Video · Brian Kim
Passive Income: is it a scam or legit?
Brian separates real passive income — dividends, rental real estate, businesses you've stepped back from — from the get-rich-quick pitches that skip the upfront capital or work.
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Published on YouTube July 26, 2024 · 8:19 · Text on this page updated · About 6 min read
Key points from the video
- Living entirely off passive income is very hard: even $1 million earning 5% produces about $50,000 a year, before tax. Brian sees passive income as a safety net and supplemental income, not a replacement for work.
- Even an extra $500 to $2,000 a month is a real help financially and psychologically, and enough of it lets you work less, retire earlier and worry less.
- Brian does not count his rental properties as passive income: legal issues and contractors still need him. For hands-off real estate exposure he points to REITs.
- Avoid putting money into someone else's small business as a "silent partner" unless you do thorough due diligence; it is often a way to lose money.
- Before building passive income, pay off high-interest debt and use retirement accounts. Brian's own mix: savings when rates are good, index funds and ETFs, plus some stocks, real estate and physical gold and silver.
Summarized from Brian's own words in the video.
What's changed since this video
Video published July 26, 2024. Checked against current sources on October 13, 2026. These updates are from the ClearValue Lending Team, not Brian.
- Savings rates Changed
In the video: In 2024 Brian could earn about 5% in a savings account.
Now: The FDIC national average savings rate is 0.38% and the 12-month CD average is 1.76% (Oct 19, 2026). Rates vary widely by bank; compare before you move money. See today's rates.
Source: FDIC — National rates and rate caps · as of
- "Passive income" pitches New since the video
In the video: Brian asks whether the passive-income dream is a scam.
Now: The FTC has banned operators who sold "passive income" online-store schemes. In one case (Passive Scaling, later FBA Machine) it says consumers lost over $15 million. Sellers of business opportunities must give you a one-page disclosure and, if they make earnings claims, an earnings claim statement.
Sources: FTC press release — FBA Machine / Passive Scaling ban (July 30, 2025) ; FTC consumer alert — Vetting a business or coaching opportunity (Aug. 22, 2023) · as of
- Rental income and taxes For comparison
In the video: Rentals are not truly passive because you still deal with problems.
Now: For tax purposes the IRS generally treats rental real estate as a passive activity even if you participate, which limits how losses can be used. That is a tax label; it does not mean the work is passive, which is Brian's point.
Source: IRS Topic 425 — Passive activities, losses and credits · as of
Reader guide · ClearValue Lending Team
Passive income: what's real and what's a pitch
Brian's video asks whether living off passive income is a dream or a scam. His answer is in between: passive income is valuable, but for most people it is a safety net, not a replacement for a paycheck. This guide follows the video in order and adds today's rates, the tax rules and what regulators say about passive-income pitches.
The math behind "living off passive income"
Brian covers this in the video · watch from 0:00
Brian describes two camps. One says living off passive income is a scam because you need a fortune to make it work. The other calls it the key to financial freedom.
He lands closer to the first, with the numbers to show why. Put $1 million in savings, a CD or Treasury bonds at 5% and you earn $50,000 a year. That is a lot, but it is before tax, and it may not replace a salary. Dividend stocks might pay more, but you can lose principal. And the real question is where the $1 million comes from.
The math is harder now that savings rates have fallen from 2024 levels.
| Rate | Yearly interest | Savings needed for $50,000 a year |
|---|---|---|
| 5% (Brian's 2024 example) | $50,000 | $1,000,000 |
| 0.38% (FDIC national average savings rate, Oct 19, 2026) | $3,800 | $13,157,895 |
Passive income as a safety net
Brian covers this in the video · watch from 1:50
If $50,000 is not enough to quit, you would need $2 million, $3 million or more. Brian's point is not that passive income is worthless. It is extremely important. But for most people it works best as extra money.
An extra $500 a month helps most households. An extra $1,000 or $2,000 a month, arriving whether or not you work, would not make you rich, but it changes a lot. Grow it enough and you can work less, retire earlier, build wealth and feel less financial stress.
