Instead you could invest in a syndication or become a private lender and buy some notes (and many other options...), those investments are truly passive and offer nice returns, this way your money will truly work for you to the fullest.

I'm curious about financing the project - specifically, how would I convert it from what I assume would be a hard-money / private-money / short-term loan from a friend / family member into a long-term permanent financing type deal? 

Background: I'm new to private money as an investor and want to make sure I understand the mechanics so I can build reliable models.

Doable, but you’ll be spending a lot on closing costs times 22) find some private money.

(D) "Institution of higher education" includes all of the following:(1) A state institution of higher education, as defined in section 3345.011 of the Revised Code;(2) A nonprofit institution issued a certificate of authorization under Chapter 1713. of the Revised Code ;(3) A private institution exempt from regulation under Chapter 3332. of the Revised Code, as prescribed in section 3333.046 of the Revised Code.(4) An institution with a certificate of registration from the state board of career colleges and schools under Chapter 3332. of the Revised Code that is approved to offer degree programs in accordance with section 3332.05 of the Revised Code.

It is a self contained area within a single family home that may have its own private entrance.

I have about $100k equity in my primary home and we are thinking about setting up a HELOC to purchase a rental property instead of Hard or Private money loans.

Do you have private or federal loans?

You can always leverage capital from private lenders, banks or other sources.Good luck for your success

Theirs an exterior private entrance already but I don't want to seal the door for if I ever want to sell the house.