The tenant just signed a new 1 year lease but has also complained that the driveway needs relaying and that the deck is falling to pieces so guess this is a ploy to start negotiations on selling price.I understand that they pay the rent for a given time, plus extra that we hold as a deposit/down payment so assume I can get that contract drawn up by a real estate attorney who can also work on closing once the agreed upon timeframe ends (is this better than a realtor or should I just go with one and pay the 5%?

Both units have private decks and access to basement for storage/laundry.I guess my questions are:How much do I want to spend on sprucing thing up before getting tenants in? 

The fact that this house has a garage and deck should get you an applicant pretty quickly.  

Rehab is kitchen remodel including adding a window, both baths, hardwood throughout common areas, trim package, new roof, and expanded deck.

I agree with you @John Woodrich its a reshuffling of the same deck.  

However, many small residential projects qualify under Austin's "express" permitting process, including the following:Replacing windows (size for size)Replacing exterior doors (size for size)Adding / removing sidingAdding / removing brickAdding / removing insulationRepairing a roof to the extent of replacing decking boardsRepairing foundation without increasing impervious coverBathroom remodel (tub / shower conversions) & kitchen remodel-Only tub / shower / sink surround drywall can be removed-Walls cannot be relocated or removed-Plumbing fixtures cannot be relocated or addedInterior non-structural exploratoryDrywall repair onlyI hope this helps!

1) It came with a huge 2nd floor deck with another steps of stairs that goes to the 3rd floor with a small standing area that is used as a fire escape.

It's just under 80 sqft 2 bedroom 1.5 bath with a back wood deck/porch. 

Unless your roof is made of razor blades and your siding is asbestos wrapped in tar and broken glass I'd say the price is a tad on the high side

Should we have the lower deck removed?