His warning is about expectations. A few people replace their whole income with passive income. It is possible, but rare. Plan for it to supplement your paycheck.
A smaller goal is easier to picture. To earn $500 a month ($6,000 a year) from interest alone, you would need about $120,000 at Brian's 5%, or about $1,578,947 at today's 0.38% national average savings rate. That gap is why rate shopping matters, and why Brian treats passive income as something you build over years.
A practical way to build it: automate a monthly transfer from each paycheck, keep the money somewhere you won't touch it, and reinvest the income it earns until it is large enough to matter.
Are rental properties passive?
Brian covers this in the video · watch from 3:31
Brian's advice is to pick income sources that are safe and need little attention. He owns rental properties in the U.S. and abroad, and he does not count them as passive income.
His reason: he is not in day-to-day operations, but he still deals with legal issues and contractors. Hiring a manager does not end it, because then he manages the manager.
The tax code uses the word differently. The IRS generally treats rental real estate as a "passive activity" even when you are involved, unless you qualify as a real estate professional. That affects how rental losses can be used against other income. It does not make the work go away.
Hands-off options, and one to avoid
Brian covers this in the video · watch from 4:17
Brian's definition of passive income is strict: no problems to handle, no people to deal with, no decisions to make. Money for having money.
For real estate exposure without the work, he points to REITs, real estate investment trusts. In his words, they focus on real estate, pay dividends, and can be bought and sold like stocks in a brokerage account. Like any stock, their price can fall.
What to avoid: investing in someone else's small business as a silent partner. It can sound appealing to fund a friend's startup and share the profits. In Brian's experience it is usually a good way to lose money. If you do it, do thorough due diligence first.
Watch for passive-income pitches. Courses and programs that promise easy monthly income from online stores, apps or "systems" are a common trap. The FTC has banned operators of one such scheme, Passive Scaling (later FBA Machine), which it says cost consumers more than $15 million.
- Sellers of business opportunities must give you a one-page disclosure document.
- It must identify the seller, list lawsuits against it, state any refund policy and give references.
- If they claim how much you can make, they must give you an earnings claim statement.
- If what the seller says contradicts the documents, the FTC says to walk away.
Brian's own approach
Brian covers this in the video · watch from 6:03
Brian budgets so he spends less than he earns. He invests the surplus because inflation erodes cash. Most of his money is invested defensively: safe, boring, a decent return.
| Where | Why | Today's note |
|---|---|---|
| Savings account or CDs | When rates are good (about 5% in 2024) | National averages: savings 0.38%, 12-month CD 1.76% |
| Index funds and ETFs | An average market return with no effort, for money he won't need soon | Can fall in value; suited to long horizons |
| Individual stocks | Part of his surplus, outside his passive core | Higher risk than a broad fund |
| Real estate | Diversification | Not passive, in his view |
| Physical gold and silver | His "insurance policy" | Beware dealers offering financed or stored metals |
On savings, Brian says he would not keep money in a bank if rates dropped to 1% to 3%. Rates on many accounts have come down since 2024, so check what your account pays now.
On precious metals, the CFTC warns about dealers that ask you to pay only part of the price, arrange a loan for the rest and store the metal for you. In those frauds, the metal is often never bought.
Do these first
Brian covers this in the video · watch from 7:31
Brian's last advice is about order. Before chasing passive income:
- Pay off high-interest debt. Credit cards, a high-rate auto loan, even a 7% mortgage. Paying a debt is a guaranteed return equal to its rate. The average credit card APR on accounts charged interest is 21.19% (Aug 1, 2026).
- Use retirement accounts. In 2026 you can put up to $24,500 in a 401(k) and $7,500 in an IRA. Tax advantages there usually beat a taxable passive-income account.
- Then build passive income as a safety net, with realistic expectations.
His bottom line: he is a big fan of passive income and keeps growing it, but sees it as supplemental income, not a ticket out of work.
Next steps
Educational information, not investment, tax or legal advice. ClearValue Lending is an education and comparison platform; it does not manage money or recommend specific investments. Examples are illustrations, not predictions.
