The Quick Read: You fund draws on hard money by paying for each phase of work from your own cash first, then recovering that cash when the lender releases the next draw. Scaling to five or more exits means sizing that float across the whole portfolio, staggering project starts, and timing exits so sale or refinance proceeds refill the reserve. Every leverage figure below varies by lender, property, and experience, and nothing here is a commitment to lend.
- Draws reimburse completed work. They are not advances, so the investor carries the cost of each phase until the lender pays.
- Across the programs Lendmire places hard money files with, fix-and-flip leverage runs up to 93% of project cost at 5 or more completed projects, up to 90% at 2 or more, and 85% with fewer than 2. Every tier is capped at 75% of after-repair value.
- Up to 100% of the rehab budget can fund in draws against completed work. That is a rehab figure, not a purchase figure.
- Peak cash need is the sum of every project’s unreimbursed work at the same moment, so staggering starts matters more than raising more capital.
- Hard money terms run 6 to 18 months, so the exit plan has to be built before the first draw is requested.
How Does a Hard Money Draw Actually Work?
A hard money rehab loan usually splits into two pieces. One piece pays for the purchase at closing. The other is a rehab holdback that the lender releases in stages as work is finished and verified. No federal regulator writes these draw rules. They are contract terms, and they differ from one lender to the next.
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The cycle looks the same on most files:
1. Approve the budget. The lender signs off on an itemized scope of work and budget at closing. Each line item becomes a potential draw.
2. Front the cost. The investor or the contractor pays for the work first. Nothing about “100% rehab” changes that. It describes how much of the budget the lender will reimburse, not when.
3. Submit the draw request. The package covers the budget line items finished since the last draw, as Yieldstack’s draw schedule explainer describes it. Invoices, photos, and lien waivers from subcontractors usually go with it.
4. Verify the work. The lender uses a third-party inspector, a photo review, or a desktop review. Some lenders pay a partly finished line item pro rata.
5. Receive the release. Funds go out against the verified work. Turnaround varies by lender and by inspection method, so ask about both before closing.
Many lenders also pay only for installed work. Materials sitting in the garage are not reimbursed, according to the same Yieldstack explainer. A tile order that arrives early is cash out the door with nothing coming back until it is on the floor.
Why Does Scaling Change the Problem?
On one project, the float is a manageable gap. On five concurrent projects, the gaps stack. A slow inspection that costs one flip a few days of patience can leave a whole portfolio short of cash at once.
The common mistake is treating each project as its own problem. The investor funds the first phase on project one, waits for the draw, and then starts project two. That works until a draw slips while two other projects are already mid-phase. The cash need is a portfolio number, and it should be planned as one.
Cash needs also go beyond the down payment. Plan for the down payment, the first phase of work, and carrying costs while you wait. Even at the 93% tier, where leverage is measured against project cost, the investor still funds roughly 7% of cost plus the first phase of work. That 7% is simple arithmetic from the tier, not a separate sourced number.
The 93% tier is also reserved for experienced investors with five or more documented completed projects. The 90% and 85% tiers sit below it. A first-time investor will not see the top tier on file one, so the cash reserve has to be larger early on, not smaller.
One more limit matters here. There is no true 100% purchase program. The 100% figure applies to the rehab budget only. An investor who plans a portfolio on the assumption that the lender covers the whole purchase will run out of cash at closing, before the first draw is ever requested.
How Do You Size the Float Across Five Projects?
Size the float from the draw schedules, not from a rule of thumb. For each project, list the work finished but not yet reimbursed at every point in its schedule. Then line the projects up on one calendar and add the columns. The highest total is your peak float.
Run it with placeholder units instead of real dollars. Say each project has five draws, and the first phase of work costs one unit before the first draw pays out. After the first draw, each later phase puts about half a unit of work in flight at a time, because the lender reimburses as each phase is verified.
- All five projects start together. Every project is in its first phase at once, so peak float is about five units, plus the carrying costs on all five loans.
- Five projects staggered. Each project clears its first draw before the next one starts. Peak float is about one unit for the newest project plus half a unit for each of the four older ones, roughly three units.
The staggered portfolio needs a smaller reserve to run the same five projects. Same deals, same budgets, less cash trapped at one time. The only thing that changed is the calendar.
Two things make the real number higher than the model. A delayed draw leaves a project’s work in flight longer, and a budget overrun lands on the investor, not on the holdback. Build the reserve around the slow case, not the average one. Leave extra room for contingency as well. Fund contingency and the first draw from cash, not from the draw schedule.
How Do You Stagger Starts and Shrink the Float?
Stagger acquisition dates so no two projects hit their heaviest out-of-pocket phase together. The heaviest phase is usually the first one, since it is the one the investor funds before any draw arrives. Put the closings far enough apart that each project has cleared its first draw before the next one starts.
