Should I sell or hold?

[Majid Tahir]

First of all I've just discovered the wealth of information here on BiggerPockets and its really exciting.  I never knew before where to go with some of my questions, but it looks like this forum is a great resource.

I have a condo that I used to live in and when we had our third child we decided to move out.  I could not sell it at the time because this was during the recession and I was about $60,000 under water on the property.  In addition, my credit was poor so I could not refinance my interest only loan.  Luckily I was able to rent it out but I was not gaining any equity on the property.  I also was losing about $300 a month in negative cash-flow.  

Its been about 4 years now and my credit has improved and I was able to refinance at a much lower interest rate.  (6% before to 4.5% now).  Now I am only losing about $100 per month.  I am still about $40k underwater on the loan so selling it is still difficult.  

The way I see it is that I have 2 options:

1.  Pay current mortgage amount and continue to raise rent annually until I break even.  Then sell the property when I am no longer underwater (maybe 5-7 years)

2.  Pay extra principle every month and try gain enough equity in the property so that I can sell it in about 2 years.  

I would eventually like to invest in better real estate properties so I want to save money for that as well.  What do you all suggest I do?