What Exactly Would You Do In This Situation?

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Hey people- It has been a long while since I last surfed around here on BP site. I would like to ask the entire BP community about your advice/suggestion/feedback based on your real estate/tax expertise in a dilemma of exit strategy my business partner and I will have to deal with our properties. Back in a couple of years ago, we bought a 2,100 sq ft resident property with an adjacent empty land in same size for $400k. We are now working with a developer and architects to construct a two units building with a rooftop on that land. They said it would cost about $500-$600k to construct and based on our analysis via sales comps around the area with similar characteristics, it will immediately have a valuation of $1.3m at conservative number ($600k for the lower unit and $700k for the upper unit). The existing property appears to be currently valued at mid-$500k range. We are trying to figure if we should sell the existing property we have now, using our respective 250k capital gain exclusion option so we won't pay any cent on capital gain taxes to the government as we have lived on the property for at least two years. Or if we should sell the newly constructed lower unit then use the whole proceeds to pay off all the construction loan, meaning there will be no mortgage on the upper unit. Then whatever the remaining proceeds, if any, will be then taxed at our ordinary rates. We did discuss about the possibility of using 1031 exchange on the lower unit to defer taxes and purchase other investment properties that generate higher COC % than if we choose to keep and rent it. Other possibility is to rent the lower unit just for one year then sell to qualify for the 15% long term capital gain taxes instead of having to pay at our ordinary rates if we decide to sell immediately within less a year after the construction is completed. We intend on moving from our existing property to the upper unit and live there for at least 2 years. We plan to have our existing property converted into a rental investment property and hold it as long as possible. It has excellent loan terms so we do not want to lose it. So, all in sum, the simple question here for all of you here in BP community is: What exactly would you do if you were in my shoes with the situation I just explained? I am trying to figure out what the best approach should be taken in this case that favors in building wealth in real estate. Thoughts or have questions to ask for further clarification? Feel free to chime in! Looking forward to your responses and they are usually pretty good here in BP. Very impressive. Thanks for reading. Best, Arthur