Questions viewers ask
Is passive income a scam?
Passive income itself is real: interest, dividends and fund returns. What is often a scam is the pitch that you can easily replace your paycheck with it. Brian sees passive income as a safety net and supplemental income for most people.
How much money do I need to live off passive income?
It depends on your expenses and the yield. At Brian's 5% example, $1 million earns $50,000 a year before tax. At the FDIC national average savings rate of 0.38%, you would need about $13,157,895 to earn the same.
Is rental property passive income?
The IRS generally treats rental real estate as a passive activity for tax purposes. But Brian says it is not passive in practice: legal issues, contractors and managers still need your time.
What is a REIT?
A real estate investment trust: a company that owns real estate and pays out dividends. Many trade like stocks, so you can get real estate exposure in a brokerage account without managing property.
How can I spot a passive-income scam?
Be wary of programs promising easy monthly income. Business-opportunity sellers must give you a one-page disclosure and, if they claim earnings, an earnings claim statement. If what they say contradicts the documents, the FTC says to walk away.
Should I invest in a friend's small business for passive income?
Brian advises against it in most cases: it is often a good way to lose money. If you do, do thorough due diligence first.
Is interest from savings taxable?
Yes, generally. Interest you can withdraw without penalty is taxable in the year it is credited, and banks report $10 or more on Form 1099-INT.
Should I pay off debt before building passive income?
Brian says yes, especially high-interest debt. The average credit card APR on accounts charged interest is 21.19% (Aug 1, 2026), more than most investments can reliably earn.
Is buying gold and silver a good passive investment?
Brian holds some as an "insurance policy"; it pays no income. If you buy, avoid dealers who finance most of the price and store the metal for you, a pattern the CFTC flags as fraud.
Full transcript
From YouTube's auto-generated English captions, cleaned for punctuation and paragraphs. Brian's words are unchanged except for clear caption errors; text in [brackets] marks an editor's insertion or audio the captions did not catch.
Read the full transcript (1,394 words)
Editor's note: This video is from July 2024, when savings accounts and CDs paid around 5%. Brian mentions his own holdings (rentals, gold and silver, stocks) as his personal approach, not as recommendations from ClearValue Lending.
Passive income myths watch from 0:00
In today's video I want to give you my perspective on passive income. Is the dream of living off passive income a scam or not? So let me answer that for you. Now, there are two types of people when it comes to passive income, and I want to ask you which one are you. Group one says the dream of living off passive income is a scam, because you need to have a ton of money to generate enough passive income to meaningfully contribute to your monthly income. Now, group two says passive income is the key to financial freedom. So the majority of people fit into group one or group two when it comes to passive income.
Now here's my perspective: I believe that passive income should be viewed as a safety net and supplemental income. In my opinion, it is very difficult to make enough passive income where you no longer need to work, because just think about it, let's do the math. If you have a million dollar of cash and you're earning 5% interest, let's just say a high yield savings account or a CD or Treasury bond, then you're making $50,000 a year in interest, right? So $50,000 a year of interest income, that would be a lot, no doubt, but is that enough to quit your job and not have to worry about money again?
And you have to remember that that is pre tax income. If you stick a million dollars into the stock market and pick out dividend stocks, maybe you can earn more than 5% in dividends, but you risk losing that money in the markets. But listen, regardless, where are you going to get that $1 million from? Also, if $50,000 a
Benefits of supplemental income watch from 1:50
year in passive income is not enough for you to quit your job and be financially free, then where are you going to get two million or three million or $4 million from to earn a sufficient amount of passive income to quit your job and live the life that you have on your vision board? But listen, I want to be 100% clear about this. I believe having passive income is extremely important, and it's important to grow your passive income, but for most people, you should view your passive income as extra money or bonus money, and this supplemental income can be a huge, huge safety net for you, not just financially but psychologically as well.
