For a 7 year old roof you should be able to find replacement cost coverage on your roof if you want it.This is a really good example of why I always say insurance is not all created equal and it's important to have an agent that can/will intelligently explain policy provisions.It sounds like you determined you had ACV on your roof on your own. 

Those are even-sized units so equal on rents in theory.

I stewed on this for a bit but found that it was tough to stomach being diluted 25% percent from the jump as a breakeven project would equal a significant loss of capital for myself.

Or another equal property at $1,500/mo?

While I don't deal with HUD, I deal with human services caseworkers all the time.HUD is not going to view the landlord and tenant as equally culpable, in part because of the perceived power imbalance.  

Equally, I’m thinking it’s a smarter choice to stay in the condo due to lower interest instead.

Particularly for luxury or higher revenue rentals (let's say above $75-100k in gross annual revenue) a 25-30% management fee equals a full time  employee wage/salary.

While you clearly don't do that, it does introduce ethics into the equation and clearly not all managers are created equal.  

I was under the understanding that I could do a room ratio and deduct 50% of the upper unit expenses due to all other areas being equally shared.

Sure, money can be lost as equally as gained.