Buy a Home... or Keep Renting With Kids?

Welcome Back, Fellow Parent

Home buying + selling season has kicked-off and I wanted to provide a few thoughts on the age-old question “Should I Rent or Buy a Home?”

I received this question recently and spent some time writing about 4,000 words on the topic, and wanted to send out a cliff note version to the community (link to full article below).

Especially as parents, I feel we all face this question at some point. Possibly sooner than those without children. But I’ll save that debate for another time, lets focus on the financials.

Years ago, the answer was super simple. Yes you should be a homeowner!

No question about it.

But in 2025, homeownership isn’t as simple as it used to be.

Interest rates are high, home prices have skyrocketed, and renting isn’t always throwing money away.

So, should you rent or buy?

Let’s break it down.

More Than Just a Mortgage Payment

Owning a home costs more than just a monthly mortgage.

You’ve also got:

• Property taxes: Anywhere from $2,000 to $12,000 per year, depending on your location.

• Homeowners insurance: Typically $1,400–$3,000 per year.

• Maintenance: Budget 1-2% of your home’s value per year (a $400K home means $4,000–$8,000 annually).

If you buy, plan for these costs so you don’t get hit with financial surprises.

Why Buying a Home Might Be the Right Move

Despite the upfront costs, buying a home can be one of the best financial and lifestyle decisions a family makes.

Here’s why…

First, you build long-term wealth through equity. Instead of rent payments going to your landlord, your mortgage payments go toward owning more of your home over time.

Historically, home values have appreciated at 3-5% per year, meaning your home will likely increase in value.

Then there’s predictable monthly costs. Unlike rent, which can increase annually, a fixed-rate mortgage locks in your monthly principal and interest payments. While property taxes and insurance may fluctuate, homeownership provides more financial predictability.

You can also tap into some pretty sweet annual tax benefits. Homeowners can deduct mortgage interest and property taxes (up to $10,000 per year).

If you eventually sell, you may also qualify for the capital gains exclusion, allowing you to keep up to $250,000 ($500,000 for married couples) in profit tax-free.

You can also argue that home ownership = stability for your family. Homeownership provides consistency in school districts, community relationships, and long-term living situations.

Parents don’t have to worry about rent hikes, lease expirations, or unexpected moves. Owning also means you can renovate, expand, and customize your space to fit your family’s needs—something most rentals don’t allow.

When Renting Can Be the Smarter Move

There are situations though where renting makes more financial sense, especially in today’s market.

Here are a few examples:

• You’re not planning to stay put for at least 5-7 years. Since buying and selling a home comes with upfront and closing costs, short-term homeownership can cost more than renting.

• You don’t have enough saved for a solid down payment and emergency repairs. Owning a home requires more than just covering a mortgage—unexpected maintenance costs can quickly add up.

• Your local housing market is overpriced. In some cities, renting is significantly cheaper than buying when you factor in total housing costs.

• You need career or lifestyle flexibility. If you expect to relocate soon, renting provides the freedom to move without the burden of selling a home.

• If you can rent affordably while investing the difference, you may build wealth faster.

I want to break down the last bullet point above a bit more, because to me, it’s the most interesting argument for renting over buying.

Let’s say you’re renting for $2,500/month, and buying a home would cost $3,000/month. If you invest that $500 difference into an S&P 500 index fund (averaging 8% annually), after 10 years, you’d have around $92,000.

We can also invest the down payment you would have used to purchase a home. For example, if you were going to purchase a $400,000 home and put down 20% (to avoid PMI for two years), you would need $80,000. If instead you took the $80,000 and invested it into the same index fund, you’d be looking at an extra $172,000 in 10 years.

For any math majors out there, the 10-year total investment you could potentially earn equals $264,000.

Of course, home values appreciate too. If your home grows at 3% per year, after 10 years, it could be worth $537,000—but you’d still owe a chunk of your mortgage.

I personally believe in home ownership, but this one did put me on a spiral for a few hours.

Creative Ways to Make Homeownership More Affordable

To wrap up today’s thought around renting versus buying, I wanted to provide a few tips on how to afford purchasing a home.

Mainly because again, it’s crazy expensive out there.

Especially this time of year when everyone is shopping at the same time (simple supply and demand).

Not all of these are super realistic, especially for parents, but interesting just the same and can help make home ownership more affordable. Especially in high cost of living areas.

• House hacking: Buy a multi-unit property and rent out part of it to help cover your mortgage.

• Co-buying with family or friends: Pool resources to afford a home sooner, but have a legal agreement in place.

• First-time homebuyer programs: FHA loans (3.5% down), USDA loans, VA loans, and state grants can help reduce upfront costs.

• Buying in an emerging market: Consider areas where home prices are lower but job opportunities remain strong.

• Opting for a shorter-term mortgage: A 15-year loan at 6.5% interest costs more per month but saves over $264,000 in interest compared to a 30-year loan at 7%.

The truth of the matter is that there is no universal answer to the rent vs. buy debate.

The right choice depends on your financial situation, long-term goals, and lifestyle priorities.

If stability, equity-building, and homeownership control are your priorities, buying can be a great long-term decision.

If flexibility, affordability, and investing elsewhere are more important to you, renting may be the smarter move for now.

Both options have their benefits. The key is making an informed decision that sets your family up for financial success.

Where do you stand?

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Outro

Thanks for reading today’s newsletter! I hope it was helpful.

See you soon,

The Dollar Dad

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