If you only want to remove the \r\n, try Replace:
str1 = sr.ReadLine().Replace("\r\n", String.Empty);
str2 = sr.ReadLine().Replace("\r\n", String.Empty);
If you want to remove all trailing whitespace (if there is any) including \r\n, you can use
TrimEnd
:
str1 = sr.ReadLine().TrimEnd();
str2 = sr.ReadLine().TrimEnd();