Certified Distressed Property Expert
Head of Short Sales Division Keller Williams Realty (northridge)
I don't know your entire situation , so i am going to give you a general advice.You should try and do a short sale. By letting your rental home go, you will be open to deficiency. Bythat i mean is , that your lien holders on the rental property can come after you for the difference of the remaining balance after it is sold at the auction.
Regardless of a Short Sale or a Foreclosure the impact on your credit will be the same until one of those is consumated. It is the recovery factor that plays out in a Short Sale. In a foreclosure your credit is said to be affected until 7 years, but their are a lot of other factors that contribute to that.
Short Sale will allow you to not only have the chance to negotiate with your lien holders and get out of deficiency but also the chance of reviving your credit within 2 years of consumating the Short Sale.
I highly recommend you to talk to a Realtor who has done Short Sales and can guide you the right way.Short Sale is the best option for you. I have helped so many clients with this scenario and they have been extremely grateful. It can be done. Talk to a good attorney and a CPA too.
Foreclosure should be your absolute last option.