Additionally, we have equity of approximately $145,000.Now, we are faced with a dilemma: should we sell our current property and purchase in a more favorable neighborhood, or should we rent the house and let it pay for itself.We would greatly appreciate any advice you may have.

With the economy of scale in multifamily, each additional unit nets you a little more than the last, as a rule of thumb.

Additionally, I have $100,000 in cash in the bank, and my monthly expenses for my home and family are around $3,500.My wife earns between $100,000 and $120,000 from her W2 job, while I've recently lost my job but found a new one that pays $65,000 a year.

These are professionals with additional training and a stricter code of ethics.

Additionally, the price point is still cheap enough to find the 1% rule and positive cash flow and there's amazing appreciation potential.

The 2-3% points in extra cost are worth it if you plan on using as I described above because the use would be for a few  months at most and due to that short term use you can survive a rate adjustment up.But, if you have no plan to payoff the debt like when using for a down payment on a long term hold why pay the extra cost for flexibility and have the additional risk of the adjustable rate with the amortization looming when you can get a fixed rate second mortgage. 

We have not disabled ours or converted to gas, but Tenant must sign a Fireplace Addendum stating if they use it, we require a higher renter's liability policy with us as additional insured, rules on wood, storage, use, safety, they pay for yearly professional cleaning each year they are there, etc.  

I was fine with all these numbers.Then I met with contractors...First, I wanted to add a new bathroom and approximately 450 sq ft of additional living space.

There are also additional costs of operating and maintaining an LLC, like separate bank accounts, annual report filings, tax filings, etc.2.

Feedback has not suggested property needs additional repairs/work, only that they are looking in a different area.