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.

Shiloh Lundahl · Answer

@Israel Mendiola as a pure money making investment it is not a good idea to keep it. The time it takes to operate and the amount the fact that you negatively cash flow obviously points to a negative ROI and negative return in time spent. So unless you think there is going to be high appreciation that will be high enough to out pace your negative cash flow, I don't believe this is a good investment. However, if you are looking at this like a lifestyle investment and you really want a cabin to go and enjoy and you want other people to help pay it off, then this may be good enough for you. I have 2 cabins in Arizona and my goal was to own a cabin that I could have others pay for so I partnered with someone with some capital and I bought a fixer upper and we make it nice and staged it and then refinanced it. My partner had about 70k of his money into the deal and I have no money into the deal. We both get to use the cabin and we rent it out as a vacation rental and it has had a mixed bag of returns. In 2021 and 2022 it cash flowed a couple thousand each. In 2023 it broke even I believe in 2024 it lost money. In 2025 it made a little bit of money. And this year it will make a little bit of money. If you add up all the gains and loses since we bought it in 2021, I would say we are up about $5,000. Definitely not financially worth it. However, I get own a cabin that I get to go stay at amd enjoy amd I didn't have to spend any money on it. And the rentals cover the cost on average each year and I make a little bit on average each year. For me, this is a win as a lifestyle investment. But it would be a loss as a regular real estate investment.

What is your goal with the property?

If your goal is to make a good ROI then it may not be a good property for you. If your goal is to have a cabin and have others pay for it, then it may be worth keeping. But I would encourage you to consider the refi but also see if there are a couple of other people who would like to partner with you on the cabin that want to be part owners of a cabin that are willing to bring in at least the same amount of money that you have brought in so that they can be able to use the cabin sometimes as well. This may lower you personal cost into the cabin and it may distribute the loss so that it isn't as expensive to have a lifestyle cabin. And if you get 2 or 3 partners, and you refinance it at a lower rate, and you have restrictions to 2-3 weeks a year for use during non-busy times of the year, you may even make money with the property.

Christian Turner · Answer

Israel, broker here, and I'd look at the debt before the strategy, because the debt is the whole problem. $400K at 8.37% is a 2023 rate; a DSCR rate-and-term refi today, even without quoting numbers in a forum, is likely a point or more lower, which on your balance is roughly $250-300 a month, or most of your $7K annual gap on its own. Add a 10-year interest-only option, which most DSCR lenders offer on STRs, and the payment drop is closer to $600-700 a month while you hold and wait for the Smokies market to firm up. Interest-only isn't a forever plan, but it converts a bleeding asset into a break-even one without selling at the bottom.

What has to line up: (1) value, since $400K needs an appraisal around $535K for 75% LTV; Sevierville cabin comps have softened, so pull recent resort sales first; (2) the ratio, since STR lenders use your trailing 12 months ($60K) haircut about 20-25%, so roughly $3,750-4,000 a month of qualifying income against the new PITIA, which is why the lower payment matters twice; (3) your current prepay, since a 2023 DSCR is often on a 3-2-1 step-down and you may be months from it dropping to 1% or zero.

Run those three before deciding between hold, sell or convert.

Adam Summerer · Answer

If the NOI looks ok but the mortgage still hurts, run a STR-aware DSCR refi at normal occupancy not peak season. At 8.37% it only makes sense if the payment drop actually covers closing costs for how long you’ll keep 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.

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.

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

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

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