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Passive Income as VPS Provider?
paroxsitic
Member
I am a recently retired software engineer (FIREd) with some capital to invest in passive income ventures. I have extensive experience working with Debian, particularly in hosting websites, and am comfortable with networking. However, I lack the skills necessary to work at a data center without additional study (I completed A+ certification back in the mid-2000s). This is basically to give you an idea how I may be a bit of a fish out of water but I could learn it. I already own another SaaS company, so I can overlook business costs, and I have a solid understanding of U.S. taxes, having been a business owner for 20 years. This new venture is something I intend to run as passively as possible.
Given my technical background, how feasible is it for me to set up and learn Proxmox, and get a panel running? I have used stripe/paypal API and can write modules if needed but have no issue paying for add-ons of the panel.
I plan to take advantage of a good dedicated server deal and split the resources into fair VPS allocations (overselling amount suggestions?), aiming for around a 10% cash-on-cash return, considering a free 1 hour/month/server for maintenance once everything is mostly automated. The initial profit will be minimal, so this is more of a hobby and curiosity about learning the business. However, I want to avoid a consistent loss, as I want to ensure the long-term potential makes sense, even at a small scale, until I’m ready to dedicate more time and invest more capital to take it further, either way, I want it to last 10 years minimum
I ran the numbers for purchasing an existing dedicated server from a well-reviewed host and using various AI tools, and they gave me some feasible options that I think LET people would appreciate. However, I am here to ask the experts who have experience at this if passive income is even possible, trying not to trust AI beyond a sanity check on the numbers.
I think mostly because I am scraping off a small return 10% off the top of perhaps a loss-leader from someone else or just a really good BF deal. The main deal breaker for the ultra budget VPS IPv4 add-ons being expensive from dedicated providers. The fact I am willing to put in some number of hours of labor for free helps the most.
Legal will be strict and basically have avoid all responsibility because I can't afford beyond exist general liability and LLC protection. If you lose important data randomly, then its the risk you take. I plan to mostly market to LET and LEB with some hope and transparency of my setup and intentions.
Any advice or suggestions?
Comments
It's like selling sand in the desert.
@Not_Oles
Extremely feasible, but I think you'd be far better off earning money passively online by creating a website for adult or mainstream movie streaming (anonymously) and enjoying the cryptocurrency revenue.
I think you'd be competing with quite literally the entire universe were you to create a yet-another VPS provider, but if you go and create some niche adult or mainstrea movie streaming website, you might strike gold. Who knows...
You can also create a niche product that doesn't exist yet, for example, there's a lot of forums running XenForo.com software, but there aren't a lot of professional addon developers, at least not the ones worth their salt. So, you could focus on that... you could also focus on WHMCS addon development, all sorts of options, honestly... but yet-another VPS hosting provider would not be my recommendation.
Let’s be real—you know that nothing is truly passive income.
Gotta give you some credit for coming in with a better plan than most. You sound competent enough to throw it together and make it happen.
I'd see what you could do locally (small businesses, personal sites, etc..) with a shared reseller plan to start - see how that goes and if that starts picking up, start getting your ducks in a row for a dedicated server and then transition when you feel comfortable and confident in your dedicated server setup.
Make sure and have a clear and concise TOS and AUP. You will have abuse and as long as it's in clear black/white, dealing with chargebacks won't be an issue.
There's a ton of good people here but there's also a ton of shitbirds here who will try and sink you immediately over the smallest of things. Search out some threads complaining about providers (I think there's been about 3-4 over the past couple days) - each one as ridiculous as the last - but it doesn't change the fact that you're likely going to have to deal with these types of people and to price your packages accordingly. Generally, you don't want to be the cheapest as it attracts the worst of the worst.
Passive as in? you can't run a company by being "passive"!
Web hosting industry is anything but passive. Once you attract critical mass of abusers it just rolls into snowball effect and your entire asn goes to hell. Pasivenes gone, headache introduced. Police raids for cp and botnet hosting. 22k in btc eventually syphoned. Few dramas in let and you are basically done ( @FlorinMarian ).
Better invest in some pump.fun scam.
+1
It won't be as passive as you think due to having to deal with customers for support, both billing and technical.
The closest thing to a passive income in the hosting world would be affiliate programs. Many pay 10%+..
hey @dahartigan where have you been?
haven't seen your boobs in the BF thread! hopefully all good?
He enginer actual bobs. This takes time and some prohormones. Anyway, nice to see spongeboob!
Hey dude, I've been busy with IRL things, I check in here occasionally but there's been no good drama to throw my 2 cents in. Plus trying to keep a certain cranky old man at bay.
Very true, I am treating this as an alternative to real estate and having to manage that. That is pretty subjective but I put in the OP about 1 hour per month per server as something id do for free. Up to 10 hours a month I'd do for free but after that I'd have to consider starting to include an hourly wage for myself. It's really the amount of effort that I have no idea, and the profit margins that are possible.
