Personal Finance

I have a growing family and a $3.1 million net worth - should we buy our forever home now or just keep renting?

Joey Frenette

Published: January 31, 2025 7:17 am

It’s arguably the biggest financial question of our generation: should I save up and pull the trigger on that dream (or starter) home or simply continue to rent and enjoy the extra liquidity that would have otherwise gone to a hefty mortgage?

In this piece, we’ll check out the case of a Reddit poster with a growing family wondering if they should jump into the housing market. With a net worth of $3.1 million, they can surely afford to buy a house, but should they?

Buy the dream home? Or rent and invest the rest?

As always, there is no right or wrong answer. To some, home ownership is an “American dream” that’s still worth aiming for, even if it doesn’t make the most financial sense at any given period of time. Undoubtedly, real estate can be a pretty decent investment over prolonged periods of time, provided you pick the right location, don’t overpay, and aren’t borrowing an obscene amount at an elevated interest rate.

That said, I do view stocks as the superior asset class over lengthy periods of time. And for most young people who are on the picket fence about home ownership, I do find that having the extra cash to save and invest is the more optimal move for building wealth over time.

That said, if you view homeownership as less of an investment and more of a long-term store of value that will cost you money to maintain (think about all the insurance coverage, property taxes, maintenance bills, and other so-called “phantom costs” that go far beyond mortgage payments), it may still make sense to go for that dream home. So, if it’s growing one’s net worth that’s a top priority, renting may be the better move, at least in my humble opinion, in today’s environment.

The extra cash can go towards an S&P 500 index fund that could fare well over the next decade as the productivity gains from artificial intelligence (AI) have the opportunity to spread to the broad market. Undoubtedly, the Reddit poster should meet up with an advisor to solidify an investment game plan.

What about the growing family?

Whenever there are children thrown into the equation, the case for buying a home tends to be that much stronger, even if the math shows that renting trumps owning a home at any given moment in time. Indeed, it’s always nice to have a home for added stability, provided you’re more than willing to put roots down in one location.

Of course, if you’re not yet committed to a city or are open to moving across the country to take a job at some unknown point in time in the future, renting will not only grant you greater financial flexibility but flexibility with regard to where you choose to live.

Indeed, one could easily get up and sell their home. However, selling a home over the near term could entail potential capital losses. Not to mention, you’ll have to pay a hefty commission to a real estate agent and go through the tiresome process of going through showings and open houses.

The case for renting: Just because you can buy a home doesn’t mean you should.

As such, I think there is no shame in renting over buying, even if there are kids involved if there is any intention (or willingness) to move at any point over the next decade.

At the end of the day, I view buying a home as a decade-long commitment at minimum, given the risks that come with selling your home over a rather short period. So, if you want to keep your options open (a job change could entail a move in the medium-term future), want to grow your nest egg at a faster pace, and want to enjoy more cash flow for needs and wants, I’d say renting may be a more attractive choice than owning.

Of course, we must also consider how much utility owning versus renting gives an individual. In this regard, such utility (or enjoyment) may be worth the hefty opportunity costs. If owning a home gives you more satisfaction than having more money in the bank, owning the home can be the better move, even if it ends up costing you an early retirement.

The bottom line

Personally, I view the opportunity cost as too high, especially given high housing prices and the stock market’s ability to continue rewarding investors for their patience. As always, contact a financial planner and have a conversation with loved ones before making what could be the biggest financial move of a lifetime.