If so you definitely  need one.If you or most all of your competition doesn't have one then it's not necessary but it may help set you apart from the competition if you need to increase your occupancy or nightly rate.

The only con is the higher interest rate. 

Does anyone know how true this is and if mortgage rates will keep going up? 

There's a lot of moving parts here but it sounds to me that you owe them at most the original $150k + a conservative 8-10% interest per year (well above market rate).

If it is a normal 70/30 leveraged property, you may end up subject to tax on 70% of your returns anyways - so cost benefit, is that 30% tax free portion worth the high tax rates paid and additional filing fees to get tax free treatment on the 30%?

I thought about doing cash out refi, but my current rate is 3.5%. 

And I could have lower income in that window after I semi-retire, before my mortgages are paid off to take advantage of a lower marginal tax rate

With no experience you may have a bigger interest rate but if you have good margins on the hose, you should be OK.

In my market, tax lien buyers make the majority of their money on interest rates / penalty fees they receive when someone redeems. 

We then take the utility bills determine base rate split and usage rate.