The Next-Door Thing:Much of the job of being a LL - if you choose the hands-on route - consists of doing maintenance. It would be a lot more time-efficient to not have to drive to your rental unit to do that maintenance. All your tools, etc. would be a few steps away and you could catch developing problems early (e.g. overflowing gutters, frozen faucets, tenants not doing lawn care, junk cars). Similarly, showing the place to potential tenants would involve a lot less driving back and forth. Plus you could keep a better eye on the property, and your tenants would be less likely to try to sneak 5 dogs in.
The Floor Plan Thing for House A:After chatting about it more with DW I am less bullish on this idea. The problem really is House A (the nicer of the two houses). It has such an odd layout, it has the master bedroom upstairs and then three small bedrooms downstairs which is also where the woodstove is. We want to have kids in the next 3-5 years and I just cant imagine a world where we have a 4 and 7-year-old on a separate lower level with the woodstove.
The solution is to drop the assumption you have to sleep in the "master bedroom":
1) Move into one of the 3 downstairs bedrooms. All you really need is space for a bed! This solves the lack of supervision problem.
2) Use another of the 3 downstairs bedrooms into a massive walk-in closet. This solves the small bedroom problem.
3) Put the kid or kids in the 3rd bedroom (you have plenty of bedrooms to work with).
4) Use the larger upstairs bedroom as a guest room, hobby room, office, exercise room, home theater, etc.
5) As the kid / kids grow older, there is the possibility of moving them, or yourselves, upstairs.
6) Use a sturdy barrier around the wood stove when it is in use if you have toddlers around.
This solution also leaves open the possibility of only heating the downstairs, saving money on utilities.
You could live in the MBR until pregnancy.
On the 2BR House B:How many kids are you having? If you can commit to one, the 2BR house will minimize your expenses. As the former owner of a large house, I can assure you the sight of unused bedrooms / bathrooms can get on the nerves of efficiency-minded people. Also, the 4BR house will cost you more in insurance, heat, taxes, and probably maintenance items too.
If you're not sure you can commit to one kid, consider that you have a 50% chance of the 2nd kid being the same gender as the first, which would allow for a long-term room sharing situation. If you're primarily committed to reaching FIRE, this sort of minimalism might be the best path.
On Real Estate Speculation:But then again, you said you wanted to make a leveraged bet on house prices increasing in your town and the 2BR option might leave you with FOMO if your thesis pans out. If you bought both houses and rented out the larger one, could the larger house be cashflow positive while you enjoyed the lower expenses of living in the smaller house? Then, if at some point in the future you decide to have 3 kids, you just move over to House A and start renting House B.
I do not know much about the mortgage rules in Canada, but in the US you have to put more money down and pay a higher interest rate for investment properties than for live-in properties. However, once the deal is done nobody comes back to check if you're actually living in a house you mortgaged as a primary residence. Thus a lot of people buy a primary residence and then move in a couple of years and rent it out.
