Rehab Draw Schedule: How It Works and How to Plan One

A rehab draw schedule is the plan that tells you when your lender releases renovation money and what has to be finished first. On most rehab loans, the purchase money arrives at closing and the renovation money does not. It sits in a holdback and comes out in pieces, after the work is done and verified. If you plan for that, a draw schedule is easy to live with. If you don’t, it is the fastest way to stall a flip.

This guide covers how draws work, what a typical schedule looks like, what to put in a draw package, and how to size your cash cushion. The same logic applies to a construction draw schedule on a larger build.

TL;DR

• A draw schedule splits your rehab budget into milestone payments. Each one is released only after the lender verifies the work, usually by inspection.
• Draws are reimbursements. You pay the contractor first, then submit paperwork. Plan for working capital to cover the gap.
• Expect roughly 3 to 6 draws. A complete request typically takes 3 to 5 business days to process.
• Lien waivers, invoices, photos and a detailed scope of work are what keep draws moving.
• Build the schedule from your own numbers before you talk to a lender, so you can spot terms that don’t fit the project.

Table of Contents

• What a rehab draw schedule actually is
• What most people get wrong: draws are reimbursements
• What a typical draw schedule looks like
• How a draw request moves from start to funding
• Costs and holdbacks to budget for
• Build a scope of work that supports your draws
• Lien waivers are not optional
• Match contractor payments to the draw calendar
• What inspections do and do not protect
• Sizing your cash cushion
• Our perspective: plan the draws before you make the offer
• Where our tools fit
• Common draw schedule mistakes
• FAQ
• Sources

What a rehab draw schedule actually is

Think of the loan in two parts. The first part buys the house. The second part is the rehab budget, which the lender holds and releases as work gets done. The draw schedule is the agreement that connects the two: which milestones, how much each is worth, and what proof is required.

One rehab lender explains this two-part structure plainly: the purchase funds at closing, while the renovation money is held back and paid out against inspections. A construction draw schedule works the same way. Each draw lists the work stage, the payment trigger, the required documents, the approval step and the recipient.

Two terms you will see on every loan document:

• Holdback: the renovation funds the lender keeps until work is verified.
• Draw request: your formal ask for the next release, with supporting documents.

What most people get wrong: draws are reimbursements

The biggest trap for first-time flippers is treating the schedule as automatic payments. It is not a calendar of deposits. It is a milestone-based plan where you pay your contractors first, then submit a package with photos, invoices and lien waivers to trigger an inspection. If the paperwork is messy or the work is not fully complete, the inspector can reject the request. That costs you interest and strains your relationship with the crew.

This is why lenders tend to want to see liquid funds from you. Whatever your lender’s exact terms, you are floating each phase until the reimbursement lands.

What a typical draw schedule looks like

Most schedules have between 3 and 6 draws. One lender’s guide says the scope of work typically becomes 3 to 6 milestone payments. A common sequence follows the order of construction: demo and structural work, then roof and exterior, then mechanicals, then drywall and interior finishes, then final completion.

Program rules also set limits. Fannie Mae HomeStyle guidance allows up to 5 draws, and HUD’s 203(k) handbook covers how advances are insured and released through completion. Private hard money lenders set their own rules, so read the term sheet.

A sample schedule for a $75,000 rehab

The table below is our own illustration, not a lender’s quote. Your milestones and percentages will differ.

Notice the largest gap between draws. If your contractor needs $20,000 of materials and labor before the second inspection, you need that cash on hand. Smaller, more frequent draws shrink the float but add inspection and processing fees.

How a draw request moves from start to funding

The steps are similar across lenders:

1. Finish the milestone. The work in that line item must be complete, not mostly done.
2. Pay your contractor and suppliers. Keep proof of payment such as canceled checks.
3. Collect lien waivers from every subcontractor and supplier on that phase.
4. Submit the package: a signed draw request form, invoices, proof of payment, waivers and dated photos.
5. Inspection. An inspector verifies the work against your scope.
6. Approval and funding. The lender releases funds, usually by wire or ACH.

On timing, one lender guide says processing typically takes 3 to 5 business days once a complete package arrives, with inspection within 48 to 72 hours and funds 24 to 48 hours after the report is approved. Treat those as a good-case benchmark, not a promise. Your lender’s timeline is the one that counts, so ask for it in writing.

Costs and holdbacks to budget for

Draws are not free. Ask your lender about:

• Inspection fees. One industry write-up puts them at $100 to $300 per draw, usually paid by the borrower. Five draws can add up to $500 to $1,500.
• Processing and wire fees. Some lenders charge for each disbursement.
• Reinspection fees if work fails.
• Retainage. Under 203(k) program guidance, a 10% holdback applies to interim draw releases until completion. Private lenders often hold back a final portion until permits close.
• Interest. On most loans you pay interest only on funds disbursed, but confirm that with your lender.

Add these to your rehab budget the same way you add permits and utilities. If you are still building that budget, our underwriting checklist for preventing rehab overruns walks through the line items investors most often miss.

Build a scope of work that supports your draws

Your scope of work (SOW) is the backbone of the schedule. Treat it as a roadmap, not a rough estimate. Lenders advise breaking costs out by labor and materials for each line item, because that lets an inspector verify completion quickly and objectively. Vague line items like “kitchen update” invite disputes and delays.

A good SOW line reads like this: “Install 30 linear feet of base cabinets and countertop, labor $2,400, materials $5,100.” It names the quantity, splits the cost and can be checked from a photo.

