Review of Automatic Millionaire Homeowner by David Bach

I received a preview copy of David Bach’s newest book Automatic Millionaire Homeowner. This is the first “Automatic” book I have read. I have to say that I really enjoyed it. There is one word to describe David Bach: optimistic. This is an optimistic book – maybe a tad too optimistic but we’ll get to that later.

The whole idea behind this book is that you, the reader, can become a millionaire simply by owning a home. Of course, that’s not all there is to it, but for the most part, Bach believes that by knowing how to manage home ownership, the average person can become a millionaire (at least in net worth) over a lifetime. Now, before I go any further, I want to say that this isn’t a get-rich-quick book.

The book opens with a conversation that Bach had with a couple he met at a seminar he was giving. Me being the skeptic that I am, wondered whether or not this conversation really took place. Nevertheless, this couple told Bach about their lifetime experiences in homeownership and about how those experiences made them millionaires. What was fascinating to me is that this couple really did nothing that extraordinary. They simply started out small and gradually moved on to bigger homes over the years. It’s an interesting opening for the book and made me want to continue reading.

Where Bach seems to be too optimistic is when he talks about how much home a typical person should be able to afford. He uses the standard provided by the Federal Housing Administration, which states that the average American should be able to afford to spend 29% of their gross income on housing costs (mortgage, taxes and other related expenses). If they have no other debts, they should be able to spend 41% of gross income on housing. He then goes on to say that a family that makes $50,000 per year could easily carry a $200,000 to $300,000 mortgage. That just seems too high to me. It seems like you would be living to pay your house note.

The book is full of all sorts of checklists and useful websites. It’s a great resource for pretty much anyone who is a homeowner or wants to become a homeowner. He gives tips on what to ask a mortgage broker as well as advice on what to ask a realtor BEFORE you hire them. He also offers advice on how to make your mortgage payment automatic and save thousands of dollars in interest over the life of the loan by simply paying your mortgage note every two weeks rather than once a month. I’ll write more about this idea at a later time.

This is a great book. It is one that would make a great gift for a young married couple just starting out or someone approaching retirement. It has JLP’s Seal of Approval.

BLOGGERS: If you have reviewed this book, send me an EMAIL (not a comment) with the link to your post and I’ll include a link to your review.

11 thoughts on “Review of Automatic Millionaire Homeowner by David Bach”

  1. Yea, I am pretty skeptical about the FHA numbers too. I read his first “Automatic” book and was impressed. He discussed accelerating your mortgage payments in that book as well. In addition, the first couple got most of their money through home ownership as well. They bought their first home, accelerated the payments, and moved into a bigger home once they have it free and clear. Then, they rented out the first home for a steady stream of additional income. By the time the husband was fifty, they had the second house paid off, and he was ready to retire. It made me wonder if this new book was even necessary.

    However, the advice is pretty good, and is mostly common sense. The hardest part is actually applying it and sticking to it.

    But, I do not think people should get that devoted to paying their mortgage. 41% is EXTREMELY high. And, just because you make less money does not mean other expenses are less. For instance, healthcare probably is a larger portion of your income if you make less money. Chances are, if you make more money, you get better health benefits. My family is a bit better off than the $50K, mark, but I also have three kids, so I am sure we are about in the same boat. We are at 19% for our mortgage to income ratio, and I would certainly feel better if it were 3-4% less of our income. I certainly do not think that someone who makes $50K a year could really afford much over $150K mortgage. If it is a single person, and he/she has no life, he/she may be able to swing a $200K mortgage… but what would be the point? How much space could a single person really need? He/she certainly is not going to be able to fill that space with much “stuff” without a lot of consumer debt.

  2. By the way, JLP, I see you have links to Amazon for Millionaire Maker. I read that last week, and I have had no luck with, or reaching anyone there via email. I registered on the forums, and I cannot log in. Have you tried any of it? I am trying to find some good info from her on truly self-directed IRAs.

  3. My first question was going to be…is this book worth getting if I already read The Automatic Millionaire, but since you didn’t read that one, can anyone else answer?

    I would also have to agree with both you and Dus10…41% seems like it is a really high ratio. My ratio is probably around 24% and I would love to see it be lower.

    I also wonder about the advice to pay off the mortgage early. As an example, my mortgage is at 4.875%. I was paying an extra $200 a month towards my principle to equal about an extra payment each year. One of the pieces of advice that I have heard is to take that money and invest it. In theory, over 30 years I should be able to make more than 4.875% investing that so I should be able to come out ahead. Agree? Disagree?


  4. RS,

    I WOULD NOT pay off a low rate mortgage any faster than you have to. Although it isn’t guaranteed, over the long-run taking the $200 per month an investing it in the stock market will give you a better return than paying off your mortgage early.

    Many people will disagree with me. You have to do what you are comfortable with.

  5. I would agree to an extent. If you have a really low rate (like below 6%), do not go too crazy with trying to pay it off early. I would say that you should try to get a decent amount of equity built up, however, because it gives you a lot of leverage in the event that you need to get some credit. Also, I really do not like the idea of how people determine the extra amount to pay on their mortgages. For example, Bach says you should pad your principal with an extra 10% of your entire mortgage, including escrow, which will come out to around on full payment extra a year. However, if you break your mortgage down with an amortization table, you can see a better way. has a tool to build an amortization table. Essentially, since you are concerned with principal, all you need to do is look at the principal portion of each mortgage payment. If you want to make an extra payment, pay this months entire mortgage, then send in an extra check that covers next months principal. Then, check off this months payment and next months payment. Then, when next month rolls around, you make another full payment, and continue on with extra payments in that manner. This method allows you to really break down your mortgage to its very basics… 360 payments, and you immediately see how much you are saving in interest with each and every extra principal payment that you make. You will also notice that you will benefit more from doing this in your first seven years than you will by doing it after those years. Further, consider that interest is in today’s dollars… and the savings will be savings you receive in the future, with future dollars… meaning you are not saving as much as you think you are. There is a lot to weigh when considering accelerating your mortgage. If you have a very low rate, then get enough equity and buy an investment property that can generate a little extra cash flow. That extra cash flow can offset your mortgage payment, and build equity in an investment. This will give you the same piece of mind as having your mortgage paid off, but with a better return.

  6. I think if you’re already investing 15% into retirement, paying down even a low-rate mortgage can be very advisable, tax breaks and all. I think that people who own their houses outright have more financial flexibility and can then afford to taking higher risks with their careers: starting a business, striking out on their own, etc. Until my house is paid off, I don’t feel as comfortable walking away from “steady employment” to start my own thing.

    Just a qualitative (though it could be seen as quantitative, depending on what options you’re weighing) look at payind down your mortgage. Remember, though, this is once you’re socking away at least 15% gross into retirement.

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