Fix-and-flip financing: understand rehab draws before work starts
A renovation loan can include money reserved for work without placing all of that money in your account at closing. The draw process matters to the contractor schedule and your cash needs.
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Separate purchase funds from rehab funds
Read how the loan allocates proceeds between acquisition and renovation. A holdback may be released as work progresses. The approved budget is not necessarily cash available on day one. Ask which costs must be paid by the borrower first.
Get the draw rules in writing
Confirm what counts as completed work, which invoices or photos are required and whether an inspection is needed. Ask about draw fees, release conditions and expected processing. Those rules vary by lender and loan; do not assume a prior deal used the same process.
Budget for the gap
Contractor deposits and material orders may come before a draw is approved. Keep enough cash to cover that gap. Also account for overruns, change orders and costs the loan does not fund. A rehab holdback does not remove the need for working capital.
Check how interest is charged
Ask whether interest applies to the full committed amount, the funded balance or another basis stated in the documents. Review minimum-interest terms and extension costs too. Two loans with the same headline rate can carry different total costs.
Tie the final draw to the exit
Work completion alone may not be enough for a sale or refinance. Permits, inspections, occupancy, rent and the final appraisal can affect the next step. Set a schedule with room for those milestones and bring Eagle Cap the purchase contract, scope, budget and exit plan for review.