The following numbers are purely hypothetical. I suggest that you try to plug in numbers that you consider realistic.
Suppose your negative cash flow from the condo rental is $600/month. Add loss and vacancy factors. Every landlord has a period of time when there is not a tenant in residence, or worse, a resident tenant who does not pay. While a landlord, you will have maintenance and repair responsibilities. Budget for these. Between tenants, you will have painting and cleaning bills. What amount of time will all of your landlord duties take, and do you have a valuation for that?
Assume you can qualify for your 350K mortgage with the negative cash flow.
What do you project the appreciation rate to be for the next 2, 3, 5 years (the time period you anticipate holding this condo.)?
Will the appreciation offset the carrying costs and expenses? By how much? How much does it need to represent in postive gain in order to make it worth the risk, the time, and responsibilities?
What would you do w/ $600 (my hypothetical negative cash flow #) per month if you did not use these $$ toward the condo?
In theory, it would be nice to say that you would invest the $600 each month, but in fact, that is unlikely.
Unless the anticipated appreciation is strong enough, it might not make sense to hold on to it soley to avoid a one-time loss. Whatever loss you aborb on the sale of the condo will be offset by the purchase you make, if your are buying in the same neighborhood and market condiditons.
Suppose you calculate that you would take a 25K loss on the sale of the condo. You might be realizing a net gain of much more than that by buying well. It is a good time to move up; harder time to downsize.
You need to plug in the numbers and ask yourself upon a reveiw of those calculations what the risk/reward is for you. I suspect you need to anticipate decent appreciation in order for it to be beneficial to hold on to the condo.