We decided the cost was too high and it was not worth it from a financial or risk perspective.  

Not sure about delusional but it's not unusual for us to have to do a genuine drain & fill several times a month during high seasons if we've rented to large groups with kids.

Rates are high.

The new design takes the home from a 3 bed, 2 bath to a 4 bed, 3 bath, 2,400 sq ft rambler on a large lot in highly desired area.

It's short sighted because it sounds like there is a high likelihood this current tenant will pay. 5.

The risk to my business is much too high just so the agent can make a little more money on the transaction. 

In my experience, allowing these professionals to guide you can be highly beneficial, as they are likely to recommend properties they would be comfortable managing.

For active investments I advocate considering how you can diversify WITHOUT ceding your competitive advantage nor the superior profitability of the niche your in.As an example my business is running an investment fund and syndication high interest commercial mortgage loans secured by income producing real estate. 

My W2 works me until the night and doesn't pay me well or high enough. 

In cities desperate for revival (Rochester and Binghamton are high on that list), this is the wrong move.