I have to convert my Airbnb to a negative cash flow rental SELL?

[Cherish D.]

So I purchased my first home as an investment short term rental near Disneyland in Anaheim CA. I've owned the property for 2 years and now the city has changed the laws and no longer allows short term rentals. The neighbors contacted the city, the city has sent me fines and gave me a notice to shut off my utilities (since they are city controlled). So I cancelled my bookings and now I am left with a negative cash flow situation. I tried to refinance and can't because there were complications and I was not approved.

I might be able to go to a friend and he said he would push a refi for $6k closing costs. That seems high but he knows I'm in a bind. 

Without refinancing these are my expenses. T market rate to rent my home seems to be $2,995

1st Mortgage- $2,646.29

2nd Mortgage adjustable- $287.95 = $2,934.24

Property tax- paid from mortgage

Supplemental Tax- $1,289.36 / 12= $107 per month

Insurance- $560.08 for the year / PAID FROM MORTGAGE

gardening- $60

= $3,101.24

Notice this is not even including repairs and the roof will need to be replaced soon. The A/C might need repairs as well. 

If I am able to refi it would reduce my total expenses by $200 a month to $2,900.00.  Also the 2nd mortgage on my home is at an adjustable rate and if I pay $287 per month I am making interest only payments. 

Before when it was an Airbnb I was making plenty of money and had money to send extra to the 2nd to pay it off early, now I am in a bind. 

Also renters don't seem to like the unit, even though it is very large at 2,400 sq. ft, 2 of the rooms don't have closets so it's technically a 3 bedroom/2 bath. There isn't a driveaway for parking outside the garage and there is a train that goes right by the house on a busy street plus the school district nearby isn't good.  I've lost some months rent looking for a tenant until I've dropped my price to $2,995. Even at this price I'm getting problem people applying for example I found one person who had recently purchased a bunch of grow room supplies and one person who wanted to use it as a daycare. 

The house gets good appreciation at 5% per year. Plus with Disneyland adding Star Wars land in 2 years I'm wondering if the home value will go up even more? 

Selling fees are about 7%. Could sell anywhere between $620-$650 and I only owe $450 on the property.

I am really torn between renting vs. selling. I could use this money to buy in an area that allows Airbnb and make more $. Also I'm currently living with family and do not have my own home as I'm young and still and don't have a need for my own place.

What do you guys think? Rent or Sell?