STR Cabin TN — NOI Positive but Mortgage is Killing Me - What Would You Do?

Question

Hey everyone,

I'm looking for some perspectives from experienced investors, real estate agents, wholesalers, or anyone who's dealt with a similar situation.

THE PROPERTY - I own an STR cabin in Sevierville, TN (Smoky 
Mountains). 1 bed + loft, sleeps 6, inside a resort community. Here's my
 situation in a nutshell:

THE NUMBERS:

• Purchase price: $549,000 (2023)

• Mortgage balance: ~$400K at 8.37% — $3,500/mo payment

• 2024 revenue: $58,000

• 2025 revenue: $60,000

• Annual cashflow: still negative, roughly -$7,000 in 2025 (big improvement from -$21K in 2024)

• NOI is actually positive (+$36K in 2025) — the mortgage is the main dragOpen to hearing if there's a smarter play I'm not seeing.

Thanks in advance!

Ashish Acharya · Answer

Israel, I’d separate the property performance from the financing problem, because your numbers suggest the asset is operating better than the debt structure is allowing you to feel.

If NOI is positive but the property is still losing roughly $7K after debt service, I’d first look at whether refinancing, a principal paydown, or restructuring the debt meaningfully changes the hold decision. At 8.37%, even a modest rate improvement could change the picture, but I’d compare the total refinance cost, prepayment terms, required reserves, appraisal risk, and how long you realistically plan to hold before assuming a refi solves it.

I’d also underwrite the property as if revenue stays flat for a while. If the cabin only works after assuming another big jump in bookings, I’d be cautious. But if operations are improving and the negative cash flow is mostly a financing issue, that’s a different situation than owning a fundamentally weak STR.

On the tax side, I’d review whether you’ve already used cost segregation and whether you materially participate in the STR. Cost seg can generate substantial depreciation, but the important question is whether those losses are actually usable. For STRs, average guest stay and material participation can change whether the activity is treated as passive or nonpassive.

I would compare three numbers before deciding: sell today, refinance and hold, or hold as-is for another year. The best answer may be the one that preserves the most after-tax equity, not simply the option with the lowest monthly payment.

Happy to connect!

James Jones · Answer

Israel, Memphis operator here - 22 years, few hundred doors, other end of Tennessee - and I want to reframe this before the refi advice runs away with the thread, because your diagnosis is already correct and it's rarer than you think: you don't have an operations problem, you have a capital-structure problem. +$36K NOI on $60K revenue is a well-run cabin. You bought a good operation at a 2023 price with a 2023-vintage rate, and the loan is the whole story.

So run the refi math honestly before celebrating it. $400K dropping from 8.37% to around 7% - which is a realistic investment-STR/DSCR rate today, not the 6.6% owner-occupied HELOC numbers being quoted above - saves you roughly $350-380 a month. That turns -$7K into roughly -$2.5K a year. Better, real, worth doing when the spread covers closing costs - but it does not flip you positive. Anyone telling you a refi fixes this hasn't done the subtraction. Also watch prepayment penalties on whatever you refi INTO, because if rates keep drifting down you'll want to do this twice.

The decision that actually matters is different: is negative $200-580 a month a price worth paying to hold this asset? That's not a rhetorical question - it's a real option with three honest answers.

Hold and pay it: -$7K a year is the cost of a call option on two things - rates falling (you refi again and go positive) and Sevierville values recovering. If you believe in both, $583 a month is cheap for that option, and you stop treating this as an emergency.

Attack the revenue: your real constraint is that 1BR-plus-loft-sleeps-6 is the single most oversupplied cabin category in the Smokies, so you can't price your way up - but you can convert your way up. In that market, amenity capex moves small cabins disproportionately: a hot tub if you somehow lack one, a themed game loft, a sauna - the things that make a guest pick YOUR listing out of four hundred identical ones. $15-20K of the right capex routinely adds $8-12K of revenue in that market, which is a better return than the refi.

Sell: get a real comp check first, because 2023-vintage Smokies cabins are the one vintage likely underwater, and if you're at or below the $400K balance after selling costs, this option is closed anyway and the decision simplifies to hold-vs-improve.

What I'd actually do in your seat: refi when the all-in math clears (get three quotes, brokers with multiple AMC paths), put the payment savings PLUS a small capex budget into making the listing un-ignorable, and set yourself a written trigger - "if I'm still negative after the 2026 season with the new rate and the new amenities, I sell in the fall." A decision with a date on it beats bleeding indefinitely while hoping.

And a general caution since you asked the internet for help with a distressed-adjacent situation: be careful with anyone whose answer arrives with their phone number attached and the word "loopholes" in it.

Amber Stout · Answer

As many others have mentioned, the fact that you’re NOI positive but cash flow negative makes me look at the debt before I’d give up on the property. At $400k remaining and 8.37%, I’d definitely run the numbers on a DSCR refinance and see what the payment looks like at today’s terms.

