There are so many factors that play into keep vs sell decisions, but ultimately your strategy should be based on your end game.

I developed a calculator in excel that adds the rehab cost to the purchase price thus adjusting the cap rate, if the rate isn't where you want it to be lower your offer or don't make one.

However, that only means you can get into the game early when things are still affordable.  

With development at an all-time low throughout the Bay Area, I don't see prices softening significantly in the near future.I would look into getting a cash out refi on your property and purchasing a cashflowing multifamily as Jason and Calvin have suggested.

Develop a relationship, see if they’re savvy, and if they know real estate most high quality lenders will spend extra time with you making sure that you are organized in the best way possible for them to give you money.

So I found an architect from a similar project development that I want to undertake (10x 1BR townhome units).  

Can’t play the game without understanding the rules.

Very beautiful suburban area with lots of development happening in the area...well, last time I was there which was sometime last year.You've definitely come to the right place for your real estate investing career. 

I know the margin might not be great, but we're willing to play the long game on this part of town. 

Your dilemma is exactly why I took my properties back and developed a software to simplify management so I can do it myself.