If you have an extra $500 a month of passive income coming in, that's probably going to be helpful to most people, but imagine if you had an extra $1,000 or $2,000 or more coming in every month consistently for doing nothing. So in that type of situation, you wouldn't be rich, but I'm sure that that would be a huge help and a game changer to most people. If you grow your passive income enough, you can work less, retire early, build more wealth, and be less financially stressed out. So those are some huge benefits of having and growing your passive income. But listen, I'm just advising you to not have the unrealistic expectation to have it replace your primary source of income. Yes, some people can achieve that, it's definitely possible, but that's very difficult. Now, if you want to build your
Rethinking rental properties watch from 3:31
passive income, let me give you some advice, and this is coming from personal experience. I believe that you should choose passive income sources that are safer and require minimal attention. Okay, so let's start with rental properties. I have rental properties in the US and other countries. I do not consider rental properties as a form of passive income. That's just my opinion, but the reason why I'm saying that is because passive income is supposed to be stress-free, and I'm supposed to be completely out of it, just totally hands off. But you know what, that is not the case. So I'm not in the day-to-day operations, but I still need to deal with the legal issues as well as the contractors. Now, I could hire someone to
Safer passive investments watch from 4:17
work with my attorneys and contractors, but then I would still have to work with that person. So even with a management company or help, you're not completely out of it, and it's not truly passive income. Problems pop up, and in certain situations you need to get involved and put in some work or efforts, so it could be annoying, and that's just not my definition of passive income. I consider passive income as: you don't have to deal with any problems, you don't have to deal with any people, you don't have to make any operational decisions. Just give me my money for just having money, and don't stress me out.
That's how I define passive income. So personally, I'm in real estate for diversification, and because I get some joy out of it, but mostly for diversification purposes. Now, if you want to include real estate in your passive income stream, then you should consider REITs in the stock market. So those are real estate investment trusts. So those focus on real estate, they pay you dividends, you could buy them and sell them like stocks in your brokerage accounts. So it's a convenient way to get some real estate exposure. Again, from personal experience, avoid investing money in another person's small business. I know to some people it may sound cool to be a silent partner and potentially make a lot of money from a business for doing no work and just giving them startup money, or you may invest in a small business to do someone a favor, but in most of these cases, this is not a good way to make passive income. This is a good way to lose your money. If you're going to explore this option, you better do your due diligence thoroughly if your money is on the line. Now let me
Personal investment strategy watch from 6:03
tell you what I do for my passive income investing. This is my philosophy, this is how I operate. So I budget properly, I make more money than I spend. So with my surplus money, I need to invest it, otherwise inflation is going to screw me over. With most of my money, I want it to be safe. I'm being defensive with it, and I want to earn a decent return. If interest rates are good, like right now in 2024, I'll stick some money in a savings account and earn 5% interest. Not bad. If interest rates on savings accounts or CDs fall to 3%, 2%, 1%, then I'd say no way, I'm not leaving my money in a bank.
I also put my money in index funds and ETFs, and with this money I'm not trying to beat the markets. I just want an average return, and I don't want to lift a finger, and this is money that I'm not relying on in the near future, so I can ride out any down swings. Again, this is my money that I want to be safe and boring and earn me some passive income. However, all my surplus money does not go towards building passive income. I allocate some money to invest in individual stocks, I invest in real estates, and a lot of people criticize me for this, but I like buying physical gold and silver, which I see as my insurance policy, you know, just in case. So listen,
Priorities before investing watch from 7:31
here's another thing: you shouldn't be obsessing over passive income if you have high interest debt. So paying that off should take priority. If you have credit card debt, if you have a higher interest rate auto loan, if you have a 7% mortgage, you need to deal with those first before you focus on building your passive income. And another thing is, if you're not utilizing retirement accounts, then you should focus on those first before [worrying] about other passive income streams. So that's my perspective. I'm a big fan of passive income. It's important to me, I try to grow it. However, I see it as a safety net and supplemental income. Let me know what you think in the comments down below. Please subscribe, thank you for the support, and I wish you a very nice day. Take care.
Where the ClearValue Lending team would start
Brian's video covers the strategy. Here's where our published methodology points business owners next — chosen for fit, not commissions.
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