Rent or Sell -- underwater property

[John Schnyderite]

I currently own a condo I bought in '09, which is underwater. My fiancee and I are looking at larger homes and are pre-approved and bidding on an REO to make our primary residence.

Other forum members have been kind enough to dispel the possibility of writing this off as a loss if I rent it, so I have 2 possibilities here:

1) sell, and take a loss of $2500-6000 after commissions paid and closing.

2) rent until I'm able to break even, which I would think will be 1-2 years.

Note: In renting, I would lose $175-225 per month, which I'll be able to recoup most if not all at years end with property tax, etc paid. Many of the core components of the home should be no worry -- roof covered by association, furnace/AC replaced in 2011,

--Other Factors --

If I decide to sell now, I can try to sell it while I occupy it and repair the REO with little gap of inoccupacy (double mortgage), whereas if I rent, prospective buyers are subject to the condition that tenants keep the place in OR I will have to wait til tenants are out to sell.

Association fees have gone up basically every year and as we know, taxes never really go down. My cost to own will rise with each year I have it, as will risk that something goes wrong with the place.

My fiancee and I prefer not to be long-term landlords -- especially with negative cash flow. Our new property would tie up most of our time as/is.

Opinions? Ideas? I know real estate values are coming up and this loss could turn into a gain if we have some patience, but we're also afraid of the risks of holding a second property with costs of a wedding and a big down-payment coming up.