Most first-time flippers assume the rehab money shows up in their account the day they close. It doesn't. On nearly every fix and flip and construction loan written in this country, the purchase funds are wired at closing — but the rehab budget is held back and released in stages, only after the work it's paying for is actually complete.
That mechanism is the rehab draw schedule, and misunderstanding it is one of the fastest ways to stall a project. An investor who budgets as if the full rehab amount is available on day one runs out of cash mid-demo, waits on a draw that hasn't been requested correctly, and watches carrying costs pile up while the property sits.
This guide breaks down how the rehab draw schedule actually works: why lenders hold the money back, how a draw request moves from your phone to your bank account, how to structure your own cash so a slow draw never halts the job, and what separates a lender who funds draws in days from one that takes weeks. At Funded Capital, draws are part of how we underwrite a deal — not an afterthought bolted on after closing.
Why Lenders Hold Back the Rehab Budget
When you close a fix and flip loan, the loan is split into two parts. The acquisition portion — the money to buy the property — funds at closing and hits the closing table immediately. The rehab portion — the money to renovate — is set aside in a holdback account controlled by the lender.
The lender releases that holdback in increments, called draws, as you complete phases of the renovation. You do the work first, then the lender reimburses you.
The logic is straightforward risk management. The rehab budget is the lender's collateral for value that doesn't exist yet — a plan on paper, not a finished kitchen. If the lender handed over $100,000 in rehab funds at closing and the project went sideways, that capital could vanish into a half-gutted house with no after-repair value to support it. By reimbursing against completed work, the lender ensures every dollar released is backed by real, verifiable progress on the ground.
This is also why rehab lenders size loans on loan-to-cost rather than loan-to-value. The draw schedule is the mechanical enforcement of that principle: your capital and your labor go in first, and the loan follows behind, tied to completion.
How the Draw Schedule Is Structured
Before closing, your rehab budget is broken into line items — a scope of work that lists each phase of the renovation and its cost. The draw schedule maps releases against that scope. There are two common structures.
Milestone-based draws release funds when specific phases finish — for example, one draw after demo and rough framing, another after mechanical/electrical/plumbing, another after drywall and finishes. Each milestone unlocks a defined portion of the budget.
Percentage-of-completion draws release funds based on how much of the total scope is done. When an inspection confirms the project is 40% complete, you can draw up to 40% of the rehab budget, less any amount already advanced.
Most experienced investors are quoted a fixed number of draws — often three to five — with the amount of each tied to the scope completed at that point.
| Draw | Typical Trigger | Share of Rehab Budget* |
|---|---|---|
| Draw 1 | Demo, framing, structural | ~20–25% |
| Draw 2 | Rough mechanical, electrical, plumbing | ~25–30% |
| Draw 3 | Drywall, windows, exterior | ~25% |
| Draw 4 | Finishes, fixtures, final punch list | ~20–25% |
*Illustrative. Your actual schedule is set by your approved scope of work and lender.
Notice what this means for cash flow: you fund the first phase of work entirely out of pocket, then get reimbursed. Every phase is front-loaded with your own capital and recovered on the back end.
How a Draw Request Actually Works
The draw process is a repeatable loop, and investors who close fast are the ones who run it efficiently. Here's the sequence.
Step 1: Complete the phase of work
You finish the milestone the draw is tied to. Draws reimburse completed work, so there's nothing to request until the phase is genuinely done — not started, not "mostly there."
Step 2: Submit the draw request
You notify the lender you're ready for an inspection and specify which line items are complete. Most modern lenders let you submit this from a portal or app with photos of the finished work. Clear, well-documented requests move faster.
Step 3: Inspection verifies the work
The lender orders an inspection — increasingly a remote or photo/video-based inspection rather than an in-person visit — to confirm the completed work matches the scope. This is the control that protects the holdback, so it's non-negotiable, but it doesn't have to be slow.
Step 4: Funds are released
Once the inspection confirms completion, the lender wires the approved draw amount to your account. With a lender built for speed, this can happen within a day or two of the inspection clearing. You then reinvest that capital into the next phase and repeat the loop.
