I just have to take advice with a grain of salt when somebody tells me I should expect to spend $450,000 on maintenance costs over the next 30 years (and that's basing it on the purchase price, not the present value which would make it even more based on your rules.) I understand how a rule of thumb can be useful to quickly sort through a multitude of investment options, but when discussing a specific property I think there's a lot more to take into consideration.
For instance, as I said, why should maintenance costs on a $500K home in a high demand area be $15,000 a year but be $6000 per year in a less coveted area an hour or two away for the exact same house? The roof doesn't need replacing any faster, the materials are all being sourced from the same place. So, given that I'm simply in a high priced real estate area, I'd tend to lean closer to 1% than to 3% of your suggested 1-3% maintenance rule of thumb, which takes it to $150K.
I also think it makes sense to use the square footage to estimate maintenance costs at $1 per square foot per year, which would put this house at $60K over 30 years. If we average these two methods to find something in between, I find my $100K estimate to be fairly spot on.
If we take into account that yes, my husband can do a lot of the work and source materials without the markup that hiring out would come with there's even more savings. If he doesn't feel like replacing the roof himself and he gets his subs out there instead, they give him a discounted rate. If he spends a few weekends a year on projects, or if I spend a day in between tenants walking through with a bucket of paint and a brush doing touch ups (or spend a couple of weekends painting the house from top to bottom as I did when we lived there) I don't see this as wasted time or working for free - it's a great return on my time investment vs. hiring a painter.
When I sit down and think how many hot water heaters will we go through, how many furnaces, how many times will the composition roof need to be replaced, how many times will I have to find a deal on a new appliance on Craigslist, etc. I find that $100K seems reasonable as long as we don't neglect regular maintenance.
Again, I know that this still isn't a good rental. I will argue that a $200K rental bringing in $1500/month in rent is not just a better rental but a decent rental in my area, and that just because a rule of thumb (which includes much cheaper to buy areas throughout the US) would cross this off other real estate investor's lists, that it doesn't mean that no one in my area should consider buying rental properties to add diversity to their investments. If you'd rather diversify your investments by buying REITs, consider that the rental described actually does meet REIT buying guidelines for my area.
But I am genuinely asking (and trying to decide for myself) whether it makes more sense in the long run to just keep this property or to put the potential $50K of free equity into a $200K rental. But I'm trying to step back, look critically, and crunch these numbers rather than shotgun pulling the trigger on selling.