on March 17, 2006
David Bach came to fame as another of Oprah's protégées. He is another self-appointed financial guru that caters all those millions of Americans that haven't figured out yet that is better to save than to get the balance of your credits cards thru the roof.
He publishes about one book a year with different title and cover but same content, just know that if you have read "The Automatic Millionaire" or others there is no need for you to buy this book, there is nothing new here.
All things being fair he has offered in the past good and common sense financial advice, all that ends here with "The Automatic Millionaire Homeowner". The advice is bias; we know that Bach is now readily accepting endorsements from banks and financial institutions of the likes of Wells Fargo. This is also one book centered on the "glamour" of real state. Just makes it look so easy; but reality is that not everybody is prepared to invest on real state, the risks are tremendous and of course this book does not cover them deep enough.
It also states that owning is cheaper than renting, which it's true in most cases, but then again, check your financial situation before jumping to ownership and make sure you can handle it. By owning your expenses will increase and possibly double, apart from down payment and mortgage payments, you will have to pay insurance, taxes, trash removal, sewer, water, maintenance, utilities (if you move from a condo to a house this bill may be up to ten times higher than it used to be), and the list goes on, so understand what you are getting into and make sure your monthly cash flow can handle it.
The most concerning part of the book is the one devoted to the different types of mortgages. It advocates very risky choices like interest only loans, no down payment options with not enough emphasis on the risks involved. Again educate yourself before being lured into any of these very risky propositions. Remember that the rate of foreclosures is skyrocketing in this country and one of the main reasons is the amount of people that find out that can no longer make their monthly payments because they picked one of those mortgages and suddenly the monthly payment is much higher than it used to be.
Do not allow that to happen to you, for sure you will find somebody to give you a loan regardless of your financial or credit situation; take the time to understand what you are getting into, or there will be no financial guru out there that will save you of the consequences.
Summarizing, skip this one, if you want fair and no bias advise pick any of Bach other books and keep it simple, make a plan, save and one day, sooner than you think you will be able to get a house and call it your own without jeopardizing your future and your family's.
on March 26, 2006
The best in the series was the first book. He was careful in detail, respectful to the reader, and not sold out. There is a lot of decent advice in this book and he does not commit some of the sins he has been accused of by other reviewers. But, the book is not particularly timely (this is the kind of book that potential homeowners needed to see circa 2000) and it does seem to cater to the mortgage industry although with careful selection this may not be bad for most people. Despite the claims of several reviewers, the stories that drove the other books are also here in this book. I don't believe it is the complete rehash of the older books some others claim, but today it is hard to determine the market for this book. Most people that have enough money to buy a house are doing so or have done so, and many of those left are the nonqualifying mortagages and no-down-payment types. To write a book supporting those activities may not be a particularly consumer friendly thing to do in these times. Also, the rental and flipping advice seems trivial and flip. Plenty of people have been "gotten" in both activities. Real estate does not go up everywhere. Nevertheless, this book does contain, on the whole, some pretty good advice for the first time homeowner and the author does mostly recommend 30 and 15 year mortgages.
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.
on March 18, 2006
Bach keeps taking the same information and recycling it with new titles. You just need one of his books and you will have enough information. 'Smart Women Finish Rich' or 'automatic millionaire' is enough.
Second, he encourages people to buy now and does not emphasize the risks strong enough. He encourages risky mortgage options to people with little financial experience which could get a lot of peopel in hot water if they are not careful.
third, he is buying into the real estate boom just like everyone else. This was the right time to write this book and make money so keep that in mind.
Four, he is really pushing that everyone buys a home NOW. this is very, very bad advice. He even encourages people with no down payment to look into risky options like piggyback loans without thoroughly going over the risks. not everyone should buy NOW and real estate CAN lose value. investments go in cycles just like anything else. People in California were in a real estate RECESSION for ten years. so these gurus who tell you real estate will never drop are full of it. You need to have enough money and you need to get a mortgage you can afford regardless of what the bank will give you. Buying now is NOT right for everyone, especiially if you plan to live in your house less than 5 years, you might be forced to sell as the market is sliding, and then you'll have all those people from the foreclosure seminars circling around you.
Be careful. There are much better books on the market about real estate that very throughouly tell you all the risks.
Remember how everyone had to buy stocks during the dot-com boom and look what happened. the market is still down from its peak in 2000. Again, buyer beware.
on March 21, 2006
In response to a lot of these negative comments I thought I would take the time to qualify some of the content in this book.
I personally thought that the chapter on mortgages was fairly comprehensive and fair in explaining the pro's and con's of each type of mortgage.
Even though other reviews say that the author encourages "dangerous" "no-down loans", he does also state that a 30-year fixed is what he would personally recommend and also says that its the safest type of loan. He includes both sides of the argument and doesn't necessairly encourage the reader to over-strech oneself financially. If anything the author recommends using "rules" recommended by HUD and other goverment organizations that say stick with between 24-40% of your gross income. He includes a table that show what amount of mortgage would be reasonable for a certain income. He encourages to stick within these bounds and not use up an upwards of 50% of one's income towards monthly payments because its too risky.
