A Testimony to the Automatic Millionaire by David Bach

     The Automatic Millionaire written by David Bach is one of the best books to distinguish the benefits of being a homeowner versus being a renter.  This book opened my eyes to the benefits and I hope that it does for you what it has done for me.

     I bought my present home nearly 5 years ago.  I bought it for no money down and no money out of my pocket.  In less than three years, my home which I paid $142,500 for was worth nearly $300,000.  What a great feeling. 

     The statistics for the gap between homeowners and renters is staggering.  According to Bach’s book, the average home owner has a net worth of $170,000 while the average renter has a net worth of less than $5000.  The average homeowner is 34 times wealthier than the average renter.  If this information does not motivate you to own real estate I don’t know what will.  I know that in my case that this was true.

     I mentioned previously that I bought my current residence with no money down and no money out of my pocket.  The second home I purchased I did put money down and paid all my own closing costs.  Where did the money come from?  I used the equity from my primary residence to do a cash-out refinance to buy the rental property.  This was more amazing to me than getting the house that I live in.  Why is this?  Because the money used to buy the rental was equity from my primary residence.  I didn’t have to pull it out of a bank account.  I just rolled over some of my new found equity into the rental property.  Yes you do get to write off the interest on a rental property.  By the way in 5 years my no money down investment is now worth nearly $200,000 in equity in the real estate market.

     I happened to buy right before the market really took off in 2005.  But David’s philosophy is to buy real estate in any market.  In the long term real estate has always gone up.  On average, the value of real estate doubles every ten years.  Yes you may have some down times but the overall outlook is always going to be up.  If you are looking to get rich quick, this may not be the strategy for you.  The other thing you don’t have to worry about when owning a home is having your rent raised with inflation or changing rental market conditions.  Right now rent is low but you can’t count on it forever.