Sell or pay down underwater SFH in Central Washington

[Matt McCain]

Hi there. New to BP. Wondering if I can pick the collective brain on a tough rental I've been wrestling with for years. I bought a SFH with a partner (who still owns half) in Ellensburg, WA over 10 years ago at the top of the market (got caught up in the hype). The market quickly tanked but has recently gotten pretty close to recovering. We continue to lose around $200+ each monthly, with some pretty big expenses lurking ($6.5k roof, aged galvanized plumbing). So we continue to debate whether it makes sense to unload the house at a loss, or pay down the loan significantly to get to cash-flow positive. Here are the basics:

- We are stuck with our original loan that has a crazy-high mortgage interest (7.375%) on the primary loan because we don't have the equity needed to refi. Current Zestimate puts it at $185k value. We owe $170k on the primary, and another $19k on a HELOC. So we're basically at zero equity.

- We could sell the house and each be on the hook for $10k-$15k to walk away, which we've been told by our CPA's we could use as a tax write-off. We'd have to throw another $6.5k total on the roof beforehand.

- Rent is $1350, so we could get this thing to cash-flow if we put a big chunk of change into it and got a better loan. 

- Neither of us want to walk away and hurt our credit, as we have other real estate investments and don't want to screw up future opportunities.

- I'm also considering having my partner pay a chunk of money to walk away, then I take over the burden and use my own money to get this thing cash-flow positive. But this idea scares the crap out of me.

Any thoughts are greatly appreciated!!