Help! I need personal financial advice!

[Jordan Sutherland]

        My wife and I are a little torn on our next steps in our financial future and I would like to hear some opinions from some fellow investors here on BP.  Feel free to share your thoughts!          

        So two years ago, my wife and I were 21 an we made a leap and purchased our first and current home. Our home is a  1650 square foot 3/2/2 house in a good neighborhood in Lubbock, TX. When we bought it, it was exactly what we were looking for. It fit perfect in our budget and provided plenty of space for us and our 3 year old son at the time. We were proud first time homeowners and couldn't have been happier.                                                                          

     Fast forward two years to now, and things have changed quite a bit. We our 23 years old and our income remains relatively the same. I work for the fire department and my wife cuts hair part time. We make enough to live comfortably, but sometimes it can get a little tight. We purchased our first two rental properties with money I have been saving since working in high school. I have always been very frugal, even when it seemed there was no need to be. Our rentals are doing great and we are saving all the cash flow, and I am eager to grow my buy and hold real estate portfolio. But like I said, things have changed a little bit. Now, my son is 5, and I have a 7 month old daughter!  Oh, and on top of that, we are expecting our third child next year (Which is still a secret to our friends and family)! Now our beautiful 1650 square foot 3 bedroom home is beginning to seem a lot smaller than it did when we purchased it. Of course, we are very blessed to be in our current situation, and very grateful. We do however, have some big decisions to make in the future. I don't normally talk to people about my personal finances, but since I don't personally know any of you it makes me feel more comfortable for some reason.  My wife and I have $40,000 in equity in our home and a total of $30,000 in liquid assets (cash and mutual funds).

So here is what my wife and I want to financially accomplish in 2017:

1. Purchase a larger home that we will feel more comfortable raising our family in. We think our price range would be about $170,000-$200,000.

2. Acquire our third rental property. Possible price range could be anywhere from $75,000-$120,000 hypothetically speaking.

3. Still live within our means and have a good emergency fund in place.

I would love to hear everyone's thoughts on the matter. Should we sell our house and upgrade to a bigger house? Should we keep our home and grind it out for a few years and save as much as we can, while building our rental portfolio? Should we keep our current home as a rental and use our savings for a down payment on a new home for us? (By the way, would we be able to find financing to do so?) Or maybe we should do something totally different? I don't know, you tell me! My wife and I just don't know what we should do. Thanks for taking the time to read this and all input is greatly appreciated!