Refinance upside down/negative cashflow property into positive cashflow or get out?

[William Murrell]

So I have a house I purchased a number of years ago, right before the market tanked.  The purchase price was 145,500 and the interest is 6.25%.  I owe ~128k and it's probably worth ~105-110k.  I have been renting it for years at a negative cashflow as I didn't want to sell and have to put a bunch of cash with it.  And the way I look at it, the tenant is paying for the majority of it.  However, now I have about 30k extra cash and I have been looking at paying it in to reduce the principal and then refinancing, which would make it cashflow ~200/month.  If I stay as is, I lose about $300/ month.  If I sell it, I still have to put a bunch of money with it.  If I put that money into it and refinance, I will drop ~2% in interest and begin cashflowing.

It makes the most sense to me to put that cash toward the house and refinance for the cashflow to go from -$300 to +$200 per month.  However, I want to make sure I am using this money to the greatest effect and perhaps someone has a better idea.

  Input/ thoughts?