Should I sell my current house now or keep as a rental?

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So I could use some advice. I have been going back and forth racking my brain for the last few months about what I should do with my current house. I am 29 years old. My wife and I are looking to upgrade from a 3 bedroom to a 4 bedroom. We have lived in our current house for about 2.5 years (we bought it brand new). We owe around 150k and could sell it for around 200k or more. Our monthly payment is right at $925 per month and we could rent it for around $1150-1200. I currently have enough money to put 20% down on our next home if I decided to hold onto this one. I am self employed and currently use my own money to run my current business (which requires a pretty good amount of cashflow), so pulling $40-50k out of my bank account as a down payment is sort of a drawback because I could put that money to work in a lot of different ways and make money from it. 

I always intended to keep my current house as a rental but I just don't know if the smartest thing to do if I can sell it now and pocket $40-50k tax free. I was talking to a buddy that buys a lot of rental properties and he told me he would sell it because the cashflow isn't that great and it would be more beneficial for me to have the tax free profit from the sale.

I am hesitant to sell because I am self employed and holding onto property seemed like a good way to help secure my retirement when the time came. But I could always look for fixer uppers that will give me better cash-flow in the future.

I want to make a decision and be done. My wife and I want to make a whole bunch of improvements to our current house but we keep holding back because we don't know if the house will just become a rental or if we are going to sell it. We would rather put the improvements into our next house because we will be in it for a while.

What do you guys think?