What should I do with this negative cash flow rental?

[Rob Cee]

I have a negative cash flow property out of state I bought about 10 year ago that was a mistake before I knew better.  Trying to decide to take a big hit and sell it cheap or hold on to it and hope market recovers.   I owe $182k on it and can probably sell it for $165k right now.  So that plus real estate commissions and closing costs I will lose a big chunk of change.  The house was built in 1976 and has a dated kitchen and bath.  Roof likely needs to be replaced in a few years.  Furnace and water heater are old. Other things are dated.  It's in a decent location and has good curb appeal.  Rents well.  It has new flooring.  I've lost money on it every year the last 10 with negative cash flow.  

My options:

1. Pay off the 2nd mortgage and refinance the first where it will be slight positive cash flow (will require about $44k out of my pocket to pay the loans down to the point I can refi) and get it re-rented with professional property management.  The hope here is that in say 3 years the market will be better and I won't have to take as big a loss on a sale.  Issue here is the property needs a lot of work (roof, furnace, etc...), and in 3 years when IF the market improves I will still be selling a dated house and I may have to incur more costs then expected on maintenance, repair, updates.  I do think the market does have potential to recover some in price, but it's a big IF.  But I will be putting a lot more money into a property I don't want and was a mistake.

2. Just sell it cheap and take the loss.

I don't really want to do a lease option or real estate contract because of all the legal issues with getting a tenant out if they don't pay. And even then I'm likely to get the house back in the future and tenants may cause damage. It's not a good market to do a FSBO either to try and save on commission. Don't want to do a short sale and wreck my credit either.

Any thoughts and suggestions?  Which choice is better?  I have had great success in the years after learning the lessons from buying this first loser.  But I still have this albatross to deal with from a dumb decision I made 10 year ago.