Sell or hold ? Rental ( prior Primary Residence)

[Drew Shaw]

We moved to bigger house with better schools and rented out house to learn how rental works and to see if we want to do it.  Its been rented out for 7 months ( so far so good) and we have another couple months to decided if we want to hold on to it or sell and buy 2 property for investment, mostly because 1. We have ton of equity in the house  2. Saving tax from the gain of primary residence. ( living in house for 3 years in last 5 years)

Rental/property info - 2012 construction, 2800Sq FT, 4Bed+Den, 3.5 bath, great neighborhood. its 15 year mortgage with 7 years left. 2.375% for 15 years. Value is ~700k, equity 500k+ . Rental pays everything and  evens out. Bought it as 425k ish

What is the recommendation here 

1. Refinance the mortgage  to 30 years, take the equity out , generate great cash flow and invest equity in other property 

2. Sell the rental. Save the taxes on primary residence and invest the proceedings to buy 2 mid-size single family

Thoughts ?recommendation ?