Sell rental to cash out equity or keep it long term

[Rohit S Bora]

Hi there,

I need some help deciding if I should cash out of my primary home turned rental property (located in Orange County, California) before I am on the hook to pay taxes on capital gains, and pocket the equity or hold it long term with positive cash flow and possibly a retirement income. Our current rental was our primary home for over 6 years until September of 2017 when we decided to buy a bigger home. So, in short we have had our rental for last one year. Right now we are sitting on over $400k of equity on the rental along with over $750/month of positive cash flow. Here are the two major questions that I have been eagerly waiting to find answers to and need some expert opinion from all you experts out there:

1. Cash out on equity on the rental property by selling it while market is high. Properties in the area for the like kind are going for over $700k but let's just say I am able to sell the rental for $700k. My purchase price on the property was $375k which means I have $325k of capital gains. My mortgage payoff balance is $295k at the moment. So, if I were to sell it by 2020 (within 3 years of turning it into rental), I pocket the entire capital gains on the property (roughly $65k) but I will instantly lose my $750/monthly cash flow from rent as well as depreciation I each year. Basically, after paying agent commissions and other miscellaneous cost (roughly 8%), along with paying of the mortgage balance, I would pocket close to $350k, tax free.
2. Stick to the rental long term with a great cash flow of $750/month and take advantage of the depreciation, while the renters are paying off my rental slowly and eventually have a paid of real estate that can generate great income for me.

Investment from me for this rental is roughly $50k. Rest is all appreciation over last 6 years. So, to get $750/month is roughly a 18% return on $50k investment. I don't think I can find a better return on a rental today. There is a possibility I can cash out and re-invest the $350k from sales proceeds (possibly get 3 rental units with 20% down) to hopefully, get a higher return. 

Please note, I don't need money at the moment and don't have any other investment vehicles that will generate a guaranteed 8-10% growth to my investment. What would you guys do in this situation? Thanks in advance guys.