@Mason Hickman I think we will do a few upgrades in the next few years to give it better curb appeal, the previous owner upgraded a lot of the units but there are still a few units that could use a makeover.

If you feel you can bill separately for water if metered you should have no issue simply adding a flat water fee and I’d imagine the $17,800  could go a long way in a 2 unit building for upgrades that would have a greater impact on revenue. 

In California, people don't want to disclose significant home upgrades because it could trigger a Prop 13 property tax reassessment. 

If the replacement included upgrading the fence significantly (for example, replacing it with more durable or higher-quality materials), it may be classified as an improvement.

What initial upgrades should we prioritize?

Of course be a good person and give people a nice place to live, especially if you're raising rents, but be conscious of how far you let their requests go especially since you should hold the same standards for everyone.

I lived in a small town in WA and heard a sad story from the guy who owned the gas station in town - he was required to upgrade the underground tanks and it cost him an arm and a leg. 

Or is it simply cosmetic or preventative or an upgrade?

We have had some inspections done that suggested expensive repairs/upgrades and we've just been saying no.

Many other upgrades done to force appreciate.