Great problem to have. I think you're looking at this the right way. $300/mo cash flow for a $325k property isn't ideal, but might be worth it if it's appreciating. A third option is to HELOC your $120k equity to get $85k or so to invest somewhere else. Keep your place until it appreciates more.
Don't forget to figure in your mortgage pay down.
I don't think there's a right or wrong answer in your case and a lot of it comes down to your own goals. I agree, you can get better cash flow somewhere else, but likely the appreciation won't be there. But appreciation is no slam dunk around here either. Which town/city? Some are appreciating nicely, others are plateauing, and still others have median prices for condos that are going down. At this price point I'd be looking closely at all the things that affect affordability. Interest rates going up and the changes to SALT deductions will make it more costly to own, which in turn will put downward pressure on sales prices.
Thanks, everyone. Definitely worth considering a HELOC or cash out refi. @Jason Lee this is located in Weehawken, right near the border line of Hoboken.