39 year mortgage that I pay additional principle every on monthHow did you add value to the deal?

Another thing to think about is framing and adding a pre-hung door to the additional space.

With an actual estimate you might gain some ground with negotiating - I purchased my house for $40k ten years ago and it's only been going up in value (including the value add improvements that I've made during my time there). 

Should I sell that house, with 320k net gain, then invest in maybe stocks, or should I rent the property out?

You can gain a competitive advantage by being local.

This is where you can really gain some sweat equity and potentially have better tenants over time.

I would highly recommend to invest in your area first to gain the experience and so you can be involved in the whole process and not have to rely on realtors, property managers etc.. because their opinion will be bias as they obviously want your business.

@Ryan Judy, I am not sure about the code and zoning restrictions in your jurisdiction, but from my experience on similar projects in NYC sprinklers were required among many other additions.

After that, tell us what your tax rate is on your 1MM plus gain?  

I'd love to see if anyone else has any additional tips on this topic!