In short, I recommend never to take all the extra cash flow out of the business, not only to be prudent with the NOI, but also because you need to operate a profitable business. 

After inspections I was able to get another $8,000 off the selling price to account for extra labor that would be needed to fix the place up.

Are you going to diligently pay down that consumer debt once you have the extra cash flow? 

If you are dead set with tackling this project solo then I suggest you factor in a decent amount of contingency cost and extra time for the project to run over.

Also, some buyers will try to milk extra information out of you and sometimes use it against you. 

This could buy you a little extra time.

Mainly fire barriers, and extra insulation in between the floors. you could go with permits for the work that is being done if you want to avoid any concerns, but as far as the city will be concerned your home is just a single family that has a Mother-in-Law suite, and you are renting the spaces separately.

Or...should you look at it as it's only an extra $100 so just have it done! 

I like to make the extra money myself. 

An average income family of four banked over $11,000 in extra stimulus money and it is burning a hole in their pocket.