Upside down in rental, what to do?

[Adam Smith]

My Brother-In-Law bought a condo in Sacramento about 6 years ago when the home prices there were still very high. He initially had a good investment going for him, but now things have radically changed.

He owes $105,000 on the condo still. He has a $250 loss every month. They are going to raise the rent slightly in October, but still a big loss. There are nearly a dozen of these condos in the area in foreclosure, most of them selling for $20-$30K.

What should they do? They are thinking about just letting it go to foreclosure. They are not big-time investors. They have new cars and a nice house, so don't really need credit that much. I told her the value of that property would eventually come back up, but who knows when? I would hesitate to take that kind of hit on my credit, but their situation is different since they don't plan on buying for a while. Any thoughts?