Rental and house? Should we do it

[TaupePanda]

We live in a really hot area of a city and houses are pretty unaffordable where we'd ideally like to live.
It's definitely more affordable elsewhere - even within a few streets of our ideal location - and we could afford to buy a cheap house in a rentable area. We've seen one that needs a lick of paint and a new kitchen but seems solid otherwise. This would be bought with cash and would yield around 6% annually.
We've worked out that we'd be left with around £8k annual profit after tax etc...
This could be used to service a mortgage on a smaller house to live in, alongside our own contributions. We can afford about £2.5k a month - same as our current rent - so we'd easily be able to pay up to a £400k mortgage.

Alternatively, we put the full amount of our current cash into a single house and we'd have a max of £200k mortgage - it would likely be a bigger house too.

As we haven't found a house we especially like in 2 years we're inclined just to buy a little terrace, like the one we sold, and make do with a second house.

Thoughts on the above scenarios. A bigger mortgage on our main dwelling, with a rental helping to pay it. Or half the mortgage which we'd obviously clear quicker.

We're planning on speaking to an IFSA but would like some thoughts from people without a vested interest too!

TIA

Now is not the time to become a small landlord due to legislative changes. Look at new standards for insulation etc. How would you fair if you got a non paying tenant, had a large gap between tenants or had a lot of damage done or they have a pet that does a huge amount of damage? You cannot say no pets anymore.

That’s my take, I used to work as a University housing officer. It’s a massive risk.

Just get a mortgage on the bigger house and skip renting the smaller one out. If you’d be reliant on the rent to afford to live then what will you do if there’s a gap between tenants or the tenants stop paying? Plus the cost of insurance, repairs, tax, etc