For Flippers - Do You Pay Contractors in Draws or Lump Sums?

[Stevan Stojakovic]

On your rehab projects, how do you usually structure contractor payments? Have you found lenders flexible with draws, or do you front more of the cash?

[Michael Hernandez]

Hey Stevan,

Most lenders I’ve worked with release funds on a draw schedule tied to completed work, so you typically need to front at least the first phase. For example, you’ll cover demo and rough-in costs, then the lender reimburses after inspection. Because of that lag, having some liquidity is key.

With contractors, I usually structure it as: small deposit (10% or less) + progress payments on milestones, never big chunks upfront. That keeps them motivated but limits exposure if things go sideways. If the lender’s draw doesn’t line up perfectly, I’ll bridge the gap with my own cash or a line of credit, then reimburse once the lender funds.

Flexibility varies—portfolio and private lenders are often quicker with draws, while hard money and banks can take a week or two to release funds. The smoother your scope of work and documentation (invoices, photos, permits), the faster it goes.

Bottom line: plan to carry the first 20–30% of the rehab yourself, then use draws to recycle that capital through the project.