Sunday, September 1, 2019

The Automatic Millionaire Homeowner: A Powerful Plan to Finish Rich in Real Estate

As I was reading The Automatic Millionaire, I was struck by the fact that homeowners are, on average, much wealthier than renters. I went looking to why this was the case; in a nutshell, renters are funding someone else's wealth, while if you're a homeowner, every mortgage payment you make goes towards you (and building the equity in your home).  This completely changed my perspective (I've been looking at it as a case of throwing money on rent is the same as paying property taxes - neither of them really get you anything/go towards your assets), so I decided to give David Bach's book The Automatic Millionaire Homeowner a read, too.

In this quick read, Bach walks you through the process of buying a home, be it your first home or a new rental property.  He starts the book with arguments on why it's smarter to buy than rent, gives you some tips on how to get into the market when you don't think you have the money for a down payment. Once you are thoroughly convinced (and if not he recommends you reread some of the chapters), he then looks at the more practical aspects like researching mortgages, interviewing mortgage advisors and real estate agents, and how to pay off your mortgage a few years early, saving you thousands of dollars in the process. He ends the book with a chapter on weathering the inevitable market bust that happens every 20 years or so, and with a final chapter encouraging you to help others become homeowners (through charities like Habitat For Humanity).  I actually really like that both this book and The Automatic Millionaire end with chapters on donating time and money to charities; a lot of the financial books I've read are more about accumulating wealth so it was nice to be reminded about the positives of giving, too.

I really liked how thorough Bach was. He really dissected the whole path to home ownership and explained it all in easy-to-understand language. Of course, I was also a fan of the fact that this book is the Canadian edition, so it was more pertinent to me than the American edition would have been. Unfortunately, like The Automatic Millionaire, The Automatic Millionaire Homeowner was written over a decade ago, so some of the websites and other facts may be out of date.

I'd also like to add that this thinking of mortgage as building your assets flies in the face of JL Collins' advice in The Simple Path to Wealth; Collins advocated for not owning and instead investing your money in an index fund. He said that only once you are secure (and wealthy) should you consider buying a home as a luxury.

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