Should I paint/carpet with tenant still occupying property

[Dwight Rigel]

I recently purchased an occupied SFR with long term tenant on a month to month (lease expired and reverted to M2M). Upon meeting with the tenant I advised them of the repairs I would be making (new A/C, Clearing bushes, sealing back area, painting handrails, adding smoke detectors and fixing toilet and bathtub caulking) and the amount I would increase their rent the following month and thereafter ($50/mo). The rent is still about $100 below market but the place is rough and would require a lot of rehab.

They agreed to the amount quickly but then asked me to repaint walls and re carpet the flooring if they sign a new year-long lease.  They have been there 11 years.

Normally I would do this in a heartbeat the interest of a long term tenant but these tenants are living this place hard. They are not clean people.  It's more trashy than I would typically buy but I won't go into the reasons for my decisions on this thread.

I am in the middle of two other projects so I don't want to move them out and let it be vacant while I am waiting to get to it.

A new lease has not been provided or signedyet and I mentioned that those items would necessitate an even higher rent on the new lease if we could come to an agreement.

I told them I would give them options shortly. Looking for a full spectrum of advice here:

Should I?

How Much should I raise to offset cost?

Should I ask for a multi-year lease ( I don't think there would be much ability to collect if they changed their mind) so this is probably not a good solution)?

What should I be aware of legally that could be lurking in the shadows?

If I do these items should I take before and after pics for a possibility of using their security deposit.  There are large stains on the wall and carpet.

One other bit of info:  I did get the security deposit transferred to me on sale.

Thanks so much in advance for your advice.

 Dwight