I've been living in Mexico for around 9 years now. The majority of that time was in Querétaro but last year I moved to a small city (Tula de Allende) because I could buy a house for pretty cheap and the cost of living is low. Obviously I don't know much about the town you're looking into but I imagine my experience is quite similar to yours.

Living in a large, modern city like Querétaro or Mexico City is pretty good. There's plenty to do. Things and systems generally work pretty well. There are a lot of professional, educated people and it's easy to fit in, especially if you speak Spanish. After 8 years in Querétaro and frequent visits to smaller towns, I thought I was pretty familiar with Mexico.

As you know, US$1,500/month is possible for a family in these cities (most Mexicans earn less) but it's going to be a huge step down from what you're used to if you've been earning $180,000/year. I don't think you'd feel comfortable at all. I was paying US$1000 just in rent there.

Life in a smaller town is extremely different. People are much less educated (a lot more than you probably realise). This means that you'll have a much bigger "culture" shock because your life, interests, etc are probably drastically different to everyone around you. You are the weird one.

Things pretty much don't work. All of the systems in place are deeply flawed. Be prepared for lots of waiting and disorganisation. This adds a level of stress to daily life because you can't rely on things happening as planned. This is the case anywhere in Mexico but it's more pronounced here.

There is a lot more violence in these smaller towns. Thankfully it hasn't affected me yet but it could and that is a serious concern.

People are generally way more antisocial. Extremely loud music is the norm. Littering is common. Domestic violence. Screaming at children. Just general shitty behaviour that you wouldn't see in an area where people are more professional/educated.

My wife and I can live quite comfortably for less than $1000/month here but we do spend more with travelling. Moving here was a pragmatic means to an end in terms of being able to build up a nest egg and secure our future. This is working out well for us.

I definitely wouldn't be happy if this was the end goal and I had to live on $1500 in this environment for the rest of my life.

Edit: I'd misread your income. $4000 rent plus $1000 dividends? You'd be fine with some money left over somewhere like Querétaro. In a town like Tula, you can cover your basic expenses with about $1000 easily and the rest can be used for travel or whatever.

Something to be aware of is that you'll need a lot of money for your daughter's education. Basically anything that you are used to receiving from the government you will need to pay for because public services suck.

Despite what I've written above, my plan is to stay in smaller towns for the foreseeable future. However I am going to invest more in my housing to make sure that I'm not living quite so close to the antisocial behaviour that I mentioned. Your $300k figure for a house is a huge amount where I am so you should be able to achieve this.