please help me advise my parents

[J Mags]

1.  My parents are trying to decide whether or not to payoff the mortgage on a single family rental they own in Las Vegas.  

2 I'm trying to do a ROI analysis so that we can compare whether or not they should keep the 100,000 in the stock market or not.

3.  Is my calculation below correct?  (**I'm not counting depreciation or the $30,000 down payment that they paid about 5 years ago.)  

3a.  If they put down the $100,000 they will get to keep all of the rental income (minus expenses) but pay more tax because there will be no interest expense to deduct.  So the rate of return when the house if paid in full is 5.3%.  So the question is whether or not they can get a 5.3% return on the $100K elsewhere, right?  

3b.  I'm having most trouble analyzing the financed scenario.  If they continue with the mortgage, they would put $2030.13 a year in equity/principal and also pay $4582 in interest.  Is their rate of return really 113%?  Or do I have to include the interest as part of the amount invested vice an expense?  What happens in the next year, when they will have to pay another $2030?  Does the amount paid in the previous year count as an investment outlay?  income/ (2030 + 2030)

4.  I don't know how to go about analyzing this question.  My parents are also trying to understand that they should do with their cash reserves on hand.  They mortgaged one of their rentals to cash out, but don't know what to do with the cash.  I suppose it's helpful to have the reserves, but I worry that we'll lose money by leaving it with finance managers at Charles Schwab and Merrill Lynch.  They haven't seen much of the benefit of the stock market after getting hit by the 2008 stock losses.  Real Estate, on the other hand, has completely saved our family financially.  My dad busted his *** working two service jobs to make ends meet at companies that now offer him next to nothing for retirement.  Without rental income, our lives would be completely different.  

5.  Thanks in advance for any help that you can offer.  I wish that I was smart enough to figure out this head scratcher.  I'm looking forward to getting to know the BP community.  

investment outlay	100,000	2030.13
rental income after expenses	7993	7993
interest	0	-4582
est income tax 33%	-2637.69	-1125
total income	5355.31	2286
***	****	***
rate of return	0.053553	1.126036