Money And Investing  -

The Automatic Millionaire Homeowner, David Bach

07 02 06 20 23

-------- Stop Renting Now

-- A book for anyone doubting if they should join the Real Estate market now. “Nothing great is ever easy – and it is almost always scary”. (quote from book) The author does a great job at explaining why Real Estate is a sound investment, and why even in an uncertain Real Estate market as the one we face in 2006 acquiring a property may be a good idea. He also explains why he believes Real Estate will continue appreciating at a very good rate, especially in the following couple of decades. He then proceeds to guide you through the basics of what you should to get a house, saving for down payment, keeping good credit scores, choosing the right mortgage for you and working through the purchasing process. You don’t find the details on what to look for in a house, what to watch for in the legal process of buying a house or any of the other mechanics of the process. The Purchase and Sale Agreement part of the process is missing from the book, as well as the extremely important advice of getting a lawyer with Real Estate experience before or at the same time you are searching for a bank and it’s pre-approval. But then again, there is only so much you can cover in less than 250 pages, and thats why you get a lawyer or Real Estate agent -- to guide you through the specific mechanics of the process.

After an overly optimistic introduction the author recommends being realistic and acquiring your first property – or any property for that matter – well within your means. He stresses the importance of living in a house that doesn’t stretch your budget to the limit so that you can have the flexibility of involving yourself in other investments. This is of utmost importance even if it probably means delaying your dream home for your 2nd or 3rd purchase.

The main reason he stresses you to be within your means is because the way he advocates on how to become millionaire is to acquire more properties. He suggests the equity built in your first house as a springboard for your future investments -- accumulating properties that bring positive cash flow and will allow for an easier life in the future. I have done something similar.

He is a true believer of taking advantage of electronic banking procedures that automate wealth buildup. He recognizes the human nature of procrastinating, especially when things are not fun to do – and financial matters are only fun when the check comes. When ether you use this advice towards the purchase of a home, creating wealth using real estate, or to invest in the market, it may be the single most useful piece of advice in personal finance: Automate. It may sound cliché, but most people don’t realize that they can still automate more and build wealth faster.

Book is well organized, and has online support by both: 1) providing website links of where to find more information about the topics discussed and 2) providing extra content on the book’s website.

In some things I may be wary of the advice. The author is too benevolent and over condescending of realtors. Maybe he wants them to market his book. I do admire some Real Estate agents: my brother was one. I do suggest that for your first property you get one involved, or at least give him/her a try. However, it is possible to buy and sell properties without using them, as I have done, it just some extra work and a lot of research. With a bad Real Estate agent you end up doing all of that work anyway. With a good one you get better value than if you did it.

Also, there is a lingering question in some financial circles. Do we have too many landlords? “A quarter of all purchases in 2004 were for investment purposes.” (The author states and it is easily verifiable through realtor’s associations.) Yet, only a quarter of the population live in rental housing (which is not the same quarter, one of them is absolute and the other is the sales in just one year). Will we get to the point where people have just too many houses? He points out the need for more real estate, but could it that the desire everyone’s have for second properties will make enough inventories to satiate growing real estate needs? I do not think he does a full and complete job of addressing the “too many landlords” concern. I do believe Real Estate is good investment, so he doesn’t have to convince me. I am a subscriber of Mark Twain’s idea: “Buy land, they don’t make it anymore.” He may need some work convincing everyone else.

If you are currently renting it is a must read!

“… if that’s all you do – just buy a house, pay it down early, and live for the rest of your [life] while its value appreciates – that’s still a lot better than renting for the rest of your life and making someone else rich!” – David Bach

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