Most larger communities will have a Homebuilders Association, i would start networking to find a builder that can finance the construction. 

A 4 bedroom would have you competing with larger condos or townhouses with pools, a much lower rate of return. 

A good property manager can help with tenant screening, enforce lease terms, and handle evictions more efficiently if it comes to that.Require a Larger Security Deposit: Within the bounds of local regulations, a larger deposit can provide a cushion in case of damage or unpaid rent.Consider Rent Guarantee Insurance: Some companies offer insurance products that can cover lost rent in case of tenant default.

Use that as a downpayment on the new larger asset.

One of the larger ex-pat directed real estate investment communities here in Japan targets all-cash buyers. 

The house will need a new fence soon, so I'll have to factor that into the scenario.I'm not sure which choice is the best option for me.

From my experience investing in mid-tier and luxury hotels much larger is you need about 70% to make ends meet, you start getting happy about the investment about 80% and around 85-90% you fell like you are a genius. 

Is one a clear choice and I am having trouble seeing it?

I think smaller markets say sub 50k population would have a larger impact from one big move from a manufacturing facility or something like a Amazon processing center.

Quote from @Bob Dole: All,Apologies for the newb question, but I just heard about cost segregation and have been reading up about it online.My understanding is this (and please correct me where I'm wrong):Pros: -accelerate depreciation, front load (vs. just a straight line over 39 years) -save money on taxes because of the depreciationCons: -if I sell the property, the recapture will be larger -not recommended if you flip propertiesSo hypothetical situation:-Majority of our income is W2 based, let's say it's $500k-Net income from commercial rental is $100k-Income from dividends and interests is $100k-Both of us are full time W2, so non-prof real estate (but this can change  -- please see below)So we're hypothetically grossing $700k a year.