House hack with a family

[Tracy J. Adkins]

Living in such a competitive market I have had a few different ideas cross my mind and haven't seen much info (probably not looking in the right places).  

I understand house hacking in multifamily. It's straight forward. But my question is it worth it to to just find a distressed property that is undervalued for $100k or less, then do an FHA and free up capital to invest instead of rent or own a typical house?

Rent in the area is $1600+. So I could free up over $1000 by living in a smaller house with a small mortgage. 

Rent a room isn't a choice since we are a family of four and like our space. 

Or is it better to just have the typical rent/mortgage and then flip or rent the undervalued property?? 

I'm sure I confused a few people but hopefully it was clear enough. 

Tracy