Time horizon for ROI on rental unit improvement

[Wesley W.]

Hello folks,

Okay, a bit of context.  Tenant has been in the unit on MTM lease for three years.  He wants the carpet replaced because he "doesn't like the color" and he wants a deeper fiber pile.  The carpet is in fine condition currently, and my business model has me replacing all carpets with laminate flooring upon turnover.  When I install the Pergo, I get increased rents over the carpeting - which most prospects don't prefer - and the flooring creates a real "WOW" factor.

This tenant is currently paying about $100 under market because the unit is not as updated (primarily the flooring) as the others in my portfolio, and a turnover would probably cost me about $4000 in materials and a few weeks of sweat equity to get it up to my standards.

Anyways, I'm inclined to say "no" to his request, but I always like to offer a solution to a (relatively) long-term tenant.  It's going to conservatively cost about $2800 to have the carpet and pad replaced, soup to nuts.  So, I plan on coming back to the tenants with a rent increase of X plus an increased security deposit to change out the carpet.  This way he can decide if it's worth it to live in an updated unit "like everyone else."  I just need to decide how many times X should divide into the $2800.

Given this situation, what would be an acceptable time horizon for a return on your money for you to go forward with this request?

Keep in mind he is on a MTM lease (the only option from me) and he could literally leave the month after a new carpet is installed prior to the other's useful life being reached.  I figured if I could recoup the investment in a relatively short time, it would be an acceptable business decision for me.  What would your time horizon be?

P.S.  I do not think he will move if I deny his request.  He will not find another unit as nice as this one for close to what he is paying.

Thanks in advance for your feedback, input and ideas.