I also really enjoy the process of taking something old or rundown, and making it new again, I just love seeing the results even if it's just a fresh coat of paint.

To them, the property is paid off, they aren't ambitious to grow, and they just want that mailbox money to enjoy retirement, so I say they are perfectly fine with a longer lease term. 

I enjoy the peace of mind of not having them spread all over the place. 

So there are a few ways to look at this, the 1st question is are you sure your renovation’s will double the property value, most renovations on primary residences, your lucky to get 60-70% of the dollar cost back out upon sale, so really nail down your comps, than you have basically a math problem if your rate on your primary goes up how long if ever before that extra payment is more than 400k in taxes, that’s just a simple calculation to help you decide, but I suspect you actually have a different question here, from a purely financial perspective my guess is the best option is to do anything to avoid that tax hit, but one of the reasons to make money is to spend it on things that you enjoy, based on your overall financial picture and a subjective view of how much enjoyment you will get out of a renovated home, you should decide if you want to roll your profit into another deal or “cash-out” your winnings, I love cars and I’m willing to spend more than is fiscally smart on them because they bring me joy, there is nothing wrong with that, but i don’t think it’s a fiscally smart choice, without knowing your exact property id imagine a renovation would fall into that category, so that’s the terms I would use to decide.

I hope you enjoy it as much as my wife and I have for the past 20 years :)

And, like in my case, there are some projects that I generally enjoy doing on a weekend and can save my jobs money.

If living there is still on the table it sounds like a good option to stay and enjoy the position you're in, with a lower interest rate (depending how/when it will adjust), rather than entering this tough market with higher prices and rates, where buying a similar house will have a much higher monthly payment.

Why not just do the renovations yourself, and enjoy these losses generated? 

I especially enjoyed R.

Both arenas challenge us to see the world from new perspectives, assess risks smartly, and enjoy the journey as much as the destination.