This should be your own conclusions based on your underwriting, not someone else’s. 

If you do, you are missing out on most of the advantages, and rationalizing bad deals into good ones based on "%'s" instead of dollars. 

I have over 40% equity based on loan amount of $200K and general market value of the property at $400K (unsure what assessed value would be).I'm thinking I'm a candidate for PMI removal.

The tax treatment of your land sales would typically be determined based on when each parcel was sold and whether they were held for investment or business purposes.

The truth is, it’s based on a multitude of factors and ultimately comes down to what makes sense to you.

Appreciation is based on the $1M, not the $200K. 

@Matthew Slaughter, I would probably start with communication and talk directly with the upstairs tenant.

And again, this is my market and area of town, but tenants like the character of the older home with the tall base boards, hardwood floors, arched doorways between rooms, etc.  

@Josh Mac are they wifi or cell phone based? 

In the meantime, offer based on what the tenants are paying now.