Downsizing - medium house or smaller house plus investment flat?

[MartinaHingis]

We've been fortunate and are in a position where we can sell our house and buy something smaller outright. Would you buy a medium sized house, 3/4 bedrooms, detached in the best area? Or would you buy something smaller, semi detached smaller garden etc, and use the remaining money to buy a flat to let out and have as an additional income? We can't decide!

do the sums on your proposed rental and see if it is worth it, and if you want the hassle of being a landlord.

Well a 3/4 bed detached is quite a big house imo not a medium.

How many people are living there?

If your older and no children living there now I would be tempted to buy a 2/3 bed bungalow so you don't have loads of stairs as you get older plus a 2 bed house to rent out to a family.

Depends on how many of you there are, and how old you are I think.

Obviously having a rental property is a great investment long term, and as long as the rental covers the mortgage/maintenance, really useful monthly income too. Being a landlord isn't that much hassle, as long as you get good tenants and keep maintenance etc up to date.

If there's just two of you (or dc are older so not/won't be living there) I'd go for the smaller + rental option. It'll make more sense financially - you'll always benefit more from two smaller properties than one slightly larger one.

But, if you're young(ish), say, with 2+ children living with you for the next 10 years or so, the 3/4 bed will give more space. Would a smaller house be enough space for you?

I also think it depends where you are - in London/SE property is always a great investment but other parts of the country maybe not so much.

These are good points, thanks.

We are young (ish) with young children in the South East.

I appreciate 3/4 detached is a big house. I suppose that's what I'm asking - should we pick a good sized house and enjoy living in it, or make some sacrifices around space and location in order to gain additional income? And is the hassle of being a landlord worth it for the money?

being the landlord isn't too much hassle with a stable tenant in situ (gas cert, maintenance, tax)

but when it goes wrong it is a lot of hassle and can cost a bomb if you don't have the right insurances.

ps expect gross returns of about 4%, less on a big house in the SE. Which should of course gain more in value - on which you'll be paying CGT.

I think also in your position you may need to consider location of your home wrt to schools/catchment areas if applicable (i.e. if your dc are going to state school). I'm in London where prices in catchment areas for the best state schools can be 10% more expensive than a neighbouring road just for this reason.

So, not really relevant to your OP directly, but as you mentioned location, it's probably worth bearing this in mind too.

If I was in your position, my heart would be saying big house, but head (and DP!) would be saying the other. And if you're going state school rather than private, I'd probably go for the smaller house (as long as you can house everyone comfortably!) in the best area (bearing in mind catchments), and get a BTL flat - even a 1-bed could bring a gross income of anywhere between £800-1.5k a month depending on location.

I wouldn't want to compromise much on location though, either with a bigger or smaller house - 1) nicer to live in, especially with dc, 2) school catchment area, and 3) re-sale potential, as location pretty much always wins there.

Thanks everyone, food for thought