Should I sell for loss, or Refinance rental

[Jeff Blankenship]

I purchase a new property in 2007 for $186,000 to be used as a rental property from day 1.  The property was initial rented for $1300.  Hindsight is 20/20 and not  good investment, but I'm trying to figure best way to exit this poor decision.  Here are the numbers:

Market Value = $165,000

Current Loan Balance = $176,000

Current Rent = $1100

Tax/Ins = $3200 / yr

Property Mgmt = 10%

Yearly NOI = ~ $8500 (Rent - prop mgmt - tax - ins)

Current Mort Pay (PI)= $1050

Yearly Net = - $4,000 (negative cash flow per year)

OPTION 1 - Get a HARP refi at 4.378% (PI $900), and reduce yearly net to -$2500 ($1500 improvement, but still a loss)

OPTION 2 - Put on market and hopefully sell at market value = $165,000 (minus commission and mortgage, and closing costs).  Negative -$20,000

Yes, market could improve, rents could go up, but both could go down as well.

Anybody see an Option 3?