First of all, when evaluating "rent vs. sell" it is immaterial how much your parents might have paid for it. What matters is what it is worth (i.e. what you could sell it for) now.
If you could truly get $450k for the property then you are losing your shirt renting it out for $1,200, particularly when adding $375/mo HOA fees.
Rule of thumb: Great rentals are 2% of the total sale price and decent rentals are 1% of the sale price. Doing the math, that's a minimum of $4500 you should be charging in rent each month. At your current $1200/mo you are getting just 0.26% of the sale price. If you follow another guideline, that 50% of your rent will be absorbed by taxes, maintenance and vacancies, that $1200 turns into $600 'profit' - and it would tkae you 72
years of rent to recoup the current cost of the house. Not good! In reality your situation is even worse, as the HOA fees are high and taxes (together they eat up over $500 in rent every month. That's before factoring maintenance and vacancies. Maintenance is roughly 1%/yr the value of the property, so -$375/mo. Over the long term most landlords factor in either 1 or 2 months of vacancy per year (some years it will be 0, others i might be 2 or 3). Going on the low side that's another $120/mo.
The final "rough estimate" numbers look like this: $1200/rent - $375 HOA - $141 taxes - $375 maintenance - $120 vacancy =
$189. Divided between three brothers and your profit is around $63/mo.
In sum: Selling this is a no-brainer. I only question why your dad didn't do it sooner.
Tax implications of selling will involve a lot more information, and frankly I'm not an expert on what happens when a property is gifted to multiple people.
Your dad is suggesting that you cash out the house and buy a better rental property. Good insofar that he is ok with you guys selling. But do you actually *want* to be a landlord? It can be lucrative, but only if you are willing to put some time and effort into it to learn the fundamentals and keep on top of issues. Going forward though look for properties with much better ratios. Duplexes/triplexes are popular for a reason, as they can be purchased much more cheaply and each unit ("door") can be rented for 70-80% of what a bedroom in a single-family home goes for. Check out
www.biggerpockets.com for a lot more information on being a landlord. TONS of info there.
Hope that makes some sense. Post back with questions/updates.