Tenant paying below market rent in unit that needs rehab-

[Kari Koszdin]

I bought a triplex four years ago and inherited one tenant.  At the time, she was paying 1050/month for her small 2 bedroom apartment.  The previous landlord had not taken care of the property, so I needed to put in a lot of time and money to fix the place up. I did not raise her rent right away, since I didn't want to deal with a possible vacancy at that time.  She has been a good tenant- always pays on time, takes care of the property and is easy to deal with.

Over the past few years, I have raised her rent to 1325, plus now she is paying for all utilities. However, market rent for her unit, if I just painted it and did a few repairs, (would probably cost about 5K) would be about 1650.  If I did a more extensive remodel, I could get that up to 1850- but it is going to cost 15K. If I did get her out, I am leaning towards doing the more costly renovation, since in my experience, really nice units are easy to rent and I get fantastic tenants.

So here's the question- Should I just slowly raise her rent over time, as I have been doing, and not have to put money into the unit, but I will never get close to market rent? Or should I not renew her lease at the end of the term and do the renovations to get the higher rents?  

The current rent roll on the property is 4425, and I own it free and clear.  Property taxes and insurance are 500 a month. I have put a lot of work into this property, so I don't have other deferred maintenance issues- the property doesn't cost  a lot to operate.

So what I am basically asking is how much is it worth to have a good tenant in place vs getting more rent, but having to put in more more money?