I hope I don't go overboard with the remodeling as I am little emotional towards home as this was my first home purchase 20 years ago.1.

The sellers were just emotionally done with the house.

When it comes down to approving tenants you have to take out your emotions, and stick to your criteria.There will be plenty of other qualified applicants(hopefully your property is in good location).

I need to make sure I don't get emotionally involved and that the numbers still work.

Real estate is relatively illiquid, and if one partner decides he or she needs to leave the partnership and access equity from assets(though the other partner may not want this or view it favorably), the dissolution document will allow for governance of what is or is not possible, and help avoid adversarial emotion when such an incident occurs.3.5) 51/49 split - make sure your partnership allows for you to make a majority vote when you may need to. 

With the info you've shared, I'm in the camp of giving them notice that you are ending their tenancy at the end of the lease.If you are not going to hire a local PM, see if you can distance yourself a bit emotionally - sounds like they have gotten under your skin if they have damaged your property and what really bugs you is their asking for their check back.  

If you don't know the buyers personally (enough so you can call and ask questions) strongly consider taking another directionFriends don't let friends do bad deals, listen we all want warm fuzzes when working with people but the reality is, your running a business. protect your self at all time - its not personal its business. be objective (AND THIS IS HARD) but houses, don't have feelings, wholesale fee's don't have feelings, title company stamps and legal paperwork have no feelings, if your the feely type get a hobby or pour your emotions in another venue. real estate (demands) you to be at the wheel, and be ready to face the ugly truth."

Never buy a property based on emotion.

Robert Kiyosaki four years ago; His book Rich Dad Poor Dad made an emotional impact on me.

(Emotion has no hold in court, so fighting summons)