As for you, Scientist, can you provide some more info? Are you in the US? Which city? You probably won't get taxed on the capital gains from selling. Also, with deductions (depreciation, HOA, mortgage interest, property taxes) you may end up cash flow positive. But once you start renting it out, you lose the capital gains exemption (it's reduced by the proportion of years that you rented it vs. lived in it) AND the capital gains increase (increase as value goes up, and also as you depreciate the property basis goes down). I'm still guessing you'll come out slightly cash flow negative, but positive equity.
Sorry to hijack, but I have a friend with a similar problem in SF:
Low positive cash flow (he said a few hundred dollars/mo)
Low interest rate (sub 4%)
Property taxes locked in under Prop 9 (can only go up a few percent per year)
Not subject to rent control
Unfortunately, he doesn't know exactly how much it would rent for, or how much it would sell for. There aren't a lot of comps for either, but I'm guessing the cap rate would be relatively low -- 4% maybe? It's almost always low in SF, which is why I personally wouldn't get into the rental game.
On the other hand, he thinks it would be a shame to give up the great interest rate and locked-in property taxes.
So how should he proceed? List the property for sale and see what offers he gets? List the property for rent and see what the market will bear? Both?