unless the payoff didn’t cone thru & I ended up owning a property. Fortunately I got out before my friend’s business got crushed in the economy.

    Since then I’ve been able to develop a passive income with one of the primary companies we worked from 99-2002 & banked a couple of years of a professional corporate sales jobs & never looked back & the money continues to come in 9 years later. We spend about 5-7 hours / week to maintain that. Pretty cool stuff!

  5. Steven Palma

    Thank you for sharing your knowledge of all your hard work. These are the signs of a good teacher and leader. I appreciate all of your hard work and willingness to share the truth about the hard work for all of us ahead. Success is an up hill climb, but you throw us a rope to help us.

  6. Jordan Zaragoza

    Great post Nate. All good points. The dream of passive income is just that for so many; a dream. The misconception that passive means little or no work involved is the killer of this dream. Massive Action = Massive Income.

  7. Julio Chavez

    Hi there! This is my first comment here so I just wanted to give a quick shout out and say I really enjoy reading through your posts. Keep them coming Nate! Thank you for everything!

    • Nate Leung

      You’re welcome Julio! Hope to see you back here soon! 🙂

  8. Selene Larue

    Great breakdown of Residual Income vs Passive Income. That’s why I love this industry of MLM because you can’t beat residual income with a stick! If more people realized how powerful this model is, more people will realize that residual income is so much better than linear income. Love the breakdown Nate!

    • Nate Leung

      Hi Selene,

      Welcome to my site, it’s always nice to see a first time visitor! I agree, that’s why I love residual income as well! Work one time, and get paid times over. Put in the work, work on your skill set, and you will build yourself a fortune that will last a life time. Thanks for the comments!

  9. James Coltes

    Great break down between the two. I’ve always wanted to know the differences. Your article explained it perfectly. Thanks Nate! 🙂

  10. Ryan Biddulph

    Really good breakdown Nate. Hadn’t heard the comparison made in this manner.

    As you note generating residual income does take some work, but it is well worth it. Put in the legwork now to relax a bit down the road….or to work down the road and make even more money 😉


  11. sherman smith

    Hey Nate, this actually gave me a better understanding of the difference between the two. I would here them being interchanged so often that one can wonder if it’s the same thing. Thanks for the explanation!