This one can add up if you miss it!!

Lender · Atlanta GA · Member since 2026 · 2 posts · 0 votes

Does your lender charge interest on the drawn balance or the full loan amount?

On a $191K Henry County flip, $136K funds at close and the $55K rehab comes in draws. If you're paying on drawn funds, month one is about $1,190. If your lender charges Dutch interest, you're paying $1,671 from day one on money still sitting with them.

Over nine months that's about $2,500. Nobody quotes it, it's in the term sheet, and it never comes up until you're comparing statements.

Taxes are the other one people miss. Georgia assesses at 40% of fair market value, no homestead exemption because you don't live there. On a $160K basis in Henry that's roughly $150 a month.

Which way does your lender bill it?

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Aaron WeikleBusiness Member
Member since 2026 · 76 posts · 23 votes
1mo
Both of these hit the P&L in different places, so tracking them separately from day one saves a lot of cleanup. On the interest side, if your lender charges on drawn funds then you book the actual interest expense each month against whatever balance was outstanding. If it's Dutch interest, you're still booking the full monthly charge as interest expense, but you should note the effective rate in your deal notes because it changes your true cost of capital. Either way, the expense hits Schedule E or your entity return as mortgage interest. Where people get sloppy is lumping Dutch interest in with drawn-balance interest when reconciling. Your lender statement will show the same line item regardless, so you need your own draw log to reconcile what was actually deployed versus what you paid interest on. For the draws themselves, each construction draw should hit a capital project account or a rehab cost account, not an expense account, until you sell. They're part of your basis. Mixing them with operating expenses inflates your current-year deductions and understates your gain. Property taxes on a flip are a basis item too, not a current deduction. Georgia's 40% assessment with no homestead exemption means that you're paying on assessed value the county set, often before your purchase. On your $160K basis scenario, that ~$1,800 annual tax goes into cost basis and reduces your taxable gain at sale, same as your rehab costs. Keep it in a separate line in your project tracker so it doesn't accidentally land in a Schedule A bucket. If your lender escrows taxes then I would reconcile the escrow balance monthly. Escrowed funds aren't your expense until its disbursed.

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Robert Cervantes
Flipper/Rehabber · Fresno, CA · Member since 2022 · 11 posts · 4 votes
1mo
The last lender I worked with was Dutch interest, new lender is non Dutch.
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