If it averages $50 a month, reduce the rent for Tenant A by $25 and increase the rent for Tenant B by $25.

Most of the time, people who get a raise/second job or more income from any source, wind up increasing their spending and up their standard of living and never actually use that money to pay debts off.

As you scale your business it will become increasingly more difficult to allocate your expenses to the proper rental or business if expenses are running through your personal account.  

Damages look fair, we will need to do lots of re-painting (they painted loud colors on most of the walls and wall papered 😂), lots of holes, and some minor wear and tear that we anticipated.  

My question is as the new owner, does that lease still have to be honored by me or can I redraft a lease (with a lot of the same stipulations) but giving them 60 days notice of a increase in rent?

You would be better off to shop for a new manager to increase the income from the property prior to the sale.

While it was a lot of work we were able to customize the "owner's unit" to our liking, and the work we did to the other unit allowed us to increase the rent.  

Too add to what @John W. said, use one color paint for all your rentals.

There is plenty of room to increase rents and it has two newly renovated units.

The owner's own contractor even backed out. 2- My rent where I am currently living will increase significantly (by $250) in about 2 months.