I wouldn’t refi just for a lower rate though - I’d compare the actual monthly savings against closing costs/breakeven and also look at where the property would appraise today. If the numbers work, you may be able to turn this into a much healthier hold without changing anything operationally.

Ashish Acharya · Answer

Israel, DM'd you with more detail, but to answer here too.

No, you don't need a US W-2 for either cost seg or material participation, both are based on the property and your actual hours, not your employment or residency status. As a foreign owner you'd generally file a 1040-NR though.

On the "I take for granted I work 100 hours" part, that won't hold up if it's ever questioned, you need actual logs, not an estimate after the fact. Start tracking now regardless of what you decide.

And yes, get the cost seg study done before the refi decision, not after, you need that number to fairly compare hold, refi, or sell in the first place.

Dan Handford · Answer

Israel, the positive NOI is useful because it separates an operating-property issue from a capital-structure issue. I would compare three forward-looking cases: hold with the current loan, refinance only if the total payment and closing costs materially improve the picture, and sell using realistic net proceeds after transaction costs. For the hold case, stress revenue, maintenance, replacement reserves, and occupancy instead of assuming the recent improvement continues. Which outcome matters most to you now: reducing monthly cash drain, preserving long-term upside, or freeing the equity for another use?

Michael Eskenasy · Answer

I don’t think the mortgage is really the problem. I think you bought an asset yielding less than your cost of debt.

$36K NOI on a $549K purchase is about a 6.6% unlevered yield.

Your debt costs 8.37%.

That’s negative leverage. The financing is amplifying a deal that doesn’t currently earn enough before debt service.

At roughly $42K/year of mortgage payments against $36K NOI, your DSCR is under 1.0. So I wouldn’t make the decision based on hoping rates come down.

I’d figure out two things:

What could you realistically sell it for today?

And what NOI can this cabin realistically produce without heroic assumptions?

If there’s a believable path from $36K NOI to $45K–$50K, I’d probably work the operation and wait for a refinance opportunity.

If $36K is basically stabilized performance, then I’d seriously consider selling. A lower rate would help, but it doesn’t change the fact that you’re starting with a pretty thin yield for an STR.

The improvement from -$21K to -$7K is meaningful. I’d just make sure you’re improving the actual economics, not getting better at carrying a structurally weak deal.

Israel Mendiola · Answer

Thank you all - this thread gave me more clarity in a day than weeks of googling on my own. Quick recap of where I landed: the refi is worth pursuing but won't fully solve this on its own (thanks James for the reality check on the math), so I'm treating it as one piece alongside a look at material participation/cost seg (thanks Ashish).

I've got refi conversations going with a few lenders now. Planning to set a real decision point before the end of 2026 rather than let this drift. Appreciate everyone taking the time.

Basit Siddiqi · Answer

As others have mentioned, look to see if you can refinance into a better rate.Are you self-managing the property?That would kinda suck if you are putting time into this business and still coming out negative on a year by year basis.I think most STR operators lost money if you brought a STR in 2022 - 2024 and got a high mortgage interest rate.The Smoky's got hit harder because everyone flooded that market to find a STR.If you can chop off 2% on the interest rate, that is about $8,000 which would bring you at a positive net income.My opinion is if you are self-managing the property, I would sell it.If you have a PM Company, I would keep it.

Israel Mendiola · Answer

Ashish, thank you - this is helpful context I hadn't fully considered. To answer your questions: I haven't done a cost segregation study on this property yet. On material participation, I'm self-managing but don't track hours formally but take for granted that I work at least 100 hours on the property during the year. I'm out-of-country investor and newbie on this, I have no idea if I can apply cost segregation and material participation. Do I need a W2 in the US in order to qualify?

Given the numbers (positive NOI, negative cashflow after debt service), does it make sense to get a cost seg study done now, before I make any refi/hold/sell decision, or is that more useful after the financing situation is settled? Would love to connect if you're open to a quick conversation.

Israel Mendiola · Answer

James, this is exactly the reframe I needed - thank you. You're right that I was mentally lumping "refi" and "fixed" together, and the honest math (-$7K to roughly -$2.5K, not positive) is a much more useful number to plan around.

I'm actually already in the process of shopping the refi - have inquiries out with a few lenders right now and I'm going to push for those 2-3 quotes you mentioned rather than taking the first offer. Question for you: when you say "brokers with multiple AMC paths," is that something I should be asking lenders directly, or is that more about who I choose to broker the deal?

I actually set a trigger for myself last year, because I don't want to keep bleeding indefinitely. The problem is the math on the other side: if I sell now, I'm looking at losing roughly $100K - basically all my savings. I know it probably reads like I'm just hoping conditions change, but honestly I'm not sure what the better move is. I thought I was buying an investment, and the mortgage is what's actually killing it. That's part of why I brought this to the community - you all clearly know this stuff better than I do, and I was hoping for some real clarity instead of just talking myself in circles.

STR Cabin TN — NOI Positive but Mortgage is Killing Me - What Would You Do?

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