Gradually raising rents, exploring lease buyouts, or selling with tenants in place are balanced alternatives.

It's likely you'll be able to raise the rent as well with the upgraded unit and you can look to market it during the time of rehab. 

Without accounting for management fees (I have not yet decided if I will try to self manage), and with planning to raise rents to typical market of $825 for each of the smaller units, and $1200 for the larger unit, does this seem like a worthy first investment? 

Following Up + More details: @carolineOur utilities were also opened using an LLC but since the power had actually been shut off the problem mostly came from ICE sending someone out to turn it back on plus installing a new style meter (which had to be approved by our HOA but that was another matter entirely and not particularly difficult).Opening a bank account with BCR as an individual is easy and you can get an atm card in about 3 days but you will be limited to holding only a thousand dollars in it.

Pay your vehicle loan, credit cards, etc because in 12 months all of the accounts you pay out of a business checking account will be omitted from your DTI in the future. 

Goal is to have credit cards that you do not use more than 10% of.

All work done to raise value after TOD is not legally in that stepped up basis.  

They hold all the cards.

Also, the whole point of hiring a PM is to handle tenant, maintenance, and rent collection, so if your partner isn’t actively managing but just supervising the PM, IMO not worth having a two people essentially looking over the same tasks.Contributing financially for one person and the other having no financial stake raises decision making questions, such as when to sell, how profits will be distributed, etc.

If they support a rent increase, you could look into raising your rents by that amount to offset the cost.