Buying investment properties vs putting in index funds

Context:

Me (28) and my wife(27) bought a house that is a final home worth 1.25M. Our monthly is 7300 for a loan of about 1M @ 6.375%.

We don't plan to have kids for the next 4-5 years. I feel we made the mistake of directly buying a big house that we don't need right now thinking that housing prices are going up really fast in Seattle area. Instead, we should have bought a smaller house and paid the loan fast to make that work as an investment property before moving to a larger home when need arrived. I say this espeically because I don't see me and my wife working after age 45.

HHI:Our HHI is 565k.

Question: Any suggestions on whether we should think about buying smaller investment propertie(s) vs investing in index funds since we kinda missed the boat of buying a smaller real estate property and living in it before moving to a bigger house.