The Quick Read: A cosmetic flip needs enough of your own cash to cover three things at once: whatever the loan leaves uncovered at closing, the largest stage of work you pay for before a reimbursement arrives, and the carry costs while that draw is inspected and released, plus a buffer. No single dollar figure fits every flip, because the number depends on your scope, your draw schedule, and your contractor’s payment terms. The method below lets you size it for your own project.
- Draws reimburse finished, inspected work. The rehab money can be fully approved and still be absent from your account on day one.
- Across the wholesale network Lendmire works with, fix-and-flip leverage typically runs 85%, 90%, or 93% of project cost depending on experience, always capped at 75% of after-repair value. These tiers vary by lender, property, and experience.
- Your cash low point comes just before a reimbursement lands, and a late inspection stretches it.
- Light cosmetic scopes tend to use fewer, larger draws, so each float is bigger.
- A sound rule: hold liquid cash at least equal to your largest unreimbursed stage, plus carry, plus a buffer.
Key Terms Defined
Hard money loan: A short-term loan secured by the property itself, with underwriting that leans on the asset, the plan, and the exit. Corporate Finance Institute describes it as collateral-backed, short-term, and higher-cost than conventional debt.
Draw: A release of rehab money from the lender after completed work is verified.
Holdback: The rehab budget the lender keeps in reserve and releases through draws.
Float: The amount of your own cash tied up in work that has been paid for but not yet reimbursed.
Carry: The monthly cost of owning the property during the project, such as interest, taxes, insurance, and utilities.
Loan-to-cost: The loan as a share of total project cost, meaning purchase plus rehab.
After-repair value (ARV): What the property is expected to be worth once the work is done.
Dutch interest: A structure where interest accrues on the full loan from day one. The alternative charges interest only on funds already disbursed.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
Why Draws Leave a Gap
Draws are reimbursements, not advances. That one fact creates the whole cash problem.
At closing, the lender typically funds the acquisition piece and sets the rehab budget aside in a holdback. On the programs Lendmire brokers, up to 100% of the rehab budget can be funded in draws against completed work. That is a rehab-budget figure, not a purchase loan-to-value. It does not make the deal a 100% purchase loan, because there is no true 100% purchase program.
Here is how the cycle runs:
1. You close and pay your share of the purchase and closing costs.
2. You pay for the first phase of work with your own cash or contractor credit.
3. You submit a draw request listing the finished items, usually with photos.
4. An inspector confirms the work exists and matches the approved scope.
5. The lender releases the funds, often less a retained portion.
6. You repeat for the next phase.
Funded does not mean advanced. A lender can approve 100% of your rehab budget and still have delivered none of it when the contractor asks for a first payment.
The inspector reports what exists, not what is planned. Work that is nearly done may not count until it is done. Work done outside the approved scope may not be reimbursed at all.
The Cash-Between-Draws Formula
Your total cash need is the sum of four parts:
| Component | What it covers | How to estimate it |
|---|---|---|
| Closing cash | Purchase share the loan skips, plus closing costs | Project cost less the loan-to-cost tier |
| Largest float | Biggest stage paid before reimbursement | Largest stage as a share of budget |
| Carry during the wait | Interest, taxes, insurance, utilities | Monthly carry times months of project |
| Buffer | Overruns and hidden conditions | Your scope’s risk, not a formula |
Start with closing cash. Across most programs, a fix-and-flip purchase funds 85% of project cost at the lower experience tier, 90% at the middle tier, and 93% at the top tier. The top tier is reserved for experienced investors. Your share is the remainder.
Then check the cap. Every tier is held to 75% of after-repair value. If the property’s expected finished value is modest against your cost, the cap can bind first, and your closing cash rises above what the tier alone suggests. All of this varies by lender, property, and experience, and nothing here is a commitment to lend.
The second part, the largest float, is where cosmetic flips differ most from heavy rehabs. It depends on how you split the work into stages.
Worked Example: A Three-Draw Cosmetic Rehab
These inputs are modeled assumptions, not market data. Picture a cosmetic scope split into three stages, each shown as a share of the total rehab budget:
| Stage | Work | Cost share | Reimbursed after inspection |
|---|---|---|---|
| 1 | Demo, paint prep, flooring | 40% | 40% |
| 2 | Kitchen and bath refresh | 35% | 35% |
| 3 | Fixtures, finish, punch list | 25% | 25%, less any final holdback |
If each draw lands before the next stage begins, your float peaks at 40% of the rehab budget. That is the largest single stage. You pay it, wait for the inspection and release, and then the cash comes back.
A practitioner write-up on rehab draws and inspections notes that cosmetic flips and light rental rehabs often use a three-draw schedule like this one. The tradeoff is larger gaps between reimbursements. Fewer draws save on inspection fees and paperwork, yet each one asks more of your own liquidity.
Closing cash and carry sit on top of that 40%. They are separate lines in the formula, and many first-time flippers forget that the float is additional to the down payment, not part of it.
Stress Test: When the Inspection Runs Late
On-time draws are the best case. Here is how the same project behaves when things slip:
| Scenario | What happens | Peak cash fronted |
|---|---|---|
| On time | Draw 1 lands before stage 2 starts | 40% of budget |
| Inspection delay | Stage 2 starts before draw 1 lands | Up to 75% of budget |
| Delay plus overrun | Stage 2 runs over by 10% of budget | About 85% of budget |
The overrun line matters most. Scope changes need lender approval, and extra cost may not be absorbed by later draws. Overruns usually come out of your pocket or your contingency.
