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Many people choose to invest in real estate because of its low starting costs. With the
availability of loans and mortgages, an average investor does not need to save up much to
invest in real estate. This Snowball Method is a great way for investors who do not have
enough money to start small and gradually build their way up to a diverse and profitable
portfolio.
It follows the idea of building a snowman- you start out with a small snowball and if you keep
rolling the snowball, it will get bigger and bigger as it picks up more snow. This process
works in a similar fashion in which you can start out with a small amount of money and
delegate it correctly so that you can build wealth and passive income streams as quickly as
possible.

 

 

The concept is to start off with one property that you can live in. Renting a multi-family
residence, such as a duplex or a triplex, can allow you to live in a unit and rent the others
out. The rental income can not only go into your mortgage but can also make you enough
passive income for a down payment for your next investment.
For example, if your rental income is providing you with $500 a month in net income, if 500$
is saved for 2 years, then you will have $12,000, enough for a 10% down payment on a
$120,000 property. Now you have two streams of rental income and can save up for your
next investment more quickly. With more income streams, you can quickly save enough
money to funnel into future investments, therefore causing a snowball effect where the more
properties you accumulate, the quicker your portfolio grows. The scalability of this model
makes it especially appealing to beginner investors because it does not take much starting
capital nor real estate knowledge to invest in using this method.
However, maintaining momentum within your investments is tricky, especially since the
success of your properties all depend on each other. It's important to remember these
following strategies in order to maximize your investments and minimize risks.
● Save 100% of your rental income: Or save as much as possible. Especially in the
beginning, when you have only one stream of income, it is important to ensure that
all of your income will go towards future investments. In addition, saving rental
income would provide you with an emergency fund for when a property needs repairs
or if you cannot find a tenant for a period of time. Before investing, check your
finances to ensure that you can live without personally spending any of the income
coming from properties.
● Pay attention to your first properties: The first properties that you would invest in
must be one that will surely bring you profits. Without a good initial investment, it
would be incredibly difficult to grow your portfolio without a steady source of income.
As your portfolio diversifies and you have multiple streams of income you can
depend on, then it is possible to take risks and experiment with different types of
properties.
With these strategies in mind, new investors can use their limited capital and quickly scale it
by using the cash flows from previous investments. With a diverse portfolio of various

properties, investors can have a reliable source of passive income and can build their
wealth.

Sources:

How to Use the Snowball Effect in Rental Property Investing


https://www.coachcarson.com/debt-snowball-plan/

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