I calculated roughly sending 800-900 per month after all expenses such as all utilities, PITI, repairs, etc.Is it worth losing a little money each month to live in a nice house that we actually own as opposed to renting?

Unfortunately our rural towns have been dying since the 50s/60s - which is sad as there are lots of cool and fascinating places - but it all happens slowly - first a large employer leaves, or maybe there's a farming crisis, tax revenue decreases, then folks with younger kids move away or the younger kids grow up then they immediately leave then never come back, then the schools start to die, then the schools close, then no one wants to live there, then the local hospitals or clinics lose fed or state funds then they close, their workers leave etc. 

My fear is I go over the 2 month period and I start losing money.Potential solutions: 1.

If something were to go wrong, could lose money with nowhereRent the primary residence and use HELOC for the downpayment on an (MFR) which I live in a unit and rent the other units. 

I have relied heavily on conventional lending, but am ready to venture away from that now.

You might want to do a Joint Venture with someone that provides the financing.

Tell him it is hard for you to talk about this the same way you would with another tenant, but the reality is you are losing money because the costs of the house aren't covered by the rent which is $300-400 below market value and if you don't raise the rent to offset the losses, you will need to sell the house or rent it to someone else at market value which is $1800.

If coming up with the down payment is an issue, you could find a joint venture partner - someone who has the cash and is willing to partner with you on the project.

Of course, but extending doesn’t mean you lose those breaks.Also, not everyone situation is same as yours.

I've just never been in a big rush to lose money so that approach doesn't appeal to me personally. if you want to rent, and use your capital to buy a cash flow positive property, then that's not such a bad idea ;)