Customer Reviews

The Automatic Millionaire Homeowner: A Lifetime Plan to Finish Rich in Real Estate

5 star:		(2)
4 star:		(1)
3 star:		(3)
2 star:		(1)
1 star:		(1)

 

 

David Bach is very much a traditional investment adviser. He believes that over the long haul one can make a fair amount of money by saving and holding on to your investments. In this book, he makes a strong case that, by buying homes to live in, buying up, and obtaining rental properties, you can do very well for yourself. Ultimately, you can become a millionaire.

Still, had you followed Bach's advice in 2005, when this book was written, you would likely be deeply in debt now with no chance to even refinance and take advantage of lower rates. That is because the real estate market was in serious straits in 2005 and Bach, despite his reservations about 0 down mortgages (30% of the market the previous year) and interest only loans (a similar percentage) was overly optimistic about real estate. As an investment, it had "never" experienced a year over year decline, he noted, citing national figures. (Nothing like 4 consecutive contrary years to suggest a problem with the initial stat!) Sure, if you are able to hold on through the current economic crisis, then in a decade or so, you will come out ahead, but in the meantime, it would help if your investment advisor could tell the difference between cycles in real estate and a bubble brought on by irresponsible government policies and banks that were more than eager to accommodate them. Indeed, Bach suggests that one of the reasons real estate will continue to go up is because subprime mortgages are so common now (2005). Talk about a serious misreading of the market!

But once you get past the hype, a fair amount of the advice in this book is valuable. Bach does give good suggestions for saving up a down payment, finding a good mortgage and a good real estate agent. The book is strong on negotiating favorable mortgage terms, weaker on negotiating a good closing price on the house you decide to buy. And he also is helpful when it comes to assessing the various purchase options you will face.

But even in this more reasonable part of the book, Bach is somewhat superficial when it comes to explaining how you can profit from homeownership. He correctly notes, for example, that you can deduct the interest you pay from your taxes. But he does not note that to do this you will need to itemize instead of taking a standard deduction. You will almost certainly come out ahead, but it should be noted that in foregoing the standard deduction you are, in effect, not getting to write off your full interest payment. Similarly, his description of real estate profits is a little superficial. Let us suppose, he suggests, that you buy a house for 200,000 with 40,000 down. If it appreciates 10%, to $220,000, you can sell the house for a "50%" profit minus your payments. But realistically, your payments will eat up most of the profit. Real estate historically appreciates at 6% per year. So figure about 20 months to get your 10% appreciation. Now, you have paid 20 months of payments, which at 5.5% comes to $1,134 a month. You have already spent the full appreciation (and then some) in payments, with only minimal progress on your principal. And you still owe your agent her commission.

So the question comes up, should you buy a house at all? The best answer is "maybe." If you are going to do so, now (2009) is probably a good time, if for no other reason than you face considerably less downside risk than you did in 2005 and the Obama administration is going to kick in a "free" $8,000 tax credit. Since you can expect other expenses to rise over the next few years, I strongly recommend getting what you can. But remember, rent buys you more than just a place to stay. It buys freedom to move at the drop of a hat which is something home owners definitely do not have, especially in this economy. So in the final analysis, don't expect homeownership to make you an automatic millionaire. But it may provide some security, especially if you lack the discipline to systematically save in other ways.

The bottom line, use this book to help you purchase a first home, IF that is what you want. But take the investment advice that is scattered throughout the book with a certain degree of skepticism. It is not so much "wrong" as it is incomplete, and the years since 2005 have highlighted the weaknesses of these arguments.

Readers of The Automatic Millionaire Homeowner need to manage their expectations. At a mere 244 pages, you shouldn't expect it to delve too deeply into any one aspect of home-ownership. If you are hoping for an advanced and detailed discussion of borrowing against your equity to purchase a second property, then you'll likely be disappointed. If you are, however, simply seeking basic information on the home-buying process, how to choose a good realtor, where to research mortgages, and potential alternative options when considering real estate investments -- this is exactly the type of book that can help you gain basic knowledge while hopefully inspiring you to think a bit differently about the place you call home.

