Is it a new market reality that rents are 10% lower than 2 years ago? 

I would go the other way and just not accept the lower credit score.

In the kitchen I was gonna keep the kitchen cabinets but found water damage, so then I went on the lower end and bought base home depot cabinets that were unfinished.

Assuming you are getting cash out, since you stated as such in your first paragraph, I think this is a no brainer...once you look at 2 numbers:1 - Added cost out of pocket (higher closing costs) for lower payments = $21,0002 - Added cash out with lower payment option = $3,0003 - Total added cost (cash out of pocket) for lower pmt option = $18,000      Note:  This is money you have to recover before you are making any profit...so the added cash flow isn't a plus until this money is recovered.4 - Monthly savings (added cash flow) = $1655 - Number of months to added cost recovery = 109...or 9+ years. 

Should I lower rents and bill back?

Lower class dont value Insurance .

I suppose that would be the smartest way to do it to keep our primary residence payment the same and at a lower interest rate than current rates. 

I always kept my units better than my competition and I always rented it for slightly lower than the market.  

Regardless of purchase price the lender will only lend on the lower of the purchase price or appraisal.  

Looking at your deal and running my numbers (I also use hard money that lends at 70% ARV, 13.99% interest and 4 points), you would need to get the purchase price down to at least 230k, preferably even lower in order to get the HML to fund the full repair (assuming you can even find one that will do 100% purchase and rehab there).I have spoken to a lot of people doing deals in Atlanta and I know there are some pretty cheap properties there that make great deals.