How would you capitalize on appreciation?

[Maxwell Emerson]

Looking for some insight and recommendations based off of what worked well for others. Here's the background info:

My wife and I bought a small house, 2 bed 1 bath, in 2018 and rehabbed it while living in it. We moved out in 2021 and started renting it out. We've had great tenants, a good property management company, and few expenses over the past few years. We're considering our options for moving forward.

Numbers:

Purchased for ~ $230,000 (2.5% interest)

Remaining balance ~ $220,000

Appreciated to ~ $400,000

Cash flow is ~ $500 a month after setting aside for all reserves

Options we're considering:

1- Cash out refinance- at current market rates, rough estimate is that we could access close to $100,000 in equity, but our cash flow would go to $0 or possibly negative for a period.

2- Sell now - if we sell before the end of the summer, we could still qualify for living in the property for 2 out of the last 5 years for the additional tax benefits. We could maximize our capital (~$150,000), but lose any future cash flow with the property.

3- look into a 1031 exchange for a multifamily or small apartment complex. I've explored this option the least and don't fully understand the benefits of a 1031 exchange compared to our other options.

4- do nothing, continue to let the property cash flow. I personally don't believe that the property will continue to appreciate or see the rent growth that it has seen over the past few years.

Based off of the surface level information, what options would you go with and why? Are there other options that you would consider that aren't listed?