How much cash do you need for a flip? Understand rehab draws.

Separate committed funds from money available today

A loan commitment is the amount a lender agrees to provide subject to its conditions. An initial advance is the portion released at closing. A rehab holdback is money reserved for later renovation disbursements. The terms and release conditions belong in the loan documents.

For illustration, a $200,000 commitment could consist of $160,000 toward the purchase and $40,000 reserved for repairs. On a $180,000 purchase, that leaves a $20,000 purchase contribution before closing expenses. Calling the loan “$200,000” does not put the unused repair funds in your checking account.

This is a hypothetical structure, not a MaxDividend loan offer. Ask your lender to separate the figures in writing and explain any fees withheld from the initial advance.

Add up cash to close and cash to keep working

Continue the invented example with $6,000 of closing expenses, $12,000 needed for work before the first reimbursement and a $10,000 reserve. The result is a planning amount, not a universal minimum.

The $12,000 spent on work is part of the renovation budget, not a second renovation cost. A later reimbursement changes who is funding that cost. Also reconcile any earnest-money deposit already paid so you do not count it twice in the remaining cash-to-close figure.

Confirm how the draw process works

A draw is a release of part of the loan funds. In a reimbursement arrangement, the borrower pays for eligible work, submits the required evidence and receives funds after the lender’s review. Other arrangements may differ, so confirm the actual sequence before agreeing to contractor payment dates.

A BiggerPockets discussion describes an investor near the end of a renovation who still had funds in the rehab budget but was waiting for reimbursements while some line items had exceeded their allocations. The account is anecdotal. It illustrates why a remaining loan balance and cash available to finish are different numbers.

1. Identify eligible work and any approved budget categories.
2. Confirm whether work must be completed, invoiced or paid before a request.
3. Prepare the required photos, invoices, payment evidence and other documents.
4. Arrange any required inspection and respond to review questions.
5. Track the amount requested, approved and actually received.
6. Update the remaining holdback and cash forecast after the deposit arrives.

This is a checklist to discuss with your lender. It does not promise same-day draws, a particular inspection method or a MaxDividend disbursement policy.

Sources: BiggerPockets discussion (anecdotal): a renovation funding gap between draws

Forecast cash by payment date

List each week’s starting cash, payments due and expected receipts. End-of-week cash equals starting cash plus receipts minus payments. Keep the reserve visible instead of treating every remaining dollar as available for upgrades.

Suppose you have $22,000 available after closing, including your $10,000 reserve. You pay $12,000 for eligible work, leaving $10,000. Before the reimbursement arrives, another $8,000 invoice becomes due. You could fall to $2,000, well below your reserve, even though the total project still appears profitable.

Stress-test late receipts and larger bills. Discuss the mismatch before signing: a revised payment schedule, more of your own available cash or a different project scope may be needed. Do not assume a contractor will wait or a lender will accelerate its review.

Ask these questions before you borrow

Compare the full funding arrangement, not only an advertised rate. Ask for dollar examples using your proposed project.

• What is the initial advance, total commitment and rehab holdback?
• What costs must I pay myself, and what reserves must I keep?
• Is interest charged on disbursed funds or another defined balance?
• Are there draw, inspection, processing or other charges?
• What evidence and approvals does each draw require?
• Can unused amounts move between budget lines, and who must approve that?
• How are cost overruns, incomplete work and unused funds handled?
• When is the loan due, and what are the payoff and extension terms?

One point means 1% of the applicable loan amount. For example, 1.5 points on $200,000 equals $3,000. Confirm the calculation base and all charges in the written terms; this arithmetic is not a full cost quote.

Keep each project’s cash needs separate

When running several flips, combine the payment calendars but retain a separate budget and reserve for each property. Count the same dollar only once. Model the case where two projects need a draw at the same time and one sale closes later than planned.

Before adding a project, review peak cash needed, contractor capacity and the person responsible for each deadline. The number of properties you can buy may be greater than the number you can finish comfortably.