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Looks like that second house is probate, make an offer, the larger garden and extra bedroom is worth it. The family may just want the money. Stretch yourself now and it will get easier later, and maybe it would more comfortable to share a 3 bed house than a 2 bed. More room. That back garden must be 60 feet, I reckon it's definitely worth the extra £20k personally.
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@spindrift @kboy will likely be gone by the time I am ready to pull the trigger. Amey made a good point. Would need like 20-30k up front to do any building work, new kitchen, decorate, furnish, electrics, plumbing surely?
Sorry another question - is it a bad idea to buy a project/shed as a first house? Much bigger physical house and more original over the green, for 20k more, than needs a lot of work doing for example (this one is out of budget but 2 bed versions in this state exist) https://www.rightmove.co.uk/property-for-sale/property-69197196.html