Your math is off.You spent $5200 to bring the mtg current.You haven't included any transaction costs ... for 2 transactions.You haven't allocated a single dollar to the displaced homeowner.

If you’re willing to allocate the time and are competitive, Cleveland’s lower end market may be a suitable fit for you.

You can also allocate your proceeds in any manner. 

If you live on it, and rent out the room, the repairs will be deductible that is allocated to rented portion of the house.

Because it can be a headache when you are working with that 100K and need to fix structure/foundation issues (just an example) that are going to eat up the budget and she has that money allocated elsewhere.

The allocated loss should be reflected on the K-1 that you each should receive as partners from the partnership tax filing.Not sure precisely what you mean when you say "we will each get to have $2,500 that we won't have to pay taxes on?"

When an investment is made, you need to clearly document the relative proportions of Roth and Tax-Deferred funds applied, and all future income and expenses need to be allocated on that same basis. 

It was just somewhere along the way that I decided to allocate those (mininal) funds to something else.I go through phases of super frugality where I cut any extra expenses....BP did not make the cut lol

This is just a small part of my investment allocation so I'm fine with what I do and the returns I get. 

You will have to use all the cash in the purchases but it can be allocated in anyway you want.So you could put all of the cash into one property paying cash for it or taking out a minimal loan.