At the early stages, the more control you have over your real estate, the better returns thus I recommend investing locally to make your dollar go that much farther and gain a good familarity with real estate before exploring out of state investing.

That way we could either claim expenses as deductions or through depreciation, rather than just as an increase in basis for capital gains if it was our primary residence? 

And it always takes a little longer and costs a little more...The more properties you have in a small area the better you can focus and gain operational efficiencies.

Over time, as rents rise and your margins improve, a good PM is worth their weight in gold. 

And if your appreciation is 4% a year, that would be a gain of another 7,600 a year. 

I'm just wondering how to handle the capital gain tax between me and my partner.

And the property manager is the only person with a long-term interest in your property, so their opinion carries a lot of weight!

Portfolio = Income derived from financial instruments like dividends (including REITs), interest, royalties, and capital gains.Mostly income w/out loss potential, and favorable tax rates.Cap losses may offset cap gains w up to $3,000 loss.

Cap rate is one metric and it's like using your weight to determine your fitness level. 300lb NFL linemen are faster runners than a 200lb McDonald's regular. 

It’s like asking someone how much weight are they losing by getting better sleep.