Book Review: The Automatic Millionaire Homeowner


Ah, David Bach.  I like you; you give out good advice, promote a long term view, and encourage automation of everyone’s expenses, all of which appeals to me.  Your book, The Automatic Millionaire, is clear guide to setting up your expenses, and it’s become one of my favorite investing books.  Because of all this, I picked up another of your books with great interest.

Alas, I think I  had bad timing when I first read through The Automatic Millionaire Homeowner.  It was just after the real estate market started to collapse, when it was hard to believe that there was still a way to make a profit from real estate.  If I wasn’t already a Bach fan, I probably would have just passed it up like all the other real estate books.  But I decided to pick it up, give it a read or two, and actually walked away with a bit more knowledge as a result.  Let’s take a look inside, then.

Summary

The Automatic Millionaire Homeowner is essentially a guide for the first time home buyer, wrapped up in David Bach’s particular philosophy of money management.  If you’ve read any of Bach’s books (or the review of The Automatic Millionaire I linked), you should probably be familiar with many of his points: automate your expenses as much as possible (applied here to saving for your down payment and paying your mortgage) and cut down on the small, everyday expenses (like that morning Latte).   The basic plan he tries to express is that by buying a house, living in it, paying off the mortgage over time, and then using the equity in the house for other purposes, such as buying rental property, by selling the home or taking out a home equity loan.

Much of the rest of the material in the book covers some of the basics of home buying.  The first few chapters, on saving for the down payment and why home ownership is a smart idea, should be familiar to anyone who read his earlier works.  The later chapters, though, start to cover the process of buying a home in much greater detail, from choosing a mortgage and a mortgage broker to finding a real estate coach and starting to buy property as an investment.  He also touts his preferred biweekly mortgage plan (wherein you pay down your mortgage with a half payment every two weeks rather than a full payment every month, leading to 13 full payments per year vs. 12), a sound plan in principle, but one that draws much fire from other financial gurus.

Pros

-Easy to follow: One of Bach’s biggest strengths as a writer is being able to write in a friendly, easy to understand fashion.  Whether discussing all of the types of mortgages that exist (or used to exist) or explaining how to choose a mortgage broker, he makes every step of the home buying process easy to understand, even to someone like me who has never purchased a home.  Combine that with the step-by-step instructions he gives at every stage of the process,, and you have a very helpful and informative book.

-Lots of Details: If you are a fan of charts and graphs illustrating what happens in different circumstances, Bach has you covered there, as well; you find plenty of information to help make decisions on how much to spend on the house, what sort of mortgage to take, and how long it will take you to pay it off.  You’ll also find lots of sources listed for more information, from online banks to save up your down payment to the Department of Housing and Urban Development.  In spite of the details, the book never seems overwhelmingly stuffed with information; you’re given just enough information to help you find what you need on your own.

-Encouraging Tone: Reading a Bach book is a bit akin to getting a lesson from someone who is part professor and part cheerleader.  He not only makes the material easy to understand, but also adds his words of encouragement and kudos to the readers, attempting to motivate them into taking action.  The result is an uplifting, very hopeful book.

Cons

-A Bit Gung Ho: At times, it almost feels as if Bach is pushing you into home ownership, regardless of your wants or desires.  The entire second chapter is devoted to reasons why ‘homeowners finish rich, and renters don’t’, for example, which ignores that there are valid reasons for continuing to rent (need for flexibility, rapidly changing life circumstances, etc) even during a positive real estate market.  It even feels as if he is pushing a home ownership agenda upon you at some points in the book, and when you get to the end, you realize he is…

-Questionable Associations: At the back of the book, it’s revealed that Bach has partnered with Wells Fargo to promote home purchases.  Now, I’m not saying that there is anything nefarious occurring there; such business and promotional relationships are quite common, and it seems as if Bach did nothing untoward in his attempts to promote this Great American Homeowner Challenge (c).  But, it does cast a bit of suspicion on the rest of the book, in light of Bach’s attitude.

-Somewhat Outdated: Again, I purchased the version of the book made in 2006, when wild and off the wall mortgages roamed the Earth and anyone with a pulse could get a house.  As a result, some of what is described in this version in terms of mortgages, minimal down payments, and requirements to get credit seems out of step with the current real estate climate.  There is a newer version of the book, though, which might bring some of these issues up to date, so consider this a tentative con to the book.

Overall

If you’re new to purchasing a home of your own and want some simple, hand holding advice on where to go and what to do, you could do much worse than The Automatic Millionaire Homeowner.  As a simple, very articulate guide to home buying, directed at the neophyte homeowner, it serves quite well.  Just take Bach’s concerns about renting as opposed to buying with a grain of salt, and consider your own situation (now and in the foreseeable future) before you make any big, life-changing decisions, and you will find this book a valuable resource.

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