Ok... you are really acting as the rental agent.
The owner of the property needs to report the rental on the Sch E and report all the income and expenses plus take the depreciation on the property. The improvements you paid for are HIS expense that probably need to be capitalized and depreciated. If you paid them and did not get reimbursed yet then that is something you need to work out with him ... you cannot deduct these costs. In action you technically loaned him the money to fix the property even if you did the work yourself.
Then he pays you a fee for your management of the property which he takes as an expense on the Sch E.
Now you are in the rental BUSINESS and the income you earn needs to be reported on the Sch C where you can deduct any business expenses you incur.
I Highly recommend you both seek local professional assistance to get this situation handled properly on both your returns. And you may need to talk to an attorney to get this agreement in writing if needed.