Delay also stretches carry. Each extra month of ownership adds interest, taxes, insurance, and utilities to the project. Terms on these programs typically run 6 to 18 months, interest-only, so the clock matters. A project that slips toward the end of the term raises the stakes on every late draw.
How Draw Count and Size Change Your Float
| Draw structure | Float per draw | Admin and inspection cost |
|---|---|---|
| Few, large draws | Bigger | Lower |
| Many, small draws | Smaller | Higher |
More draws shrink the float but add inspection visits and paperwork. Fewer draws do the opposite. Ask your lender how many draws the program allows and whether it pays for partial completion, because both vary. Also ask whether interest accrues on the full loan or only on funds already disbursed. That choice changes your carry.
Where the General Rule Breaks
Final-draw holdback. The same practitioner write-up says some lenders hold back part of the last draw until permits close and any required certificate of occupancy is issued. Even a cosmetic flip may need cash to bridge that.
Materials on site. Many draw rules will not pay for items that are delivered but not yet installed. HUD’s draw-request instructions state this plainly for its renovation program, and they also keep a 10% holdback on each draw. Fannie Mae’s model renovation loan agreement likewise holds proceeds in escrow with a 10% holdback on each disbursement, released with the final one. Neither governs a hard money loan. They show how standard the reimbursement mechanic is. Early material purchases and large contractor deposits therefore come out of your cash.
Municipal inspections. A city permit inspection is separate from the lender’s inspection. A failed municipal inspection stalls the work, and the draw stalls with it.
Liens and paperwork. Liens, missed payments, and incomplete documentation commonly hold up releases. Keep invoices, lien waivers, and photos organized.
Hidden conditions. Cosmetic scopes can uncover rot, wiring, or plumbing behind a wall. That work may fall outside the approved scope, so it lands on your buffer.
Five Ways to Shrink the Gap
1. Stage the scope. Put quick, visible, inspectable work first so the first reimbursable milestone arrives early and stays small.
2. Match contractor terms to draws. A weekly labor schedule leaves you less exposed than a large upfront deposit. Paying the contractor from draw receipts shrinks the float further, if the contractor agrees.
3. Request draws as soon as work is done. Submit complete packages with photos and itemized invoices so the inspector can verify each line.
4. Skip early material purchases unless the lender clearly reimburses them.
5. Size the reserve to the worst stage. Hold cash at least equal to your largest unreimbursed stage, then add carry and a buffer for overruns.
Do You Have Enough? A Quick Self-Check
Add up your closing cash, your largest stage, carry for the full project, and a buffer. Compare that total to cash you can spend without touching rent, tax, or personal living money.
If the total exceeds your liquid cash, you have four fixes:
- Trim the scope to the work that moves value most.
- Split the project into smaller phases.
- Bring in a partner with capital.
- Choose a property that needs less work.
Experienced investors also tend to qualify for higher leverage tiers, which lowers closing cash. First-time investors qualify at the lower tiers, and credit generally starts at a 620 score, with added conditions below 660.
Plan the exit too. Standard DSCR rental loans are not built with rehab draws. The holdback structure belongs to short-term bridge products. Many investors refinance out of hard money into long-term DSCR investor loans once the property is stabilized, and Lendmire brokers that path. On standard rentals, cash-out typically tops out around 75% LTV, with roughly six months of seasoning a common expectation. Coverage of 1.00 is where select programs start, and a separate select-lender path goes below 1.00 with leverage and terms adjusted.
Clearing that ratio is not the same as positive cash flow. Repairs, vacancy, and management sit outside the calculation. For the full picture, see the complete DSCR loans guide.
Two related reads cover the other end of the project: how much equity a top-leverage hard money rehab needs for a DSCR cash-out and what a BRRRR cash-out refinance returns after the hard money payoff.
Frequently Asked Questions
Do I get the rehab money at closing?
No. The rehab budget is set aside in a holdback and released in draws against completed, inspected work. You pay for each phase first. The loan then reimburses you, subject to lender guidelines.
Why does a three-draw schedule need more cash than a five-draw schedule?
Each draw covers a bigger slice of work, so you front more before each reimbursement. A five-draw schedule shrinks that float but adds inspection visits. The right split depends on your scope and the program.
Do inspection fees change how much cash I need?
Yes, but mostly through the number of draws. More draws mean more visits and more fees, while fewer draws mean larger floats. Ask your lender how fees are billed and whether they come out of the holdback or out of pocket.
How big should my reserve be?
Cover at least your largest unreimbursed stage, plus carry for the full project, plus a buffer for overruns. If a delay could let two stages stack before a draw lands, size for both.
What happens if I run out of cash mid-project?
Work can stall, and the draw schedule stalls with it. Scope changes need lender approval, and overruns may not be covered by later draws. Talk to the lender before cash gets tight, not after.
Next Step
If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. As a broker arranging financing through select lenders in its wholesale network, Lendmire works across 41 markets, including Washington, D.C. Nothing here is a commitment to lend, and every file is underwritten individually. Any calculator on this page gives an illustrative estimate only.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income rather than personal income, subject to lender and program guidelines, a fit for self-employed investors and LLC-owned portfolios. Lendmire was recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
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Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. Corporate Finance Institute: Hard Money Loan
2. Medium – Rehab Draws & Inspections
3. HUD draw-request instructions (reginfo.gov)
4. Fannie Mae model renovation loan agreement
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much an Insurance Increase Moves an Airbnb DSCR Ratio · DSCR Cash-Out Now vs Waiting for Hard Money and Rehab Card Payoff · How Much a Low Appraisal Changes Cash to Close on a DSCR Purchase
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.