What would you do? Hold or Sell?

[Justin S.]

I believe I may already know the popular vote, but here is my situation: 

I purchased a brownstone in Brooklyn in 2014 as a shell and the house underwent a gut renovation. 

It is a 3 unit building that my wife and I occupy. We just had a little girl last month and I am kicking around selling. We are in a gentrifying neighborhood and the property values have went nuts but the market is starting to soften, the economy is showing signs of doubt (Dow down 800pts) and I am thinking now may be a good time. We have about 1.1M in equity in the house. 

I saw an article a couple of weeks ago in the NY post about how Billy Joel purchased a townhouse for his first wife in the 80s for 4M and its now back on the market for 20M. I don't want to be that guy! :) https://nypost.com/2018/08/22/townhouse-billy-joel...

Everyone knows NYC is an appreciation play and I don't want to cut myself short. I signed up for Biggerpockets this year and @John Hickey caught my eye. Here was a guy who had the same story as I did and ended up selling it to buy a ton of properties in Newburgh. I jumped on the bandwagon and now own a few properties there myself. It blows my mind how my 100k investments cash flow more than a 2.6M brownstone in Brooklyn, and it got me second guessing myself. I know @InvestorLew is big on pointing out the fact other people are still paying down your mortgage (which is at 3%) and maybe the house is breaking even now (it would it I rented the entire thing) but if the rents increase down the road, the property that I sold because it was breaking even, then would cash flow 3-4k per month. 

Ideally I would like more space but everything in my house is brand new. My wife and I are not 100% sure if we want to raise our kids here in NYC either. I LOVE Brooklyn, so its certainly a possibly. So I guess what I am asking the community is: 

1. Cash out 1M by selling. I can walk away with 500k without any capital gains because it has been my primary for the last 4 years. I can also 1031 the other 500k since that portion is the investment side. Buy a house in the burbs or a bigger brownstone.

2. Keep it and rent it out. The property doesn't cash flow 

3. Put an extension on the house and stay here. Would cost me at least 100k 

My purchase price was 860k and I put in 600k worth of work (nuts I know!) I learned a TON on this project and I am applying those learning experience in Newburgh. What would you do if you were me?