I also don't think he is recommending to buy/own a house at all costs. But I do think he has a reasonable argument to say that the returns on buying a house could be advantageous over investments in equity/stocks/etc, considering the fact that he is recommending this "automatic" method needs to be a long-term investment. Sure the real-estate market can deflate for a few years, but he argues that if you stick through it, the average return on real-estate has been around 6% for the past 60? years. Factor in the fact that you can deduct interest paid from your income and the return on the investment rises even more.
In addition to the chapter on "Mortgages", the chapters on "saving up for a down payment", "finding a mortgage lender", "finding a realtor/real estate", are all have helpful information for those just starting out. I'm sure there's other books that will go into greater detail for each of these topics, but the author does a decent job summarizing each aspect while still covering a lot of information. There are a lot of good recommendations for different websites that could be of further help.
I would agree with the other reviewers that some of his content is recycled, but a lot of the material is new. If you are unwilling to spend the money, just go to a bookstore and read a chapter you're interested in and decided for yourself whether its all fluff or if there is information that is worthwhile. You can even go to his website and download the accompanying mp3's for free.
In the end, the book does a fairly good job of summarizing all the major steps of owning a home/investing in real-estate and why he believes that this financial decision can lead to great returns.
on March 7, 2006
I've read some of the author's other books. This is, by far, his worst.
Among the many flaws of this book:
- lack of anecdotes: perhaps because the author lacks much experience in real estate
- superficiality: there are few checklists and thorough descriptions of pros and cons
- redundant material from the author's other books
- mediocre writing: book reads like a rush job
- simplicity: he makes real estate investing sound like something you can just snap your fingers and do quickly
- dangerous advice: he encourages risky interest only and other loans without any mention of large risks and foreclosure.
I recommend that you save your money and skip this title.
Instead, I recommend the following real estate books which I have read and grown from:
- Real Estate Investing for Dummies by Tyson and Griswold
- Home Buying for Dummies by Tyson and Brown
- John Reed's real estate books (those of general interest)
- Buy and Hold Real Estate Strategy by Schumacher and Bucy
on May 22, 2006
This book was a disappointment. The author praises one couple who created wealth by keeping their principle residence and turning it into a rental property. Then they refinanced it bought a newer larger principle residence. The problem with this advice is, because the refinaced mortgage proceeds were NOT used for investment purposes, the mortgage interest CANNOT be claimed as a tax deduction. Anyone with basic real estate investment knowledge knows the principle residence could have been sold (capital gains free), the majority of money from the sale could have be used to buy the new principle residence and the remainder of the proceeds from the sale used as a small down payment on another rental property. This would have minimized the size of the non tax deductible mortgage on the principle residence mortgage and maximized the size of the tax deductible mortgage on the rental property. This is basic information. The author then praises another couple who does sell their principle residence and uses the proceeds as down payments on a new principle residence and two rental properties. He also says the couple were able to pay large enough down payments on the rental properties to create a significant positive cash flow from them. Once again this is not efficient tax planning. The mortgage on the principle residence should have been minimized because it is not tax deductible and the mortgages on the rentals should have been made as large as possible to reduce positive cash flow (and income tax payable) and maximize the mortgage interest deductions to the couple. I would expect someone writing a book on real estate investment to think this information would be valuable to their readers. Unfortunately the author also does not give completely accurate information on the first time buyers' RRSP plan. He states this plan is only available to people who have not owned a home in the last 5 years. This is not true. It is available to people who in the last five years, have not lived in a home they own. (you can be eligible for the plan and own a home). I know for a fact this is true because, I owned two rental properties (that I never lived in) and applied for, was eligible and used this plan to buy my first principle residence. I would expect an "expert" who gives financial advice to know this basic information.
Mr. Bach spends much of his book telling you that he will be telling you the secrets to financial success, instead of actually giving usefull information. I found no new information in it. I have to agree with the other reviews who say if you have read one of his other books, you should not spend your money on this one.
on April 17, 2006
I must admit that I feel as though David Bach recycles the same information in all of his books too. I was actually surprised that there was new information in The Automatic Millionaire Homeowner though. Since my husband and I are homeowners, I felt as though this would be a good read for us. I was disappointed that there wasn't enough information for people who already own. I felt like this book is a great read for renters and first time homebuyers but there wasn't enough information for those interested in becoming landlords.
on March 26, 2006
Three things concerned me. First, as most other reviewers pointed out, much of the info could be gleaned from the other books. Like grade school math, half the year (book) was spent reviewing what was done the previous year (book). Second, the author tried to say that markets vary across the nation, yet all his examples were San Francisco or New York with multi-hundred-thousand-dollar apprecations in a couple years or less. That doesn't happen in the rural Midwest. Third, I was hoping for more info on being a landlord, specifically, passing on the day-to-day management to a management company. Also, cash-out refinancing means new closing costs, which we know is not typically cheap. I don't think the author emphasized that.
on April 10, 2006
I read David Bach's other book called Smart Couple's Finish Rich and Loved it. I was pretty disappointed with this one. It had very repetitive information in it compared to his past books. It was very simplistic and I think it would be good for someone who has never purchased a home before. My husband and I are on house number 3 between the 2 of us and are experienced with investment property, so this book was too elementary for us. Might be a good read for a first time home buyer with little experience in real estate.