Learn How To Start Investing In Real Estate
Learn How To Start Investing In Real Estate

How To Retire Early With The Debt Snowball Method

Written by Paul Esajian

Key Takeaways

  • The debt snowball method is a strategy used to pay off consumer debt.
  • Proponents of the method believe that its effectiveness stems from behavioral change.
  • Acute investors know how to apply the debt snowball method as a way to own their real estate investments free and clear.

Have you ever heard of the debt snowball method, and did you know it can be used to your advantage in real estate finance? Not only is it a valid strategy for owning properties free and clear, but it could also be your roadmap to retiring early. Before getting into how it can be used in real estate, it is important to get to know the basics of how debt snowballing is used to pay off consumer debt.

What Is The Debt Snowball Method?

The debt snowball method is a strategy used to pay off consumer debt. Popularized by financial author Dave Ramsey, the snowball debt reduction method focuses on paying off debts in order of smallest to largest. Ramsey argues that tackling the smallest debt first allows you to see progress more quickly. Upon experiencing this satisfaction, you are more likely to stick to your plan and build momentum. This momentum leads to behavioral change that helps you stay out of debt in the long run.

How Does The Debt Snowball Method Work?

The debt snowball method works by incrementally increasing your budget to pay off debts until all accounts are eventually settled. In the first phase, minimum payments are made on all accounts except the one with the lowest balance. Here, you will focus on putting any extra funds that can be scraped together to pay off the account as quickly as possible. Next, the freed up monthly payment that used to be put toward the first account is “snowballed” into the payments made toward the second smallest account until it is paid off. As you repeat the process, your budget for paying down your debts will grow significantly. Your goal of becoming debt-free starts to approach at a faster pace as you gain momentum.

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Snowball method debt

Using The Debt Snowball Method To Retire Early With Real Estate

The snowball method can also be used as a way to pay off real estate debt. Many investors will buy and hold rental property, hoping property values and rent prices will appreciate over time. Although this method works perfectly well, those who leverage the snowball method for paying off mortgages can grow their property portfolios more quickly, and eventually own all of their properties free and clear. The following is an example of how it works:

Let us say that you use your savings to invest in four rental properties at once, being careful to secure low-interest mortgages for each. Instead of paying the minimum on your mortgages and pocketing your rental income, you employ the debt snowball method. This means that you take 100 percent of your cash flow, plus any extra savings you can set aside, to aggressively pay off the mortgage with the lowest balance until it can be eliminated. Because you are still generating income off of four properties, but only have to make mortgage payments for three, your cash flow has increased significantly. Next, you use the freed up cash flow, plus any other income you can set aside, to pay down the second mortgage, and so on. The snowball method remains in effect until each mortgage is paid off, which you may notice becomes easier and easier each time.

Although this method can take many years, delaying reward and working diligently toward the goal of owning properties free and clear is worthwhile for many. Instead of tying up cash flow in mortgage payments, they will have free reign to use their rental income however they would like. Some investors will use the extra cash flow to continue buying rental properties, and repeat the snowball method for several cycles. Owning numerous income-generating properties, without having any mortgage obligations, can give you the financial freedom to retire early or live the lifestyle that you desire.

Benefits Of The Debt Snowball Plan

When implemented properly, the debt snowball approach can help investors own multiple properties free and clear. Here are some of the unique benefits enjoyed by those who follow the debt snowball plan in real estate:

  • Planning and control: This strategy is a good fit for investors who wish to have control over their wealth-building activities. Investors can purchase income-producing properties and customize their mortgage payoff plans by conducting their own research and deal analyses.

  • Improves over time: It’s easy to lose steam when working toward a long-term goal, especially when it’s hard to measure your progress. The snowball method provides the psychological benefit of experiencing visible, measurable progress that results directly from your actions. Mortgages also get paid off at a faster pace the longer you stay committed.

  • Flexibility: Those taking advantage of the snowball plan aren’t forced to stick with it in case circumstances change. The rate at which mortgages are paid down can be slowed or stopped as needed, as long as the minimum payments are made. Investors also have the flexibility to use their freed up cash flow as they please. They can choose to invest in additional rental properties, as well as continue working toward an early retirement goal.


The debt snowball method is a well-known strategy for getting out of consumer debt, but the idea of applying it in real estate may be a best-kept secret. Real estate investors can use the method as a strategy to pay off their mortgages as quickly as possible. When successful, they can own several income-producing properties free and clear, and have the flexibility to reinvest their freed up cash flow as they please. While this strategy requires patience and diligence, as it can take several years to pay off, the reward of being able to grow your investment portfolio and retire early can be well worth it.

Have you ever calculated how you much extra income you would have if you no longer had to make mortgage payments? Are you enticed to try your hand at the debt snowball method to see if you can reach that goal? Feel free to share in the comments below.