The entire cadence — finish, request, inspect, fund, reinvest — is the operational heartbeat of a flip. A lender who takes two weeks per draw can add a month or more of carrying costs to a project across four draws. That delay is a real, quantifiable cost, which is exactly why draw speed belongs in your lender comparison alongside rate and leverage.
The Cash Flow Trap — and How to Avoid It
Here's the mistake that catches new investors: they treat the rehab holdback as available cash and plan their budget around it. Then reality hits at Draw 1. You've paid your demo crew, your framer, and your dumpster rental out of pocket — and you can't recover a cent until that first phase passes inspection.
The gap between spending on a phase and getting reimbursed for it is real working capital you need on hand. Underfund it and the project stalls: you can't pay the crew for phase two until phase one's draw lands, and phase one's draw won't land until the crew finishes.
Three practices keep the cash moving:
Carry a working-capital reserve. Beyond your down payment and closing costs, hold enough liquid cash to fund at least the largest single phase of your scope before reimbursement. This is separate from the reserves lenders already expect — it's your bridge between draws. It's a core reason fix and flip loan requirements include liquidity checks.
Sequence the scope to minimize the gap. Front-load the phases that unlock the largest draws so you recover capital sooner, rather than saving all the reimbursable work for the end.
Request draws promptly. Every day between finishing a phase and submitting the request is a day of carrying cost with no offsetting draw. Treat the draw request as part of the job, not paperwork you get to later.
Model all of this before you make an offer. Our deal calculator helps you pressure-test whether your cash actually covers the gaps between draws — not just the down payment.
Draws on New Construction vs. Rehab
The same principle governs new construction loans, but the schedule is usually longer and more granular. Ground-up projects run through more distinct phases — foundation, framing, dry-in, systems, interior, final — so a construction draw schedule may have five to eight releases rather than three or four.
The stakes on sequencing are also higher. A construction draw released against foundation work can't be recovered if framing never happens, so lenders inspect construction milestones tightly. Budget accuracy matters more too, because a scope that's off on a ground-up build compounds across every subsequent phase. The 70% rule and disciplined ARV underwriting apply just as much here — the draw schedule only works if the underlying budget was real to begin with.
Fund Your Draws in Days, Not Weeks — Apply With Funded Capital
A rehab loan is only as good as its draw process. A great rate means little if every draw takes three weeks to fund and your project bleeds carrying costs waiting on reimbursement.
Funded Capital builds speed into the entire lifecycle. We issue term sheets in as little as 2 hours and close in as little as 5 days, with no income verification on most programs. Fix & Flip from 8.75% up to 90% LTC. New Construction from 8.75% up to 85% LTC. DSCR from 6.0% up to 80% LTV. Our draw process uses fast, tech-enabled inspections so approved funds reach you quickly and your crew never waits. We lend in 44 states from our Miami headquarters at 100 N Biscayne Blvd, Suite 1210.
See how the process works, run your project through our calculator, or apply now and get real terms — including a clear draw schedule — on your next deal today. Questions? Call us at (305) 857-5620.
Frequently Asked Questions
What is a rehab draw schedule? A rehab draw schedule is the plan for releasing a fix and flip loan's renovation budget in stages. Instead of receiving the full rehab amount at closing, you're reimbursed in increments — called draws — as you complete phases of the work and each phase passes inspection.
Do I get the rehab money at closing? No. On almost all fix and flip and construction loans, only the acquisition funds are disbursed at closing. The rehab budget is held in a lender-controlled account and released as draws after completed work is verified. You fund each phase first, then get reimbursed.
How long does it take to get a draw funded? It depends heavily on the lender. Once you submit a draw request and the inspection confirms the work, a fast lender can wire funds within a day or two. Slower lenders can take two weeks or more per draw, which adds meaningful carrying costs across a project's multiple draws.
How many draws does a typical fix and flip loan have? Most rehab loans have three to five draws tied to renovation milestones. Ground-up new construction loans usually have more — often five to eight — because the project runs through more distinct phases that are inspected separately.
How much cash do I need on hand between draws? Because you pay for each phase before you're reimbursed, you need working capital to cover at least the largest single phase of your scope, on top of your down payment and closing costs. Underestimating this gap is the most common reason a fully-funded project still stalls mid-renovation.