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

Physician's Money Digest, May 2006, Volume 13, Issue 5

The

Automatic Millionaire Homeowner: A Powerful Plan to

Finish Rich in Real Estate

The Automatic Millionaire

The Automatic

Millionaire Homeowner

When you think of automatic, most peoplethink of an action or behavior that occursinvoluntarily and without conscious thinking.This concept applied to finance results in tasks such asautomatic bill payments and automatic deposits. Asseamless as these activities are, they do involve an initialsetup and an investment of time. But can you become anautomatic millionaire, especially through real estate?David Bach proposes this concept in his book, (Broadway; 2006). Bach examinesevery aspect of the home-buying process, including the difficult task of comingup with a down payment for your first home. Borrowing themes from his numberonebestseller, (Broadway; 2005), he asks prospectivebuyers to consider all the needless small purchases made throughout the day—whathe coined The Latte Factor®—and redirect that money into savings. While this pointdoes address America's problem with overspending and debt in general, The LatteFactor® oversimplifies the difficulty that many individuals and families face: savingenough for a down payment while simultaneously paying rent. To remedy this problem,Bach suggests moving in with parents temporarily and even borrowing fromparents for a down payment—propositions to which many parents may not be openminded.The author also recommends obtaining a mortgage with only 5% or even $0down as a solution; however, he does not mention that such creative mortgagingusually involves percentage rates as high as 4% and 5% above prime. Balancing thisoptimism, Bach thoroughly warns of the dangers of no and low down payments andadjustable-rate mortgages, and outlines how prospective homeowners can avoidpaying private mortgage insurance. Although the author does stress that this book isintended for individuals looking to make long-term real estate purchases, and thatyour home is the best investment you will make in a lifetime, paints buying a first home seem too?automatic. Despiteoversimplifying the major hurdle of obtaining a down payment, the book's greatestmessage is that a first home should not be your dream home, but a means to fulfillyour dream in the future.