A major factor here is how important it is for you to stay in this location vs. the undoubted stress, inconvenience and financial uncertainty of remodeling. Simply packing up and moving, although a big effort, is a lot easier than the kind of disruptive remodel you are talking about.

Yes, it would be a 4-month remodel with a baby and 4-year-old.

I would be surprised that 140K would get you a legal habitable bedroom, bath, and family room, in a standard attic only designed for storage. There are a LOT more obstacles than you think, starting with legal headroom, required insulation (which eats into the legal headroom) and required emergency escape and egress windows for bedrooms.

Take that 150K and look at putting it towards another house that gives you more room from the beginning. What can you buy for 450K?

We faced this decision at one point. Lived on a great block with neighbors we loved. Ready to put about 100k into attic conversion and some other things. However, at the end of the day we would still have the same small (but great) kitchen, small bedrooms, etc.. Reluctantly left, moved across town, spent many years improving a larger house with great bones (and plumbing issues). What made it the right move-and what I didn't necessarily see then-is that our four kids under the age of nine would get bigger, would want space to have their friends over, etc.. Since I wanted them to have their friends hang here, it's proved to be the right move. The I do miss my old block to this day, though, as we haven't enjoyed the same level of closeness with our neighbors but I think that is more a function of having older kids now. All this to say, maybe look around and be opened to a larger house in a different neighborhood.

unless you are a hands on do it yourself person, its cheaper to move and buy what you want than remodel. if its completely down to price, move. reap the cruddy return on investment that the sellers are going to experience.