Otherwise I’d stick with LTR of the entire home, especially if you’re trying to make the property like an annuity. 

At less than 5% she would be better off buying an annuity with her retirement cash if she wants risk free guranteed income with no hassles.

The bi-annual calculation would be used to adjust the annuity.

Have been through the Variable Annuity rodeo and don't want to go there again.  

One bad tenant or major repair can wipe out all your profits in a single tenant property.It never really makes sense to use extra cash to pay down the mortgage unless you are only going to do this deal and use the income as an annuity. 

have around 500k in fixed AIG annuities,arrgghh!)

The annuity is also structured with monthly payments instead of bi-annual payments like what is characteristic of bonds.

Admittedly with some upgrades we could get $825/month, but who cares.We do not even know her last name, so my wife calls her the 'annuity'.

My parents have a good amount of retirement income from pensions and annuity to cover expenses (they have no mortgage), and they certainly never travel,  And yes, I would def give them a nice gift for helping me out...

Garrett you cannot use the 50% rule in many parts of the country that works in areas were values were hammered or have stayed low for years.Yours is a appreciation asset.. the assets that generally can be bought using the 50% rule or other low end rental cash flow rules by and large are more like annuity assets.. just income no appreciation of the asset over time.And this leads to the discussions about California Real Estate and what markets are better to invest in..