The problems I see are:Rent is a low percentage of the house value, so not optimal use of this equity/capital.Property taxes are high due to the higher house valueMy costs would be a baseline of $2700+800 = $3500 plus maintenance, unoccupancy, etc. so basically breaking even cash flow for 12 yearsIf/when we sell it, we'll owe capital gains tax since we wouldn't have a "new" house to 1031 into.

My time is invested identifying the areas and properties that are both eligible for a vacation rental permit license and likely to produce investable rental revenue, but beyond negotiating and supporting the transaction, is the facilitation, transition and optimization to an active vacation rental.Here are some key points for out of state investors of nightly vacation rentals to consider that are just as essential to success as the 'right' property:- The RIGHT People  Operating an AirBnB or mini hotel is hard work and it takes a tribe.

Likely, you will research a bit and maybe start and stop or never get started at all and that is fine maybe even optimal for you I do not know.  

You have to make your own decisions but paying down a mortgage while borrowing to buy furniture is usually not optimal.  

Several BP commentators suggested that arrangement was not optimal.

As a specialized real estate CPA, I'm here to provide expert guidance on your most complex tax matters, from navigating 1031 exchanges and cost segregation studies to optimizing your rental property deductions and handling multi-entity structures.

You could analyze the interest expense differential if you wanted to geek out but this is mostly going to be a behavioral decision up to you, no right or wrong only what's optimal in your case.  

This rental property will be designed with a keen focus on generating a healthy cash flow.Project Blueprint:Budget: Allocated at $200,000, covering construction and all related expenses.Focus: To merge energy efficiency, durability, and tenant comfort with cost-effective construction strategies, making the rentals both affordable and sustainable.Location: Currently scouting – I'm open to suggestions and insights on ideal locations supporting this vision.Strategic Planning:Efficient Design & Planning: I'm considering compact, multi-functional layouts to optimize space usage and incorporate cost-saving construction methods without compromising quality.Sustainability & Efficiency: The plan includes investing in top-notch insulation, air sealing, energy-efficient systems, and sustainable materials to reduce the building's carbon footprint and operational costs.Budget Management & Cost-Saving Initiatives: Careful budgeting and exploring value engineering options are crucial, alongside seeking out grants or incentives for energy-efficient building projects.Community & Sustainability Goals: To create shared amenities to foster a community feel and implement systems encouraging tenants to monitor and reduce their energy consumption.Seeking Community Insights on:Cost-Effective Building Strategies: How can I ensure the project remains within budget while achieving high sustainability and efficiency standards?

But you payment will increase and depending on the interest rate it may not be optimal. 2.

They're the pros, after all, and they can offer tailored advice, ensuring you're not only correcting the mistake but also optimizing your tax situation.Good luck, and definitely consider getting professional advice to navigate this.