You can use fancy words such as 'using leverage to enhance returns' etc. all day long, but the fact remains: if as a client I loose 50% of my premiums to commissions and fees I don't care what kind of leverage I gain as a result, it would practically be impossible to recover my losses. 

Still managed to almost lose my hat on the deal just finishing out flooring and a few trim items.  

I think very highly of them.Personally, I budget more for turnover and more for vacancy/collection losses than you have above, but I'm conservative by nature.Best of luck to you!

What items look the most dated?  

Usually once your company is in the system, it won't take as long to add more units.One of those pamphlets you picked up at the Sect 8 office should have a list of all the items the inspectors look for when they do their inspections.  

You would then be stuck trying to sue the seller, title company, RE agents, etc. to try to recoup your $500 loss because you got bad info at closing.This type of hypothetical situation (and many others) can be avoided with an estoppel from the tenant prior to COE.Is it likely that you got bad info on a duplex?  

I have taken some serious losses in the past.

For rental condition, make sure everything is clean and functional (and safe) and has amenities similar to those in your area and price range.... no need to make it look like HGTV after shots...Some of these items you list sound cosmetic and it may fair well in your rental market as is or with just some minor fixes (again, I would look at similar units for rent (not sale) in the area to get an idea if formica and older carpet is the norm in your area and price range...)And I would simply look at temporarily blocking off or restricting the fireplace use, clean the carpet, tack on the molding.

What exactly will my business partner be able to categorize as a loss for 2015?

Suggested timelines would be great too.The items could be obvious, or a small detail that some forget.