Right way to analyze a purchase?

[Chris Wilson]

We have a house with our son that he lives in where he contributes $1,000 a month and we contribute $1,100 towards the mortgage, property tax and insurance. We will have an opportunity to pay off the mortgage at $317,000 later this year. He will still be contributing $1,000 a month of which $500 goes towards the property tax and insurance.

I’m trying to determine the return for doing so. If I use a cash purchase in the BP calculator it ranges from a cash on cash return of 5.1% to 6.06% depending on if I deduct the loss of deductions for interest and tax that I would lose. I have used $2,100 as the rental income and added the cost for tax and insurance, I also used $1,600 and did not added those expenses and I used $1350 as the income to reflect the loss of deductions also without adding the expenses. They all come back in that range when looking at this.

Is this the right way to look at the return for paying off that mortgage or is it simply the interest rate on the mortgage itself?

Thanks,

Chris