Neither of us have broached the topic of renewing their lease term, so at this point I'm assuming they are planning to stay and would like some extra time, so I thought it might benefit us both to end the fixed lease on 6/30, and then start a new month-to-month lease with a 1 month term and 30 days notice, all on 7/1, with some language built in for their leniency on showing the place to prospective tenants.  

Property management companies are asking extra charge for initial setup2.

This extra amount is disqualifying me to obtain the loan.

But I’d give the required notice, maybe even an extra 30 days and raise it to market rent for the condition, probably another 75-100 a month. 

and or check for little improvement that might help you increase a bit the rent. like $10-$35 extra.

Better luck and better prospect with Marriott and Hilton brands, to get some good management companies - ultimately costing you 20% or more of the gross - when you add their extra-expenses of over staffing and unwanted maintenance and repairs bills, and, using their unused-resources to bill "your property" for services etc.

House 1 you say is move in read, so if you plan to offer $42K, where does the extra $5-10K invested come from to get $47-52K?

Then if they are rented out, that extra bath and garage may not matter."

I put extra each month on the highest interest student loan, but save most cash for the rentals.

No industry accepted rule, mine earn around 3x the long term rate so it’s really a no brainer to do them as a str. if the rate of return on a long term vs short term isn’t much difference percentage wise then i’d definitely just do LTR.