My mom and I own two rental properties together. There are 5 years left on a 15 year loan on one of them, and the other is paid off. The balance is $49k at 5.875%. I have about that much money sitting in a checking account not doing anything for me. I was planning on putting it in the stock market, but it being at an all time high makes me hesitant to dump such a large amount in at once. I'm thinking I could pay off the property now and take the $921/month payment and make monthly contributions to a taxable Vanguard account.
Can someone help me do the math? My mom pays the taxes on the rental income, but I think she makes so little money that she doesn't really pay any in taxes. Her rental income is about 32,400. She gets a mortgage interest deduction for 2013 of about $3200. Her taxes are $3500/year for the two properties. Her insurance and HOA dues are about $2000 year. There are usually some miscellaneous expenses of another 5k/year. I'm not sure how much she gets in depreciation, but she paid 160k for one property and $170k for the other, and that was ten years ago. If I would be taking away a tax benefit for her, then I don't want to pay off the loan, but if I'm not, would it be a good idea?
She just retired from her job, and she is 58 years old. She gets a VA death benefit from my dad's passing of about 1200/month that is not taxed. She will probably go ahead and collect SS benefits when she's 62.
Thanks for any insight you can offer!