Some will go with a nicer pad and a cheaper carpet.The nicer pad makes the carpet FEEL more expensive to the tenant when they walk on it.A great pad also resists wear and tear and if you need to replace the carpet the pad usually can be used again.Used to you would put a plastic membrane in between the carpet and pad to protect the pad but the plastic would slide and make noise sometimes.Now they have pads with built in protection.You are not looking for the cheapest product but the best VALUE for what you pay.It depends on the area and what kind of tenants and rent base you are working with.

He them procede to tell me it had hair line crack and that possibly the water was leaking from there and that it was a wear and tear because those pans only last so long. 

Appliances has its own head aches ,wear and tear and complaints .Circling back to your case ,your appicants sounds too pushy which is a red flag.They want it for 6 months ,when clearly your ppty is clearly advertised for LTR .They want utilities included and washer and dryer installed.BIG RED FLAG.They are too demanding.You are the Landlord and not them.Donot flex your criteria and property for the applicants.Tomorrow they will come back and say the compressor unit is too loud and must be replaced,cabinets are not shaker style and closes hard while closing and needs to be replaced etc etc.To me this above mentioned applicants are a pass .

Even though I don't pay utilities the wear and tear on an AC is a huge expense. 

@Olga DaiselNo one can answer this question is no idea how much the repairs areIf you say you want it to tear it down then I would not pay more than land value minus demo cost.

The only thing we probably didn't do was tear out walls.

We're going to tear out the drywall around the jacuzzi, replace it with cement board, add a shower head, and tile the surround.

If you want to enjoy it for awhile before renting be sure it won't be a "knock out" factor for potential renters.Look for ways to "harden" the property from wear and tear. 

Hi @Sam Liu it's fairly common to charge an additional monthly pet fee for MTRs to account for any additional wear and tear on furniture. 

You never know how much damage the termites have done until you start tearing into walls/floors....can get expensive fast.Location is the only thing that cannot be fixed, and you said this property was in a "really good location".