Milestone design does the rest. Draws come sooner when the budget is built from smaller line items. A single plumbing line holds funds back until the whole job is installed. Split it into rough-in and fixtures, and the lender can verify and pay the rough-in first. Do this at the budget stage, before closing, because the lender approves the line items at origination.
Other design choices that shrink the float:
- Put the largest early expense, often demolition, framing, or roofing, in the first draw or the first line item.
- Keep line items small enough that a half-finished one does not stall the whole request.
- Ask the lender whether it pays partial completion pro rata, and plan the schedule around the answer.
- Count the draw fees. They are typically modest, but they multiply across many draws and many projects, so fewer, larger draws can make sense on small jobs.
What Are the Sources of Float Cash?
Float cash comes from three places: a standing cash reserve, recycled exit proceeds, and the payment terms you negotiate with contractors. Each one has a different cost and a different failure mode.
| Source | Strength | Main risk |
|---|---|---|
| Cash reserve | Always available | Ties up capital between deals |
| Recycled exit proceeds | Refills the reserve | Depends on closings landing on time |
| Contractor payment terms | Cuts the cash needed | Needs trade partners who agree |
The reserve is the base layer. Exit proceeds are the refill. Contractor terms are the lever that reduces how big the reserve has to be. An investor who relies only on exit proceeds is exposed the moment one sale slips.
Should You Pay Contractors on Draws or With Deposits?
Pay on a draw schedule. A large up-front deposit puts your cash at risk before any work exists to verify. As Sellers Little Helpers explains in its look at the contractor deposit problem, a draw schedule ties payment to completed work and keeps the investor’s leverage over the job.
| Factor | Large deposit | Draw schedule |
|---|---|---|
| Cash exposed early | High | Low |
| Match to lender draws | Poor | Strong |
| Leverage if work stalls | Weak | Stronger |
| Fit across many projects | Strains the reserve | Fits the pipeline |
Line up your contractor milestones with the lender’s line items. If the lender pays for rough-in plumbing, the contractor’s second payment should be tied to the same rough-in. That way the money you owe and the money you receive move on the same trigger.
A short payment-terms checklist:
- Milestones in the contractor agreement mirror the lender’s budget lines.
- Each payment is conditioned on a lien waiver for that phase.
- Final payment is tied to the completion inspection.
- There is a buffer between the contractor’s payment date and the lender’s expected release.
What Goes in a Draw Package, and How Do You Track Five at Once?
Use the same package on every project, so no draw is held up by a missing piece. The usual contents are the finished line items, photos, invoices, and lien waivers from the subcontractors. A general contractor will often submit a requisition with partial lien waivers, and payment follows, less any retainage.
Lien waivers matter more at scale. They act as a receipt that can help prevent a mechanic’s lien from surfacing against a property you are trying to sell. Collect them at each draw, not at the end.
Track all projects on one sheet. A simple pipeline tracker is enough:
| Project | Phase | Status | Next action |
|---|---|---|---|
| A | Rough-in | Inspected | Await release |
| B | Demo | Submitted | Follow up with lender |
| C | Finishes | In progress | Collect waivers |
| D | Closing | Pre-start | Confirm budget lines |
| E | Punch list | Overdue | Escalate, check float |
Review it weekly. The column that matters most is “overdue,” because that is where float turns into a problem.
What Do You Do When a Draw Runs Late?
Decide the order of payments before it happens. When a draw runs late, pay the people who stop work first, hold the people who do not, and keep the project moving without breaking the lien-waiver rule.
A simple if-this-then-that playbook:
- If the inspection has not been scheduled, call the lender and confirm the inspection method. A photo review or desktop review may clear sooner than a site visit.
- If the package was returned, fix the gap and resubmit. Missing waivers and out-of-scope work are the usual causes, and out-of-scope work needs a change order before the next draw.
- If the delay will outlast your reserve, pay for the line items that keep the critical path moving and tell the other contractors the new date in advance.
- If it keeps happening with one lender, that is a lender-selection problem. Ask about turnaround and inspection method up front on the next loan, and get the process in the loan documents.
How Do Exits Fund the Next Entry?
Exits refill the reserve, and the order matters. A sale or refinance pays off the hard money loan, returns the investor’s cash, and rebuilds the float for the next project. If an exit slips, the next acquisition should slip with it. Closing on a new deal while the reserve is still tied up in an unsold one is how a portfolio gets squeezed.
Hard money terms run 6 to 18 months, interest-only, with no prepayment penalty on the programs Lendmire works with, and these terms vary by lender, property, and experience. There is no multi-year option. Five exits inside that kind of window leave little room for a delay on any one project.
Not every project has to be sold. Many investors refinance out of hard money into long-term rental financing once the property is stabilized, and Lendmire brokers that path through the hard money exit refinance program. The long-term loan that pays hard money off is a DSCR loan. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.
