I offer the small pricing tweaks and info for your consideration.I would increase your property tax estimate to 1.25%.  

WAAAAAAY more affordable.http://ktar.com/story/1908091/could-downtown-phoenix-be-the-next-major-hub-for-high-tech-companies/"Shannon Selby, the economic development program manager for the City of Phoenix, said the number of high-tech companies in the area has increased from 67 to 281 over the last five years, a growth of more than 300 percent."

Silicone valley obviously increased a lot already in last 5 years, and it should be one of the most expensive city in among the US.

Signs of slowing due to increased inventory, but still double digit growth/appreciation continued for remainder of year.You will get good cashflow in midwest, but limited appreciation.I'm vested in southern California and Las Vegas.

The issue is with the second floor tenant, they've been there for 5 years and never had a rent increase.  

I realize now, that I made a huge mistake buying new and I can greatly increase my monthly cash flow for other, more important investments.

That would increase your savings rate! 

Or, can I just have them sign the new contract which would have a rent increase and pet deposit/fee? 

If he does not want to pay the increased amount he will leave in his own.

If I buy a property built before a certain year that currently has tenants in it, I cannot raise there current rents beyond the allowable increase for the year(3%-4%)  I would have to wait until any of the units becomes vacant to raise rents to current rent rates.Is this correct so far?