Advice: I Inherited a house in San Diego with a Long Term Tenant

[Matthew Ware]

 I am a 44 year old teacher who suddenly inherited property in San Diego when my father passed away unexpectedly. I have no experience managing tenants or property. The home is a single family home in the Clairemont neighborhood within short walking distance of Mesa College. Zillow values the house north of 500K. The house is paid for and the taxes are very low thanks to prop 13. My father was renting to an older couple, and as far as I can tell, never raised the rent. They have been paying $1400 a month for the four bedroom house for years and years. They've lived in the house for over a decade I think. I live way out of state (Vermont) and have hired a local property manager to oversee this property and another property that my father left. After a bit of research, I told the property manager that I wanted to raise the rent to fair market value which seems to be at least 2500 dollars a month according to Craigslist and Zillow. She was reluctant at first, which pissed me off, but after I insisted she told me what a good idea it was. When the PM informed the tenants, she claims they were indignant and very rude to her. They claimed to have had "an agreement" with my late father. The property manager after consulting with my probate attorney then advised me to give them at least six months to find a new place, which I did, and this waiting period is up on July 1st.

Recently,  I received a call from the property manager informing me that the tenants had approached her and said that they are unable to find another place to live and asked her what renovations I would do in exchange for a rent increase. She asked me what I wanted to do and I have not responded to her yet. 

What should I do? I feel somewhat guilty about raising the rent and/or forcing the tenants to find a new home , but also anger about my father having been taken advantage of. 

Should I respond to this request, or should I continue with the plan to renovate and turn over tenants? How valuable is a long term tenant in the San Diego market?

I know that I will need to renovate the house after they leave, but I have no way to truly estimate these costs. The thought of coordinating this from across the country is daunting.  I'm sure there is quite a bit of deferred maintenance since it has been rented for so long. Do any of you seasoned landlords see any value in keeping these long term tenants in the house? The tenants are an older couple with an adult son who is disabled and in a wheelchair.  I have strong suspicions based on my one brief visit to the property that the tenants were also subletting a section of the house although I have no proof of that. I am not reliant on the rental income and there is money from the estate to renovate with. I am conflicted about being an evil landlord, but feel in my gut that it would be best strategically and financially if they were gone. Is there anything else I should consider? If you've read this far, thank you. Your thoughts are appreciated.