Much of the premise is implicitly based on being at the right place at the right time (e.g. purchasing and selling a property from 1993-2005 like him!), but that does not discount the usefulness of his advice. The point is that long-term patience and focus in home-ownership can eventually lead to wealth. The author does attempt to warn the prospective buyer about risky mortgages, market changes and bad choices by writing Ch. 11 entitled "How To 'Bubble-Proof' Your Real Estate Plan - And Survive a Downturn," though this short caveat probably could have been longer and more forceful considering all the previous urging on his part to "go for it" and "jump right in"!

No doubt the housing market is a much different place than it was in 2005, but the book is by no means obsolete. It is still useful today for the uninitiated home-buyer or renter lacking the basics.

This book is a 5 star book if you are looking for a book to inspire you to be a first time home owner. 80% of this book explains the entire process of how to become a homeowner, it would have been very helpful to me before I bought my first home 16 years ago. He explains mortgages and how they work, what kind of real estate agent to use and what to look for in making your choices. 20% of this book explains why it is important financially to own your own home. For example: Homes rise in value on average 6% a year. So if your home is valued at $100,000 it will grow in value by $6,000 a year. This can add up quickly in equity and will turn out to be one of the greatest investments you have ever made. David Bach believes that home ownership is essential to becoming an automatic millionaire. This book briefly discusses how wealthy you can become by keeping your homes as rental properties as you trade up to larger homes. This book is not about "flipping" properties it is about owning them for the long term. I would highly recommend a beginner in real estate or personal finance to read this book it will be very useful, however this is not for current home owners or real estate investors. I will be giving this book as a gift to my children when they turn 18. Owning a home is essential to financial success, even though I am uncomfortable with Mr. Bach's advice to leverage debt for multiple houses. My first starter home made me $40,000 in 10 years when I sold it, which was a huge contributor to my net worth. If you want to build wealth buying your home is essential along with your 401K contributions, and living as debt free as possible. With the current horrible housing market this is the best opportunity to buy in decades. Pick a starter home in a growing area and watch its value grow while you lock in payments that do not increase with inflation. Live the American dream, buy your own home.

This is a fantastic book whether you own or are purchasing a home. Mr. Bach has some great tips to help you out along the way. I would highly recommend this book to anyone and everyone who wants to "finish rich".

This was a waste of time and money with very little value of information . For a first time investor this book has very little help. Rich Dad Poor Dad Real Estate investing has usable info, with the added benefit of free property evaulation work sheets that are the back bone of any real estate investment !

this is the book for you. It offers basic knowledge for a young person who is looking to buy their first home. This book, however, is not for someone who is looking to start over, reestablish themselves, has or had credit issues. It offers no suggestions to help people who are trying to get out of debt or who have made mistakes in real estate.

I do agree that this should be required reading for graduating high school seniors. Because if you're not diligent from the very beginning, David can't help you!

This is a good "breadth" level book for people looking to buy a home and build wealth through real estate - it covers a lot of different topics related to building wealth in real estate, though it doesn't really dive as deeply as needed. In terms of the pros, I think David is clear that flipping or getting rich quick is not viable in the long run. He also recommends safer mortgages. I think, however, the right combination to get you to buy a home is to read 2 books:

1. The Total Money Makeover by Dave Ramsey - this will tell you how to get your life in order so you can maximize your savings and cut debt, based on the income you already make today. It is important to first correct your spending habits before people venture into buying a home, which for many, will be the largest financial purchase they will ever make.

2. Home buying for dummies - once you do get your finances in order, the dummies book, I felt, is a more useful guide to get you to buy a home.

This book has it's merits, but I wouldn't buy it. I would recommend borrowing it from the library and getting through it in about 4-5 hours.

Hope this helps.

I am glad to have bought the book because it had some good points but nothing that I couldn't have found on google myself by doing a search.