You did noy say the value of the rental or the rent per month. As a rule of thumb, if the annual rent income is not at least 10% of the current value (or 10% of the value you paid for it, I will let you choose :) ) and it is generating positive cash flow then you should sell ASAP. The real warning sign is the negative cash flow right now. Even if you paid of the mortgage right now, you will still almost certainly get better returns from a well considered investment in stock/bonds or an actual investment grade rental. So dump this loser and do something useful with the money.
You are better paying off the house than keeping money in the savings accounts. You may be better investing instead of keeping in savings or paying off, but that is up to you. There is some risk in paying off just a little short of the whole mortgage in that you will then have neither cash nor a paid off house. If you pay off the mortgage I would wait a few months until you can pay the whole thing. By that time you will also be wrapping up sale of the rental, so with the sudden free cash flow you will recover quickly.
The next step is to fund every tax advantaged account up to the max (403b, 401k, Roth IRA, HSA, etc.). In fact if you haven't done so for this year this should be the first priority.
Cash in Ally is not bad but 1% is less than inflation so you are losing money. A more agressive but still reasonably safe method would be to split taxable money equally between a municipal bond fund, an intermediate term treasury fund, a US stock fund, and an international stock fund. Or, allocate it as makes sense as part of a larger whole including the investments in your tax-sheltered accounts.