This is an awful rental. Sell it. $2600/mo will not even cover your expenses (vacancy, repairs, taxes, management) - you are losing *at least* $1000/mo even if things go really well.
It sounds like the house you want to live in will either cost $1.5-2 million, or rent for something like $4500. Off the top of my head that seems like a pretty good deal for rent if you can invest at ~5-7% returns while you are saving that mortgage money.
If you never, ever plan to leave the Bay area, maybe buy a place, but I'd still sell the current one.
-W