Real estate investors tend to perform renovation projects more often than constructing new homes since they take less time & money, and have less red tape.
As the housing market starts to stabilize, there are more investors are looking for distressed and undervalued houses. This means that brokers will have a consistent stream of fix-and-flip projects coming into their pipelines. Execution speed is directly related to safeguarding margins because with average returns still in the 25%–30% range, good deals go fast.
That's where a lot of investors start to run into problems, though. A badly planned fix-and-flip timetable can slow things down, leaving gaps in funding, and raising holding costs. Before closing, you should look over the investor’s draw schedule to make sure the deal will go smoothly from the start.
A Rehab Draw Schedule tells you how and when money for renovations will be released during a project.
Instead of releasing the whole repair budget all at once, lenders keep money in reserves and disburse in stages that depend on how much work has been done. A normal structure looks like this:
This framework makes sure that capital is used correctly and keeps projects on track and under budget.
Most private financing structures follow the same steps:
Step 1: Scope of Work Submission. A thorough plan for renovations, a budget, and a timetable are sent in and utilized to back up ARV-based underwriting.
Step 2: Draw Schedule Agreement. The lender sets the draw count, quantities, and milestone conditions. This is included in the closing package.
Step 3: Complete the Work. Draws are paid in arrears, which means that the work has to be done before the money is issued. Investors need enough cash on-hand to pay for the renovation work before they get their first draw repayment.
Step 4: Request the Draw. The borrower sends in a draw request after finishing a stage of work. Most lenders want proof that the work was done, such as images, emails between the contractor and the borrower, and sometimes even paid invoices.
Step 5: Lender Inspection. The lender checks on progress by doing an inspection or having a third party examine it. Usually, the examination is done in person and is recorded with photos and videos.
Step 6: Funds Released. The draw is given out when the inspection is done. Different lenders may have different timelines. Some provide you the money within 3 to 5 business days, while others can do it faster though technology-enabled disbursements.
It is crucial to know how to structure a timetable for a remodeling project before signing any contracts. This is difference between negotiations that go smoothly or that can start to cause problems.
Too many draws can make a project move slowly. Not enough can cause cash flow problems.
Vague milestones create delays.
Ensure each draw clearly defines:
Draw speed directly impacts project timelines.
Confirm:
Even slight delays can add weeks to project timelines, which significantly raises holding costs.
Most lenders operate on a reimbursement basis.
This means your client must:
Make sure they have enough cash on hand to pay for the first few stages of work.
Each draw may include processing or inspection fees.
Review:
No renovation goes exactly as planned.
A strong draw schedule should allow for:
If the draw structure isn't right, even good agreements can fall through. Some common risks are:
In a short-term project, even a 2–4 week delay can have a big effect on profits.
Helping clients prepare for draws allows you to build stronger relationship that lead to repeat business.
Key steps:
Most fix-and-flip projects take between 9 and 12 months. Delays in draw execution can immediately reduce margins.
When presenting a deal, focus on clarity and predictability.
This method builds trust with both clients and lending partners. Deals that are properly laid out from the start tend to go faster, end more cleanly, and lead to more business.
RCN Capital's fix-and-flip program uses both in-house underwriting and servicing to make sure that draw execution goes smoothly. Loans can range from anywhere between $75,000 and $2 million, and experienced investors can qualifying for 100% financing on purchase and renovation costs. Closings can happen in as little as 10 business days.
Through our dedicated technology suite, brokers have real-time visibility into loan progress, including draw milestones, reducing the need for manual follow-ups.
Visit the RCN Capital's broker page to learn how we can help you set up deals that go smoothly from closing to exit.