Depending on the type of loan (conventional versus FHA), they have very specific requirements for the condition of the property - from the age of the roof to the condition of the paint. 

and if it get fixed up to a top condition will i be able to have great tenenets there ?

The property was brought back to better than original luxury status, therefore increasing my rental prices from $950 to $1200 per month.

It will come at a cost of fees and some time though.Now umbrella insurance and liability insurance on the property is definitely an obtain and increasing the policy increases your protection but one thing that is always unknown is how much a claim will be. 

We purchased the property with a conventional loan and 5% down, 30 year, and a PMI obviously.We are doing some significant updates and upgrades that will increase property value.

We are undecided on whether to put down asphalt or gravel to help increase value to our home & property.  

I often find buyers having little to no insight into how lenders view a property and under what conditions they will fund a loan.

The roof, master shower, and carpets throughout need replaced, and although the property is structurally in good shape and the AC\HEAT is in good condition, the house has never been updated to today's modern look.I want to walk away with 40,000 in cash but I am afraid that after the projected closing costs of $13000 that include the realtors $9600 commission I wont get the $40,000 because it needs a roof, shower, and carpet.   

What condition do you want to buy it in?

Current value is likely below $100k in its current condition.