not renewing long term tenant lease

[Brian Zaug]

Looking for a bit of advice on how to handle this situation.  I just bought a duplex a 6 months ago and inherited the upstairs tenant.  Downstairs was vacant, I cleaned up the apartment, screened and screened and got a great tenant. 

The tenant I inherited has been living in this apartment for 8 years now.  He pays his rent on time every month, which is almost 200$ below market.  I have 2 months security ($1800) for them.  He is on a 1 year lease and lives there with his illegal wife (she is from Honduras) and daughter.  She does house cleaning jobs here and there and the husband works as a chef at Red Lobster.  They make very little money.  The husband also collects disability for whatever reason but can still work.  I got this house for a great price but the apartment they live in needs a lot of work.  New kitchen, floors and some updates in the bath as well.  I'm thinking $5000ish because I'm able to do some of the work. 

The PROBLEM.  They make so little money that if anything ever happened, I doubt they would be able to pay rent.  If I raise rent in June when his lease expires, I doubt they would be able to afford it.  They have run out of oil 3 times this winter so far and it's only January.  The rent they are paying is ok based on the current condition of the apartment but I need to renovate that apartment so my appraisal next year comes in at the right number so I can pull my cash out.   If I renovate the apartment now, which I want to, then I'll have to raise rent which I know they cannot afford.  I know that if I kick them out of my apartment, they are going to have a very hard time finding a new apartment with there income as well as the fact that his wife is not a citizen of US.  

Just curious how you would handle this?  I'm pretty sure I just need to not renew the lease but it's hard to kick a family out onto the street that has been living in this house for the past 8 years.  They are really nice people and rent is definitely their priority.  The previous owner said they never missed a month in 8 years.....