Pigeon Forge STR - Hold, Sell, or Cash-Out Refi?

[Angela Morris]

I would like some advice on whether to hold, sell or cash-out refi my first STR. I purchased it in June 2020 for $599K. It is on track to produce $160K in 12 months (almost there!). While I love the cash flow and would really like to hang onto it, I'm thinking now may be a good time to sell since the inventory is low and prices are high in the area. It's not usual for a property to get 20-25 offers. I could then use that profit to purchase 3-4 more in the same price range. Its all about scaling, right? If I sell, I would want to get at least $1.2 mil, which is double the price I paid for it. Based on the income it generates, I believe that's a reasonable price in the area, but would I have a problem with the appraisal? I haven't found any comps that generate that kind of income. It's a 3 bed/4 bath pool cabin. I've been researching recently sold properties in the area and many higher priced, larger cabins are generating less income. I've also considered doing a cash-out refi, however, since appraisals are based on comps, I don't believe it would appraise for more than $700K. Thoughts/suggestions?

I also just sold 2 long term rentals and plan to 1031 those into another cabin. I should have done that last year as now I'll be paying alot more $$$ for a lower income cabin. Ugh.

[Angela Morris]

Originally posted by @Jason Shackleton:

Hey @Angela Morris Selling for the price you mentioned makes sense at this point in the market cycle. I would refi personally. The cash flow it produces is awesome. Also if you refi and put a bigger mortgage on it you will take on more debt. This will allow you to have more mortgage interest to write off vs the high income it produces at tax time. The potential low appraisal is a concern but why not actually see what an appraisal would be before making a decision. The comps are the main factor yes but if your income is way higher than others that should be taken into account. Appraisals are not very expensive. Also I am curious how are you financing these STR's I only have one private lender that finances STR's. Thanks!

Thanks for the advice! I used traditional bank financing for this purchase. As a vacation destination, most properties in the area are purchased as STR's.