5 min read
How Rehab Draws Work
Why renovation funds are released in stages instead of all at closing, and what the draw process usually looks like.
When a loan includes a renovation budget, that portion of the funding is typically not handed over in full at closing. Instead, it's released in stages — commonly called draws — as work is completed and verified. Understanding how draws work helps you plan your renovation cash flow.
Why lenders use a draw process
Releasing rehab funds in stages protects both the lender and the borrower. It reduces the lender's exposure if a project stalls, and it keeps the loan aligned with real progress on the property rather than a lump sum that could be spent before the work is done.
What a typical draw request involves
A borrower usually completes a portion of the scope of work, then requests a draw for that stage. The lender (or a third-party inspector) verifies the work was completed, and funds are released — often to reimburse costs already paid, or to fund the next stage of work.
Turnaround time for a draw request varies by lender and by how the inspection is scheduled. If draw speed matters to your project's cash flow, ask about typical turnaround before you commit to a lender.
Planning around draws
Because draws lag behind the work itself, most experienced investors plan to front some renovation costs and get reimbursed, rather than relying on a draw arriving before a payment is due. Building that timing into your budget helps avoid a cash-flow surprise mid-project.