keep paying or mail in the keys?

[Devin McCormick]

First of all thanks for sharing all the info on here. It's a great site. Here's the deal.

Personnal residence

206k 11/2006
30 year fixed at 7.5 0 down.
Mortgage payment of $2240 includes escrow for taxes, ins, and PMI. Currently renting for $1225 because I can't afford to live there. My best guess is current value at $160K.

Two family

$195K 5/07 2 year interest only at 7.5% renewed for 3 more years.
10K down plus 20k in rehab costs.

Rents for combined $1600.Current value also around 160K.

I am calculating 5 to 10 years right now to get above water on these loans. The two family is close to break even after taxes on a cash flow basis, but the personnal residence that is rented out as a sfh is killing me. Probably paying $1300/month for that property and $650/month for the two family, not including my time.
I am working on increasing my revenues by taking a second job and bootstrapping a second business in the hopes of turning these into positive cash flow propeties by the five year mark. I realize that either way they are terrible investments, but I can live with that if they cashflowed.

However, it seems awful daunting and much smarter to mail it in on both of these properties. I am in a non deficiency state and would not face recourse from the banks if the properties went through foreclosure.

If I could do it again, I am confident I would be able to find a great cash flowing property. My goal is to build wealth through real estate. On a purely financial basis, it seems a lot smarter to stop paying on these properties and save up some cash. What would you do? What would a foreclosure or two do to my prospects of continuing in REI?