Move to a bigger house or buy a small flat and rent?

[oreoxoreo]

Hi I cannot seem to make up my mind on the following.

Got a small 3 bed house for myself and my 2 DC.
My mortgage is low and I am in a position to borrow more, which I would like to do whilst fairly young.

I could move to 4 bed (I don't really need 4 bed, but would love a bigger garden). I could possibly get a lodger if I want to. Or the bigger space might be handy if my DC want to live here post education (they are now 11 and 8), given that I am in London suburbs.

The alternative is to buy a tiny flat (think one bed in Chatham) and let it out. I expect I would have to add some of my own money in addition to BTL to repay the borrowed money, but the equity would be building up and I would have repaid it by the time I am retired.

Which one to go for?

I would go for the bigger house if I were you. We made that decision 5 years ago and we are very happy in the bigger house and our equity has grown and our house value has gone up too.

If invested smartly, tcould pay off to release equity and put into investments. But some people would struggle with the concept on an emotional level.

If you don't feel that the financial market is for you, then I'd buy a bigger house. It'll be more enjoyable for you to live in or you can get that income from a lodger. Investment-wise, when it comes to selling + downsizing, you'll also have a pile of cash tax-free. When buying or selling rentals, there are hefty taxes to pay.