Everyone’s got the same problem: STR oversaturationPrices are high in most markets and if/when you do buy, your competition is fierce thus pushing down nightly rates and occupancy rates in almost every worthwhile marketGood luck fixing that! 

You want to have your financial house in order so you know what you CAN afford and what you SHOULD spend.

It might mean giving up a lower rate but if you do not have the personal capital or do not want to part with it, it is the easiest way.  

If they want to stay, they will sign a new one-year lease with a monthly rate of [$XXXX].

As another poster mentioned rates are lower than they've been in the previous 18+ months but unless some very surprising economic data comes out between now and when you did your refi it seems unlikely that rates are going up in the short term and there is at least a decent chance that rates drop a little more before then. 

Our occupancy rates have been 65-95% during the peak.

They should do a cash out refinance or a HELOC when rates go down to tap the equity. 

million in addition to their investors (who expect a reasonable rate of return) by keeping the rental rates at a fraction of the market rate?

Under Alabama law, that is a VERY dangerous play and you could end by losing money.You also cannot sit back and let him build the house and say "Thanks."

More control of the active income of our business due to long term rental market changes that are being effected by the rates as well as growing deal prices.