Same thing here buddy: I moved from a big appartment where I had my train room with a huge 7x3 N scale layout, to a smaller house where there was no room from trains.
Trust me, this is the best thing that could occur to me !
As I really wanted to have trains, I searched and searched, and found the perfect deal:
The laundry room is quite small, but still had some space for the trains. What I'll do is quite simple: build a 2x4 layout on a 3/4 plywood. The plywood is attached to the wall using hinges. Whenever I want to work on the layout, I unlock the top on the layout, it folds open and I can work ! When I'm done, I fold it up and it doesn't take space anymore !
I understand that my explainations are quite unclear, so as soon as I start building this thing, I'll post picture here if you'd like.
The biggest advantage for me was the I could start over on a new layout. The fact that the layout will be smaller is also a great plus: I'll have more chances to complete it in reasonnable time.
Good luck with your project !