My vote would be for buying a duplex or triplex, living in one unit and renting out the other(s). When you search local real estate websites, search for multifamily housing and see what's available. If you're willing to consider a tiny house or yurt, you will have no problem living in a 2BR/1ba while renting out one or two other units, which widens the range of properties you can consider buying--if you "needed" 3-4 BR the pool of available properties would be much smaller.
This could easily eliminate your mortgage payment or at least reduce it to a trivial amount, and it has a couple of additional benefits:
- Other people (your tenants) are buying a house for you, so building your assets
- You get a lot of control over who your immediate neighbors are (buy a cute place in a decent location to have your pick of tenants, then run credit and criminal background checks on applicants)
- Your kids grow up with front-row seats to the business you're running (landlording), which I happen to think is good for kids; I grew up in a parent's business and think it taught me a lot of useful life skills.