It was suggested that I install luan to increase the height of the floor and try to match it to the hardwood, but that is a lot more work and I am not sure this is even a good idea.What would you suggest I do to these floors? 

Here are the reasons:1) Buy selling it now and then buying another property at $1.5M would increase your property taxes as property taxes would go with purchase price of $1.5M whereas you most probably will be paying way less taxes on your current residence.2) you would be starting a new mortgage cycle and adding another 30 years of interest.

You can't get great financing on it and are stuck with the tenant for a year even if someone better comes along.Single tenant length of lease term HEAVILY affects value and cap rate exit on sale among rental increase and other items.

A 10% increase in value probably isn’t worthwhile to refinance (unless you’ve paid down some of the mortgage too).

This means around the 1st of the year there is a temporary boom of unqualified renters entering the market and to make matters worse the temperature normally drops tremendously which increases the danger of frozen pipes or high utility bills (choose one or the other) insurance agents tend to frown upon vacancies... 

Knowing that once you cross north of 5th St. you need to increase your vacancy credit by 1% will have a much larger impact on your true returns than using MIRR vice IRR.The nearest I can figure why MIRR doesn't get more traction on BP is that most people don't really understand IRR beyond the definition "the rate that sets the NPV of future cash flows to zero", so the factors that you pointed out don't make sense.

Would you prefer an ongoing 20% ROI, while not expecting any increase in the value of your original outlay, or, would you settle for an ongoing 10% ROI, while counting on (uncertain) future appreciation that might compensate you for the other 10% that you could have been getting from day one?

Increase earnest money.

I take their financials into consideration when determining if I can find ways to reduce operating expenses and increase my bottom line.

They are currently paying $450 a month in rent and have not received an increase in their history.