Lien waivers are not optional

Many investors skip over lien waivers until a draw is rejected. A lender will not release funds if it cannot be sure the property stays free of future mechanic’s liens, and unpaid subs or suppliers can file them. Collect a waiver from every sub and supplier on each phase as you pay them, not weeks later. A missing waiver can freeze all later releases.

Match contractor payments to the draw calendar

Your contractor wants payment on a certain day. The lender pays after an inspection. Those two clocks rarely line up, so you bridge them.

• Put the draw milestones in the contractor agreement. Payment terms should mirror the lender’s schedule.
• Agree on a small deposit for materials, funded from your own cash.
• Never promise payment dates you do not control. Tie them to inspection approval.
• Schedule the inspection early. Request it the day the work finishes, with the package complete.

Before you sign anything with a lender or a contractor, run your own deal diligence too. A step-by-step due diligence guide can help you structure the checks you make before committing funds.

What inspections do and do not protect

A draw inspection protects the lender’s collateral. It confirms that the work paid for is in place and that the property’s value is supported. It does not guarantee quality, and it is not a warranty. HUD’s 203(k) guidance makes clear that the borrower is responsible for vetting contractors and for the standard of the work.

That means you vet licenses and insurance, get references, and negotiate written warranties yourself. The same goes for specialty trades such as waterproofing or roofing: a passing draw inspection says the work exists, not that it will last.

Sizing your cash cushion

The float is where first-time flippers get hurt. Use this quick method:

1. List your draws and their dollar amounts.
2. For each draw, estimate the cost you will pay before it is funded. That is usually the full milestone amount.
3. Add the days between finishing work and funds arriving. Using the benchmark above, plan for roughly a week, longer if an inspection is rescheduled.
4. Add fees for inspections and processing.
5. Add a contingency. One guide suggests 10 to 15% over planned draw amounts.

On our sample $75,000 rehab, the biggest single draw is $20,000. Add roughly $1,500 in worst-case inspection fees, plus a 10% contingency of $7,500, and you want well north of $29,000 of liquid cash beyond your down payment. Run the numbers with your actual budget before you make an offer.

If you are using an FHA 203(k) loan, the down payment is separate from renovation funds. The minimum required investment on purchases is 3.5% of the lesser of appraised value or sales price plus rehab costs, according to program guidelines. Private lenders vary, so ask what they require.

Our perspective: plan the draws before you make the offer

We built our calculators around one idea: most flip problems are decided before closing. When investors overpay or underestimate the rehab, no draw schedule can save the deal. When they size the rehab honestly, the schedule becomes a cash flow tool.

Here is the order we suggest:

1. Establish ARV with real comps, using the comps analyzer.
2. Estimate the rehab by line item, then add a contingency.
3. Work out your maximum offer from those two numbers.
4. Lay the rehab budget into 4 to 6 milestones and calculate your largest float.
5. Compare financing terms against that float, using the financing calculator.

If you plan to hold the property, the BRRRR calculator shows how rehab cost, holding time and the refinance interact. A draw schedule that runs two weeks long is a real cost in that model, because every extra week is interest and a delayed rent start.

We would rather you walk away from a deal on paper than discover the float problem with a half-gutted house.

— Michael

Where our tools fit

The free calculators on Real Estate Investor Toolkit need no sign-up, so you can test ARV, rehab and maximum offer numbers in minutes. If you want unlimited reports, saved deal pipelines, advanced property data and AI deal insights in one place, the paid plan is $39.99 per month.

Common draw schedule mistakes

• Treating the schedule as automatic deposits. It is a reimbursement plan.
• Vague scope items. Inspectors cannot verify what is not defined.
• Late lien waivers. Collect them as you pay.
• Front-loading the budget. Heavy early draws can leave too little for finishes.
• Ignoring fees and retainage. They are real cash out of your pocket.
• Requesting draws for partial work. Wait until a milestone is complete.

FAQ

What is a typical draw schedule for a construction or rehab loan?

Most schedules have 3 to 6 draws tied to phases such as demo, rough mechanicals, drywall and final completion. Lighter cosmetic rehabs often use fewer draws, while heavy renovations use more. Your lender’s term sheet sets the actual structure.

How long does a draw request take?

One lender guide cites 3 to 5 business days once the package is complete. Missing documents or a rescheduled inspection can extend that. Ask your lender for its typical turnaround and plan your contractor payments around the slower end.

What documents do I need for a draw request?

Expect a signed draw request form, contractor invoices, proof of payment, lien waivers for the phase and dated photos. Some lenders also ask for permits or updated insurance. Confirm the list before your first request.

How much down payment is needed for a rehab loan?

It depends on the program. For FHA 203(k) purchases the minimum required investment is 3.5% as described above. Private lenders set their own requirements and often want substantial liquid cash for the float, so ask for the exact figures.

Sources

• How Draws Work on a Rehab Loan (RevCap)
• Construction Draw Schedule Explained (ClockShark)
• Fix and Flip Draw Schedule: How Renovation Funds Actually Get Released (Hard Money Bankers)
• Fannie Mae HomeStyle matrix
• HUD 203(k) handbook
• Rehab Draws and Inspections (Medium)
• FHA 203(k) Program Guidelines (Plaza Home Mortgage)

Recommended

• Rehab Cost Calculator — Fix & Flip Deal Analyzer
• How to Estimate Rehab Costs on Investment Properties
• Investors: Underwriting Checklist to Prevent 20 to 40% Rehab Overruns
• Light vs Medium vs Heavy Rehab: How Scope Changes the Deal Math