Why ‘smart home buyers finish rich’

If you only read one real estate book this year, “TheAutomatic Millionaire Homeowner,” by David Bach, should be that book.Whether you are a renter considering purchase of your first house or condo, acurrent homeowner, or a seasoned realty investor, this common-sense book willreinforce what you probably already know even if you resist facing the facts.

The book has two themes: 1) ordinary renters can becomemillionaires by investing in their first home, and 2) that home can become thefoundation for buying a better home and/or investment property in future years.

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As the book’s introduction says, “Homeowners get richand renters stay poor.” Bach then proceeds to build on that simplestatement, backing it up with facts and many real-life examples to make thebook easy reading, enjoyable, and profitable.

“Nothing you will ever do in your lifetime is likely tomake you as much money as buying a home and living in it,” the authoremphasizes. In the first chapter, Bach relates the powerful true story of Johnand Lucy Martin, now retired in Phoenix, who bought their first home and used itto pyramid their way to a better home and even rental property.

After explaining why smart home buyers finish rich, theauthor then proceeds to explain how to automatically save for a home downpayment. He emphasizes the key is depositing your paycheck directly into yourchecking account and then automatically having the bank take out a specifiedmonthly amount and putting it into a separate home down-payment account.

Bach calls this method the “latte factor” and the”double-latte factor” to determine the minimum amount to be savedeach day and each month.

To illustrate, he says if you spend $7 a day on a morninglatte and nonfat muffin at Starbucks, that’s $210 a month minimum, which can beautomatically saved.

“If you’re looking for a fast way to save for a home,the bottom line is that it’s all about the small stuff,” Bach advises.

Next, while you’re saving for the down payment, Bachsuggests looking for a mortgage adviser you can trust. He explains thedifferences between a direct lender mortgage banker and an independent mortgagebroker, who can shop among many lenders to find the best mortgage for yoursituation. Most important, Bach advises to never pay up-front loan fees andjunk lending charges.

The author heavily emphasizes the different types ofmortgages available, such as fixed and adjustable, and when each is best. Hegoes into considerable detail about the pitfalls of adjustable rate mortgagesand why they can be dangerous for homeowners. Then he launches into discussingthe pros and cons of “interest-only” and “option”mortgages.

Bach says, “The Automatic Millionaire Homeowner is along-term buyer who plans to live in his house for many years like the Martinsdid and weather the cycles of a real estate market that goes up and down. Thismeans getting yourself a mortgage that makes sense for the long term.” Inother words, this is not a book for “fast-flip” speculators.

Almost half the book is devoted to obtaining a lender’swritten pre-approval letter before beginning to shop for a house or condo. Thereason, Bach explains, is your home is your best route to becoming amillionaire and financing is ultra-important.

The author is not opposed to buying a home for nothing downif you qualify. But he explains how to avoid the dreaded PMI (private mortgageinsurance) premium by using several finance alternatives.

One topic that Bach unnecessarily complicates is hisexplanation of how a bi-weekly mortgage can cut five to seven years off a30-year mortgage’s life, thus saving thousands of interest dollars. He says itis all right to pay the lender a $200 to $400 set-up fee, plus a monthly fee upto $6.95 to create a bi-weekly mortgage payment plan.

But he neglects to even mention the same result can beaccomplished at zero extra cost by dividing the monthly principal and interestmortgage payment (excluding taxes and insurance) by 12 and adding that amountto each monthly payment to pay down the principal just as fast as a bi-weeklymortgage.

Chapter topics include: “Meeting the AutomaticMillionaire Homeowner”; “Why Smart Homeowners Finish Rich”;”The Automatic Down Payment Solution”; “How to Find a MortgageAdvisor You Can Trust”; “How to Get the Best Deal on YourMortgage”; “Find Yourself a Home the Smart Way”; “How toHire a Great Real Estate Coach”; “Make Your Mortgage Automatic andSave $106,000 on Your Home”; “From Ordinary Homeowner to AutomaticMillionaire Homeowner”; and “How to Bubble-Proof Your Real EstatePlan and Survive a Downturn.”

This is one of the few real estate books that cannot be recommendedtoo highly for both beginner and experienced homeowners. It simplifies what canseem complicated. So far, this is the best real estate book of 2006. On myscale of one to 10, it rates an off-the-chart 12.

“The Automatic Millionaire Homeowner,” by DavidBach (Broadway Books, New York), 2006, $19.95, 244 pages; available in stock orby special order at local bookstores, public libraries, and www.amazon.com.

(For more information on Bob Bruss publications, visit his
Real Estate Center
).

Copyright 2006 Inman News

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