I suspect maximizing the investment might make it slightly less desirable as an owner or at least the renovations might have lower ROI if sold to a homeowner.

Quote from @Devin James: Gross Margin is an important calculation for developers/builders.Gross Margin = Gross Profit / RevenueWe shoot for a 20% gross margin on our New Construction HomesReal #’s:Home Sales Price: $374KClosing Cost: $18,700Cost of Construction: $258KLand Cost: $30KGross Profit = $67K$67K/$374K = 17.9% Gross MarginCame slightly short of our goal of 20%Homes Values and Build Costs are constantly fluctuatingI wish we had a crystal ball build larger homes. average new build in our market is 2200 square feet, 4 beds, 3 baths, 2 car garage and sells for 515k. construction costs lower if design is good and find the median or average home sale price and push that up. my guess is you built too small. 347k is cheap. we target 429-479k price range in columbus ohio for single family homes and also only purchase close to urban core where premiums are 20% higher and we build smaller like 1500 sq ft where price per square foot goes up. 

Despite the equity We also want to take advantage of tax advantages we did stay in the property for 2 years !  

Keeping clean records from day one really helps when tax season rolls around.

Maintenance and potential repairs will also require a long-term financial plan and setting aside a contingency fund for such expenses.The steady cash flow, appreciation over time, and tax benefits can make a meaningful difference to your wealth in the long term, especially with the principal paydown on the mortgage.However, if managing the property from a distance feels too burdensome, or if you’d prefer the certainty and flexibility that comes with having less debt (especially given the high mortgage rates), selling and using the $100,000 in equity to reduce your loan for your next home may be the smarter move.

When we looked at what his cashflow is currently, and then considered what he would net out of a sale post tax, he decided to keep owning the properties.

So, the actual increase to market rent will be much lower.

As far as what to tell them, you simply say that you're listing it for $1,700/month and are not willing to lower the rate.

If you live there 2 years or more before selling you will be exempt from tax on the 1st $250k in profit which is a nice bonus. 

STR seems to have better tax benefits (in the right market) but is it worth it at a distance ???