Maybe it is not favorable since the mortgage payments might be high.  

I honestly don't know anything about hard money loans or other types, but I know that if the interest rate is as high as 5.4% this will work in your favor.

(Generally this can take 45 - 60 days to find, requires more documentation, but offers more favorable rates and terms).

I'm not sure how this works out, but it made me think that seller financing may work in his favor and mine.

First, if you are doing her a favor, you dont need to be driving there. 

When rehab is completed and the property more likely to obtain favorable bank financing, the IRA could convert some of the initial loan to equity and then the IRA and partner could seek a bank loan, but it would have to be non-recourse with respect to the IRA.Some banks will do a loan with a personal guarantee from only one of two partners, but that is not common.I suggest you and your partner engage an attorney to craft a way to work together. 

That's not to say there aren't pockets where you can see more favorable returns, similar to some of the suggestions the folks here have offered.Essex County has some good opportunities but be wary of the locations when browsing. 

California is definitely tenant pro, which I'm in favor of, however, when analyzing a rental property, you better be sure it pencils and increase your vacancy rate 5% to 7% on your proforma to be on the safe side these days. 

With all that being said if it's not already been agreed you will likely be legally obligated to honor the property management contract and the tenant contract until you notify them or intent to terminate or terminate and resign under more favorable terms for yourself. 

Why not stack the investing cards in your favor and invest where it makes sense?