My husband and I are having a difference of opinion as to the value of these improvements.

Then, they listed the fix up costs on Zillow and not one of those improvements even paid for itself.

So I plan to rent the bottom unit and finish the attic and do some other improvement while I live upstairs.So there is a little background and here is my potential problems.

If the Buyer is improving the property, which your post doesn't say, then there is some hope.

If you are confidant that you could pay both, and still cash flow a profit, then your return will only improve after you finish paying the 2nd note off after a few years.

Usually the realtors know exactly what price houses can be sold for after the improvements.

I take a mortgage out for 300k now and start to pay it off while I improve the property.

My net profit will be around $50K (purchase, sale, and improvements costs included) but the tax is 15% of that, isn't it?

Have you looked onto using a PPI - Purchase Plus Improvements mortgage?  

Current research leads me to think that the right angle is inadequate protection of the collateral by the owner (no insurance, continued decline, no evidence of effort to preserve or improve the collateral).