Question on acquiring bank financing for a rehab

[Zane Paul]

Hello all, I purchased my first home as a personal residence in March and I got what I thought was a pretty reasonable deal at 20% below market.

It had been a rental for 12 years and came with a lot of deferred maintenance, but nothing absolutely horrible, mainly just neglect and poor upkeep. So original intention was to slowly fix it up at my own pace for a year or two then purchase another house and rent this one.

Well, things have been pretty wild the past few months and I'm noticing comparable home sales with finishings that are just a touch above rental-grade are suddenly selling for quite a bit more. It's a small town located directly between 3 growing metros, so I think it might be a bit of the covid fever driving people out of the cities and I don't want to miss out on the boosted appraisal value.

I've shifted my strategy from DIY to ASAP, I estimate the remaining rehab to cost about $40k using other people's labor. Problem is, I only have $20k I'm comfortable with spending at the moment. 

Current loan amount on the home is 75k and comparable home sales are hitting between 170-190k. I was planning on approaching my local bank about getting a personal loan for the other $20k. I've priced most of the work except the pouring of a new driveway (but I know the neighbor had a similar one poured 4 months ago and I have that price and the contact) so I'm fairly certain the cost will come in right around $35,000. I have close contacts in plumbing, ac, cabinet installers, flooring, counter tops and tile work so I'm confident I can save a big chunk on labor there, but I'd rather over borrow than under borrow. I also have an additional $10k that I could use if I blow the budget as a backup fund.

My idea was to go to the bank with a pdf showing the other homes in the area that recently sold, showing the finishings, current photos of my home, my estimates for cost, and my income history as well as my expenses (I have about 45% of my income unspent each month). The problem is I'm a fairly low income earner (less than 60k) and my wife is unemployed. I'm not sure if there is a way I could get approved for an unsecured loan of such a relatively large amount compared to my income. I was considering maybe using my $20k in cash as collateral somehow on a $40k loan, because somehow I feel a bank would be more comfortable lending that way even though it's the same amount of money overall. I just feel like a 50% secured loan would be easier to swing than a 100% unsecured. 

What do you guys think? Do you think the bank would be willing to lend me the money for 12 months on the condition that I repay the entire balance in full before the 12 months by refinancing? I have enough bandwidth in my DTI to support refinancing the home for the maximum amount but I would only refi to pull out enough to pay back the $20k.