I've never done it before, but I found some old discontinued baits I've been looking around for for years now. The problem is that they're are in bad colors so I'd like to repaint them. What are the steps to do it? My real question is do I need to sand it down first or can I start painting over the existing finish.

are they balsa or plastic bodies?

As BC says in his reply....depends on the material. I would suggest sanding wooden lures with a light grit sandpaper until the wood shows. Probably need to seal the wood then lightly re-sand any roughness off, then apply a base coat of paint followed by your pattern. As for plastic lures some factory finishes are just plain hard to get off! I usually sand with 400 grit until the clear coat is pretty well gone then soak the lure in denatured alcohol (Warning: some cheap lures will separate at the seams so beware)until the remaining paint and clear coat loosens up and can be wiped off...sometimes a lure needs to soak for just a few minutes (StrikeKing, Bill Norman), other times hours (H2O). Anyway once the lure is down to plastic wipe it down really well to get the trash off, and dunk it in some AC1315 or MCU, to seal the plastic....then apply a base color and paint your pattern. Hope this helps resolve the sand or not to sand issue.

This is a plastic lure: Rapala XRW9

Thanks for the replies.

Is there a good way to do a paint job without an air brush setup?

bois is right on the money. what your're looking for is a surface that the acrylic paint can grab onto. sanding will give that to you and is a very controlled method of prepping a bait. another product is strip x. that stuff will take the habit off a nun and that's tough to do. but it's very unforgiving. i've melted more than one bait using that stuff, but it really works.
i usually don't take something down to skin unless my plan is to do a ghost pattern.
at this point in your painting life i'd stick to sanding. i will use a 220 grit to get through the clear coat and 400 to smooth everything out before i base coat.
as far as painting without an airbrush setup goes. i'm sure it's possible for a very basic pattern. i can't imagine you could get a very detailed look with rattle cans or a brush. then again, ole m. angelo did pretty fair work with a brush.

Colors I was thinking about are old tried and true's: bone, red head white body, etc. Having a super detailed topwater would be awesome but my goal is more to get rid of a 100% hot pink/bubblegum body than a custom painted lure. I will want to get there one day, but today my victory was finding these discontinued baits.

What kind of finish will I want to use? I have all kinds of epoxy's from being a custom rod builder, but I feel like they'd weigh down the lure too much.

Dilute your epoxy w/ denatured alcohol. It only takes a few drops. I use Devcon 2 Ton 30 minute epoxy thinned w/ DA.

Awesome! thanks