Bought unit w tenant: raise rent to market rate or raise slowly

[Kuriakos Mellos]

I have recently bought an investment property ( a SFH) with a long term tenant in place: she has been there for years but has been locked in WAY below market rate. She has always paid on time and keeps the house in great condition. Here is where my dilemma comes in: I could be getting between $500 to $700 more a month for the rental if I went with market averages.   My property manager actually told me and said she is willing to come in slightly higher than she is now, about $350 more a month that what she is paying but I would still be leaving anywhere from $200 to $300 extra per month on the table.  He flat out told me, do not get emotional - and that this is a business.  He will work with her on getting her a new place. (but I guess I just wanted some other advice from others that have come into a similar situation.

There will need to be SOME work done when she vacates to get ready for a new tenant, fresh paint, some minor things fixed etc - which would probably come in at around $3000 - the amount I would make extra if I were to just leave her in place and have a piece of mind.

Do I:

A) Follow my property managers advice and block out emotion. Even though we can't have someone else move in until Sept, (that is when the current lease is up) we did post it for online to start marketing it and have gained interest of several people who don't seem to be bothered by the new price. (Issue is they want it now.)

B) Work on settling at a lower than market rate rent, and have the current tenant stay. The tenant's rent will still increase by at least $350 a month - maybe slightly more - bud do I find a happy medium? While I would forfeit a profit of $200 to $300 - I know I would have someone in place that wants to stay and maybe have her sign a longer lease with built in raises?

This is my first time that I have run into this, and as I scale, having less flips and vacancies to worry about (and freeing up money for future purchases) becomes more crucial.

Thanks all!

K-Man