Debating next move on my current duplex ( house hack )

[Kevin Barnard]

Hello BP, just wondering what you would do 

I currently own one duplex in southern California . Unit 1 is 2/1 with unpermited bonus room and unpermited 2nd bath making it a 3/2 in a sense 

which I assigned a 2 car garage as well. Has a nice private back yard . Unit 2 ( where I live ) is a small 1/1 with a massive 6 car covered car port and a nice work shop . 

My tenant has been here 4 years in unit 1 paying sub market for 4 years. I listed originally for $1850 a month and he wanted to rent it . But He took a while to make his mind as as a 1st time home buyer I lowered rent to $1495 in panick it wouldnt rent at all by the time he came back. So he signed the 1st year lease at $1495 

I've made the mistake of befriending him and his family . They are for the most part very easy to deal with . I didn't raise rent first 2 years. Then raised it 5% annually after that . Currently $1650 

I decided its time rent goes to at least low market rates . So I offered a lease for another year starting January as he has been on MTM for 3 years at $1850 a month on new lease. 

He isnt happy at all about it , I also included a $500 pet deposit in new lease since they broke the terms of last lease and got a cat despite lease agreement . He said " he would rather pay $2000 a month than sign a lease with such a crazy price hike "

So I have a few options , give 60 days notice , move into the bigger house , now have my larger house, extra bathroom and garage for my hot rod and only increase my portion of mortgage $350 as I believe renting the 1/1 at $1300+ will be cake .

Or supply 60 days notice and get new tenant at anywhere from 1850 -2150 a month and stay another year in our small 1/1 . 

Or of course keep him and just rasie rent 5% every 6 -12 months 

My wife would love more space as we have 1.5 year old boy and are trying for second. 

I'm searching for deals daily and learnig more and more on BP and hope to invest more aggressively in the future but this is all I have for now .