I'm more inclined to come down on the side of keeping it, purely because it's a small fry debt that currently earns you 18.6% net, not including future appreciation.

Regardless of what I just said there will always be opportunity in the future!

Also learn how to prevent such issues in the future.

Apparently remediation is going to cost around $2,000 with and if I want to prevent it in the future, a $100 / month servicing contract for bedbugs. 

I am looking into the possibility of buying a Co-op in New York City in the near future.

What would you do in the future to deter such actions!

And with the recent laws passed by the state as recently as this week I feel there is a bright future for STR's in Nashville, though like any investment I do recognize the risk I am taking that things could turn negative for short term rentals. 

This way you can show the bank there is a larger future income stream. 

No comments on this specific issue but reading your line : The neighborhood is now trendy and property values have skyrocketed and will continue to do so I imagine.Its easy to believe there will also be future growth and then the market shifts, neighborhood etc.  

The future is almost impossible to predict and your equity growth could stop anytime.