What is a real estate snowball machine?

The concept of a "real estate snowball machine" refers to a method of building wealth through real estate investments by reinvesting rental income and profits to acquire more properties. The snowball effect describes how initial investments generate income, which is then used to buy additional properties at an accelerating pace, much like compounding interest but with real estate.

For instance, once you own several properties, the rental income allows you to purchase another property more quickly, thus accelerating the building of your portfolio. Brad Barrett discussed this with Rich Carey on the ChooseFI podcast, explaining that the more properties you own, the faster you can acquire new ones due to the increasing rental income and savings from existing properties 1.

Rich Carey illustrates this by noting how initially, with six houses, he could save enough rental income in a year and a half to buy a 7th house. Later, with ten houses, it took only eleven months to save enough for another property, highlighting how the process accelerates 1.

In summary, the "real estate snowball machine" is about starting with a few properties and continuously reinvesting the rental income to grow your real estate portfolio exponentially.