Is the situation different it I borrow an extra $40,000 to pay for upgrades/repairs (refinishing floor, repainting whole house, new fridge...) to the house? 

I'd wait and upgrade as the tenants moved out.

Others aren't okay with breaking even for a year while you stabilize rents and upgrade the unit.

What will be the best way to structure this offer so that I can either use as rental property or sell after some upgrades?

i emailed him and explained that licensed gas tech ran 4 propane lines and he asked about any plumbing changes and electrical changes i said a licensed plumber a licensed electrician fixed broken things . now he is demanding a walk thru. i am seeking a lawyer. any recommendations?

You'll rent it for $1,200 to $1,500 depending on condition, upgrades, size, etc.

You can't charge them more because you decide to do upgrades.

In pretty much every state, the landlord is required to maintain the home in habitable condition, which includes having intact (non-broken) windows (especially in the winter). 

Roll the equity you have in the MI house into a new property and use the cash for any upgrades or to bridge the gap in down payment.  

Seven days later we were able to return (no power until the next day), fortunate enough to a house that had not been broken into for a 3rd time – although there really wasn’t much left to steal!