Need help with understanding draws!!!!

3 Replies

How does the draw process/schedule work when borrowing from a private lender (in as much detail as possible)?


1. After having the property inspected and appraised 

2. Closing on the purchase 

3. Draw scheduling/process (detail)

4. First draw

5. "Junk fees", unknowns, helpful tips/hints

Thanks BP!


@Brendan Henry-Lambert This depends on the lender. With most hard money lenders, they will send out a 3rd party inspector to confirm the work is completed that you are trying to take a draw on. Then once it's confirmed, they will release it and usually just deduct the fee from the draw. The draw fees/inspection fees should be around $150. Not sure what you mean by junk fees. You shouldn't be dealing with any lenders who have junk fees. 

Hi Brendan --- Most Lenders use the Build First method with 3 even draws. The work for the phase must be completed to the satisfaction of the Lender, via the Inspector, who will release funds to your account to pay Contractor. The Contractor needs to know this going in so he isn't expecting upfront cash to begin work. Hope it helps!

Hi @Brendan Henry-Lambert

For us, draws are up to you and your contractor. You should work with a lender who works with your business model and rehab schedule. Some times a rehab can be done in a single draw, sometimes 3 or 4 are needed. For my lender the draws are set up initially, then you call when you are ready for a draw, we send an inspector out that compares your SOW and the work done. If everything meets the SOW the money is released. Feel free to reach out if you want some more detail. 

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