He has sacrificed enough that part of me just wants to see him fulfill his dream of having a home.

But I wonder... am I sacrificing quality?  

While we certainly have sacrificed it is not as "scary" as your wife thinks it is. 

But seeing my parents sort of changes that perspective for me since it was almost like they sacrificed that negligible cash flow for a promising guaranteed return.

If you're aiming mid-level or higher, it may be worth sacrificing some of that for more eye-appeal (such as using tile instead of tub surrounds, or refinishing floors if you happen to have wood under those carpets).

I'd also encourage you to look long and hard at your finances; can anything be sacrificed to put money away, and/or what is the plan for 2 to 5 years out to maximize income and minimize expenses.  

If your son wants to just help people out, there are lots of ways he can do that without sacrificing tenant quality or risking your investment/home being treated like a shelter.

We are ready for some more control and security for our future, without sacrificing our time with eachother like we have been.

Not that that necessarily means sacrificing $50k now, but to me the time to recoup the $50k is secondary to which overall strategy will accomplish our goals. 

Then the reality sets in once they start getting from behind their computer and actually getting into the markets and they realize some small sacrifices will have to be made.In my market here in CT if you want to buy a duplex in a nicer neighborhood you are probably going to be sacrificing a little bit of cash flow.