Bank lending or Private money? 2-6 month gap needed b4 purchase

[Zach Henderson]

Hi everybody -

I have a rental property purchase lined up but need to borrow cash for a short period to change my eventual interest rate on the conventional mortgage. I'll be using the equity in the soon-to-be-purchased home (which has been gifted to me by my mother) as collateral for the loan as well as signing a personal guarantee (I have a strong W2 & earnings). Should I just be working directly with a bank on this or is a short-term private money deal the way to go? I'm essentially looking at paying fees/interest upfront for a short hold period on the loan for the long-term savings on amortized mortgage interest. 

The details:

• - Mother owns a home in upstate South Carolina
  • - $170k ARV
  • - $58k mortgage balance
    • - The remaining equity is being gifted to me
  • - Approx. $12k in renovations necessary to make rent-ready
    • - Work mostly done and renters expected in by Feb 1, '21 if not sooner

Once the renovations are complete, which should be done before end-of-year, I can purchase the home from my mother; however, it would behoove me to spike my credit score by paying down some personal debt (which I intend to transfer to the equity of this home upon closing) before originating the conventional mortgage on this property.

I have a contract in place with my mother on the property as well as a financial POA for her to manage any of the accounting throughout the process. I'm looking to borrow $40k against this property, pay off debt and allow my credit score to stabilize over 45-60 days, and then close on the property, paying off the $40k loan by rolling it into the mortgage. I have a strong W2 and am approved to purchase nearly 4x the loan amount I'll be seeking on the property (I intend to borrow below 80% LTV).

Question is - is this a simple bank transaction, and if not, what is the right private money structure and terms for something like this? I nearly have the renovation complete and have a longstanding relationship with my property management company so I anticipate this being an incredibly clean and quick turnaround. I've owned/operated investment real estate for over a decade and am comfortable with creative deals as well, but this seems like a fairly simple transaction. 

Thank you in advance for your advice and suggestions!