Construction Draw Schedules Explained for Fix and Flip Projects
Quick Answer
Rehab funds are released after inspections verifying work completion. Typical draw stages include demolition, rough construction, mechanical, finish work, and final completion.
Table of Contents
How Draw Schedules Work
In fix and flip lending, rehab funds are not given to the borrower upfront. Instead, they are held in a reserve account and released in stages as work is completed and verified through inspections.
This process protects the lender by ensuring funds are only released for work that has actually been done.
Typical Draw Stages
1. Demolition
The first draw covers demolition and site preparation. This includes removing old fixtures, tearing out walls, and clearing the property for renovation.
2. Rough Construction
Framing, structural repairs, and major construction work. This is often the largest single draw.
3. Mechanical Systems
Electrical, plumbing, and HVAC rough-in work. These systems must be installed before walls are closed up.
4. Finish Work
Drywall, flooring, cabinetry, painting, and interior finishes. This stage transforms the property into a livable space.
5. Final Completion
Final touches including landscaping, exterior work, cleaning, and punch list items. The property should be market-ready after this stage.
The Draw Request Process
- Complete a phase of work according to your scope of work
- Submit a draw request to your lender with documentation
- Lender schedules an inspection
- Inspector verifies work completion and quality
- Lender approves the draw
- Funds are disbursed to the borrower
Tips for Smooth Draw Processing
- Keep detailed records of all work completed with photos
- Follow your scope of work exactly as submitted to the lender
- Submit draw requests promptly after completing each phase
- Budget for out-of-pocket costs between draws
- Communicate with your lender if timelines change
Related Reading
Key Takeaways
- ✓Rehab funds are released in stages, not upfront
- ✓Each draw requires an inspection to verify work completion
- ✓A detailed scope of work is essential for smooth draw processing
- ✓Plan your cash flow around the draw schedule