This is a very good point. I really don't want to deal with anything illegal and I have no issues keeping things small and slowly growing with trusted buyers. I am even open to offering higher specs and VDS as long as I am making the 10%. Is there a filter or some type of screen that would be successful in ensuring I would only get the best of customers while still offering cheap prices? Perhaps a reputation or limiting to just American addresses, rejecting VPNs, etc. Or is it just a reality that there is a good solution?
PS: Selling just to americans was something I considered anyways because international saas sales/vat complications is something Id prefer to defer
You might catch some slack for even mentioning that but if you're looking for the most "passive" income, that'd be the way to go. You'll still run into problem clients but with the proper protocols in place, you'd be able to keep the time suckers at bay.
At the end of the day, it's your business, you choose who you want to serve and if people don't like it, they can get over it. Not everyone is looking to dedicate their life to serving people for peanuts and it's nice to see someone who actually value their personal time.
If you wanted to expand into an international market later on, nothing stopping you from doing something like @Cam does and specifically states "NO SUPPORT" - so short of the node being offline/non-functional, you're not throwing your personal time into some blackhole that ends up being a net negative. Having to deal with transactions marked fraud and the inevitable support tickets that stem from that are a guarantee, so just make sure you're comfortable with where you are if you do decide to make that leap. Mo money, mo problems.
So for things I'd recommend looking into:
Shared Reseller hosting from a reputable provider (I'd suggest Speedypage - https://speedypage.com/reseller-hosting)
WHMCS - https://www.whmcs.com/
Virtfusion - https://virtfusion.com/
Fraudrecord - https://www.fraudrecord.com/
HetrixTools - https://hetrixtools.com
And as far as picking up a dedicated server, I'd check in with
@crunchbits @fiberstate @oplink @DataIdeas-Josh @jfreak53 @PureVoltage @RoyaleHosting @MrRadic @AlexBarakov @advinservers @Atomic_Networks
It’s not worth it unless you have a very unique entry I’d say
A unique selling point. Something you can offer
I haven’t made it work even theoretically, in a spread
If what you’re doing is just like everyone else, expect a profit margin of a few percent IF you’re lucky/do it very well
Offering good VM’s isn’t easy at all, it takes skill. Running a successful venture too.
Sadly, for us, a lot of people have those skills.
Unfortunately, the hosting industry is anything but passive. If you want to start a hosting business that’s great, but it requires a lot of time, expertise and motivation - not to mention a competitive edge. If you’re looking for a passive income source, like another has said, would likely be in the affiliate realm, however you would still have to spend time on marketing, blog writing, etc which would still be a time investment.
In my experience, affiliate, especially the SEO kind, is hardly passive. You have to stay on top of the game constantly, or a competitor will steal the SERPs.
If you are really passionate about it, go for it. Otherwise, it's true that it's not passive income due to support, maintenance, staying active and relevant with marketing, and so on. If you need any stream of income even not passive you will have to work for it in hosting, it's not passive.
Bonds are very passive right now.
With the best will in the world, you might need to rethink how much work will be required.
anyone can spin up a summer host
in the hosting business, its all about reputation, nobody likes hosting production environment on a summer host
@paroxsitic trust us all when we say the key to success is $7 yearly deals.
P.S. IPV4 and IPV6 please or @yoursunny will put you on the IPv6 shame list. We like his list. It’s satisfying to read when it’s updated.
New requirement is at least /64 IPv6, because /64 is the smallest sensible IPv6 sub-assignment size.
Anyone with even smaller allocation size are being added to the upcoming IPv6 less than /64 Hall of Incompetence, now accepting submissions.
dont worry about low-end VPS business, just DCA bitcoin
I think these are two key factors that you really, really have to consider.
Not trying to deter you, but I think you have seriously underestimated the amount of work and overestimated the profit margin.
To be able to sell, you need a selling point. It could be price, service, quality or any number of things, but you need that one thing that makes customers chose you over thousands of other providers.
If you intend to compete with price your margins go straight to hell. It's single digit percentages, and low single digits at that. Considering that the prices in the lowend market bottoms out at the famous $7/year, it gives near zero profit. We are literally talking cents per year. So to make any money at all you need quantity, and judging by your op you are not looking for a fulltime bigscale effort, so I take it that is not an option.
To compete with quality we are looking at great support, quick answers and high maintenance costs. Again, if you do not want to dedicate 100% of your time (and probably a few others as well) this is not going to happen.
I'm sure you could get a dedi somewhere, spin up 20-30 vps's and sell them at a low price to people that just idle them. You might even make enough to cover the cost of the dedi, and in the best of worlds you could even make 5-10$ profit...per year. But really, what's the point of that?
My honest opinion is that selling vps as kind of a hobby project to make a passive income is a terrible idea. Do it for fun, sure, go for it, but do not expect to make any money. There are lots of people actually trying hard and investing a lot of money and time into it that are still not able to get it going. You seem experienced and with enough technical knowhow to get something going if you actually put your mind to it, that I do not doubt, but expecting an income while spending an hour a month? Not gonna happen.
