And trust me that this photo does not do it justice. The carpet was stained and torn up, the walls were dingy and looked like they hadn't been painted in 50 years. We closed up the closet and regained that space in an adjoining room, ripped out the built-in under the window, and replaced the radiator.
The carpet had to go, and although there were hardwoods beneath, they were so damaged that we ended up just putting in new wood flooring from Lumber Liquidators - Brazilian Walnut. Not to mention the awesome drop ceiling:
Notice that there was nothing wrong with the ceiling above, we think they just wanted a ceiling light? Seemed like a bad trade-off to us, so we ripped it out! Here's what it looks like now:
It's so nice to have high ceiling and space for a big comfy sectional!