Mr. Frankfurter owns a 10 unit apartment building. Rent is currently $400 per unit per month ($48,000 per year). Current depreciation charges are $10,000 per year. There are 20 years, including this year, of remaining depreciation. Other expenses are about $1,000 per month for the complex.

Mr. Frankfurter can improve the apartments at a cost of $12,000 per apartment. Depreciation would be straight-line for 20 years. Revenues are expected to increase by $150 per apartment per month. His tax rate is 40% and his discount rate is 10% after tax. He can sell the complex for $200,000 after tax to a local broker. What is your recommendation?