Buy BOXX and hold for at least one year.
The return would be less than 10% per year but it requires minimal effort and has practically no risk.
Nothing except passive investing of capital is passive income
Thanks everyone for all the feedback, I think passive income in this business probably isn't possible but I wanted to at least share my brainstorm on what I came up with that could be a loss-leader for a startup to later on switch to colocation with own hardware to squeeze more profit out.
I was targeting this price point / market:
https://search.ponyhost.xyz/?region=northamerica&country=&virtualization_type=&os=&cpu_brand=&cpus_shared=0&cpus_dedicated=2&memory=8000&disk_type=nvme&disk_size=2&bandwidth=5000&port_speed=1&ipv4=true
TLDR
I wanted to try to target budget VDS instead of VPS in North America. With the main competitive edge is offering budget but with 10/gbps. It's doable at very cheap labor, Maybe. Not for me though, not unless it's risk-free.
Core concept
The core concept is to operate as a transparent broker of dedicated server resources.
We would be fully upfront about which dedicated server providers we use and the pricing and specs the machine is from. This transparency allows customers to understand exactly what they're getting, including provider-specific benefits like DDoS protection and all the things that set dedicated providers a part.
The business would effectively split dedicated servers among multiple customers who want high-performance computing but don't need an entire server. For example, customers might purchase 2-4 dedicated virtual CPU cores instead of an entire machine. All this sounds exactly like a normal VPS, but this is a VDS with no overselling at all and it comes from reputable large dedicated hosts with many features.
For new hosting providers the funding model could use a waitlist system with escrow payments. When enough customers commit funds for a specific server configuration at a chosen provider, we would purchase and partition the hardware among them.
These numbers are back of the napkin numbers, with some of the deals not even being offered anymore and some assumptions about add-on pricing. The labor estimate is where I and most will undervalue how much time 15 or 30 customers can take.
Intel
Target:
Dedicated base:
Limited time BF deal: https://blackfriday.fiberstate.com/
Breakdown:
$120/mo base server
$55/mo /27 (29 usable) additional IPv4s
$10/mo labor estimate (this is the issue)
$7/mo baseline host resource cost
$192/mo sub-total before 10% return
$211/mo total expenses
Requiring 31 VPS' @ $7 to hit $211/mo, but remember you want to dedicate 1 VPS worth of resources to the host, so you really will divide resources by 31+1 = 32, this multiple of a power of will help in dividing RAM just right but when you do have to you do so as it makes sense taking into consideration how partitioning VPSs will work w.r.t unused resources.
2 dedicated vCore check: PASS
32 VPS' is lower than the amount of physical cores (40) so there is enough to allow 1 dedicated physical core (2 dedicated vCores) per VPS. In fact you could add in a shared core similar to how HostHatch does
8 GB RAM check: PASS
256 GB divided by 32 VPS' allows 8 GB RAM
Final Specs:
Issue: Not enough IP addresses initially but need could be filled with existing nodes buying additional IPs to offset needed upgrade.
AMD
Target:
Dedicated base:
Limited time BF deal: https://blackfriday.fiberstate.com/
Breakdown:
$120/mo base server
$25/mo /28 (13 usable) additional IPv4s
$10/mo labor estimate (this is the issue)
$12/mo baseline host resource cost
$167/mo sub-total before 10% return
$184/mo total expenses
Requiring 15 VPS' @ $12 to hit $180/mo, but remember you want to dedicate 1 VPS worth of resources to the host, so you really will divide resources by 15+1 = 16, this multiple of a power of will help in dividing RAM just right but when you do have to you do so as it makes sense taking into consideration how partitioning VPSs will work w.r.t unused resources.
2 dedicated vCore check: PASS
16 VPS' is same as the amount of physical cores (16) so there is enough to allow 1 dedicated physical core (2 dedicated vCores) per VPS.
8 GB RAM check: PASS
128 GB divided by 16 VPS' allows 8 GB RAM
Final Specs:
Issue: Not enough IP addresses initially but need could be filled with existing nodes buying additional to offset upgrade. Price couldnt approach $9/mo and only worked with 12/mo
Conclusion
There is a gap of unknown size (warning!) in the market for budget VDS with high Gbps. If one can replicate how the dedicated hosts are making a profit, then it could be worth it given the 10% return could be used as corporate debt to expand and it's only used to pay off interest on loans.
The specs are given in such a way that it is safe to cut in half or double the prices and resources together. That is for $12/mo you can get 4 dedicated vCores and 16GB or
Dedicated 1vCore with 4GB RAM and 10 gbps (IPv6 only) for $3/mo is something to consider as well.
Finally, there is an option for an AI play because fiberstate and these higher quality dedicated providers offers a graphics card add-on which is something these lower budgets possibly can't offer in addition to their dedicated cores.