Your standard deduction was $25,900 plus the negative AGI of $80k, means you could have “forced” $105k of ordinary income to your tax return(best is probably a Roth Conversion) with $0 of tax liability.

The house is in decent shape, with updated bathrooms and kitchen and has a nice backyard with a patio and a garage, but the house is in kind of a lower class working neighborhood, not in the more desirable downtown area.

What exactly is tax deductible and is income taxed at my ordinary income rate?

Capital losses offset capital gains, and once capital gains are eliminated up to $3k of capital losses may be deducted per year against ordinary income.

It made more financial sense and was much easier than flipping more houses and paying taxes on ordinary income. 

Ordinary income versus capital gain?

It is taxed the same as ordinary income, regardless of whether you have your own management company. 

Also has a covered patio that I can convert to living space for extra sqft ($$$).

It's 1,100 square-feet with a 700 square-foot patio for $585,000. 

It is completely normal to spend about 10% of your annual income on ordinary maintenance.