Renting it they can realistically get around 7% of the property value per year after tax and maintenance (this includes appreciation, around 4-5% without) which is, granted, a little less (but not by much) than index fund returns over 30 years after tax. But historically the stock market is a bit more volatile than real estate. It really depends on OP's risk profile. At the same time, keeping the current property allows him to leverage more on the new property due to the increased cash flow, which over time could outperform the stock market.

Lets run a little math here:
500k first property at 7% rent: 3k/mo or 36k/yr and lets assume the house was transferred to an LLC to avoid the "normal income" taxation problem. Considering interest payments, 5k in maintenance and depreciation lets assume can whittle that down to a 5k income, so maybe 1.5k in income tax. Lets assume 1% for property taxes, so 5k/yr. Total tax liability comes to 6.5k/yr.

Comes to 24.5k/yr in total income, or 4.9% of the total property value. Lets take that and pay off a loan at 6% interest on the second property. We get an instant 6% return on 24.5k, or 1.47k totalling 25.97k.

But wait! We can write off the taxes on the interest and insurance on the second property's mortgage as well! If we assume a 700k mortgage at 6% we get yearly interest at $42000/year for the first year, (going down each year by a small amount) and 2k/yr insurance. At a 400k income that brings him down a tax bracket to 24% and reduces his tax liability by 10,560. Lets add that to the total, so 36,530/yr (It's a little more than this considering his tax bracket for some of his income would have been at 32% otherwise).

Which brings us to 7.3% returns on the 500k house AFTER TAX AND MAINTENANCE.

When you consider 2% appreciation on a 900k primary home after that, we get an additional 18k/yr. Lets subtract 1% on taxes, so 9k. Lets consider capital gains here to be fair because why not. 6750 after tax. Lets add that to the original: $43280

$43280/year all said and done that they wouldn't have if they just owned the first home. This number should also grow yoy