How Fix and Flip Draws Work (and How to Get Paid Faster)

The Scope of Work Sets Everything Up

Your scope of work is a line-item budget: demo, framing, roof, mechanical, electrical, plumbing, drywall, kitchen, baths, flooring, paint, exterior and so on, each with a dollar amount. The lender uses it to size the loan and later to decide how much each draw releases. A vague one-line budget leads to slow, disputed draws. A detailed one with materials and labor separated gets paid quickly.

How a Draw Request Works

Most draws follow the same steps:

• You finish a phase of work and submit a draw request listing the line items completed
• An inspector visits or you upload dated photos or video, depending on the program
• The lender compares completed work to the budget and approves the amount
• Funds are wired to you or your contractor, often within a few business days

Interest on Funds Drawn

With non-Dutch interest you pay interest only on the money you have drawn, not on the full rehab budget from day one. If your rehab is $120,000 and you have drawn $30,000 in the first month, you pay interest on the purchase advance plus $30,000. Ask every lender how they charge interest before you compare rates.

The First Draw Problem

Draws reimburse completed work, so you or your contractor need cash to start. Plan for the first phase out of pocket, which is usually demo and rough-ins. Some programs advance part of the first draw at closing for experienced borrowers, so ask if you need it.

Habits That Get Draws Paid Faster

Investors who get paid in days instead of weeks do the same few things:

• Submit draws by line item that match the original budget
• Send clear, dated photos of every completed item
• Request draws at real milestones instead of every few days
• Keep permits and inspections current, since lenders check them
• Tell the lender early if the scope changes, before the money is spent