The DSCR figures differ from the hard money figures, and the two should not be blended:
- A DSCR cash-out refinance on an investment property tops out at 75% LTV, and a DSCR rate-and-term refinance can reach up to 85% LTV with no cash back at closing.
- A DSCR loan typically wants about 6 months of ownership before cash-out, measured from title recording.
- Coverage of 1.00 is where select DSCR programs start, and the credit floor is 620, with stronger tiers at 660, 680, and 700.
- A DSCR loan commonly carries about 6 months of PITIA in reserves, stepping up to about 9 months above $1,500,000.
Clearing 1.00 on a DSCR loan is not the same as positive cash flow. Repairs, vacancy, management, and utilities sit outside the calculation. Lendmire’s piece How a Repeat Flipper Moves Hard Money Exits Into a DSCR Pool walks through the portfolio version of this exit. For the full program picture, see the complete DSCR loans guide.
One more point: only drawn principal counts toward the payoff. Undrawn funds do not accrue payoff, while interest and fees keep growing every month. An unused holdback is not a cushion at exit. Tax treatment varies; consult a qualified professional.
What Does a Path to Five Exits Look Like?
Go in stages and fix the main constraint at each one. Moving from one project to five is mostly a cash and systems problem, not a deal-finding problem.
| Stage | Concurrent projects | Main constraint | What to fix |
|---|---|---|---|
| First | 1 | Float on one draw | Cash for phase one |
| Early | 2 | Draw timing overlap | Stagger starts |
| Middle | 3 | Reserve sizing | Portfolio float model |
| Scaling | 4 to 5 | Inspection bottlenecks | Standard draw package |
| Established | 5+ | Exit timing | Refinance or sale plan |
Concurrent projects and annual exits are not the same number. An investor can complete five exits in a year with three projects running at a time, if each one clears on schedule. Fewer concurrent projects also means a smaller float.
Where Do the General Rules Break?
A few edge cases change the plan.
Advance draws. Some lenders offer forward draws that pay before the work is done. These are uncommon and generally limited to specific situations, and they carry more risk for the lender, which tends to show up in terms. Do not build a portfolio plan around one.
Budget overruns. The holdback is fixed. If a job costs more than the approved budget, the difference comes from the investor, and a new change order does not mean new lender money. Overruns are the failure mode that scales worst, because they hit several projects at once when a cost category moves.
Stored materials. If the lender pays only for installed work, bulk purchases are cash you carry. Order in line with the draw schedule.
Hard money is not cash. A hard money offer does not work like a cash offer. Claiming cash leaves the contract with no financing contingency, and earnest money can be lost if the lender does not fund.
Property type. The collateral is non-owner-occupied residential, one to four units. Manufactured homes, log homes, and barndominiums are not offered through the DSCR programs on the exit side.
FHA rehab loans. The FHA 203(k) program has its own draw form, and Yieldstack’s explainer uses it as a contrast to private lender draws. It is an owner-occupant government program, so it is not a model for how hard money draws behave.
Key Terms Defined
Holdback: The part of the loan set aside for rehab and released in stages as work is verified.
Draw: A single release of holdback funds against completed, verified work.
Reimbursement float: The cash an investor carries between paying for work and receiving the draw.
Draw package: The invoices, photos, lien waivers, and line-item list submitted with a draw request.
Change order: A formal change to the approved scope or budget, which can delay the next draw.
Project cost leverage: The loan amount measured against total project cost, not against the after-repair value alone.
Frequently Asked Questions
Do hard money lenders pay for the rehab upfront?
Not in most cases. The lender holds the rehab money and releases it in draws after work is finished and verified, so the investor or contractor pays first. The headline of 100% of the rehab budget describes how much can be reimbursed, not when it arrives.
Can I get draws on several properties at the same time?
Yes, each property carries its own loan, its own budget, and its own draw schedule. The hard part is the combined float, since every project has unreimbursed work in flight. Stagger the starts so the heaviest phases do not overlap.
How much cash should I keep in reserve?
Size it from your draw schedules, not from a fixed number. Add up the unreimbursed work across every project at the busiest point on the calendar, then add carrying costs and room for contingency. Build the number around the slow case, since late draws and overruns are what drain a reserve.
What usually delays a draw?
Missing lien waivers, incomplete photos, work that falls outside the approved scope, and a backed-up inspection are the common causes. A change order that has not been approved stalls the next release. A standard draw package and a weekly tracker catch most of these before they cost money.
Can I reach 100% financing on a flip?
Not on the purchase. There is no true 100% purchase program. Fix-and-flip leverage runs up to 93% of project cost at 5 or more completed projects, and every tier is capped at 75% of after-repair value, with all figures varying by lender, property, and experience.
Next Steps
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, Lendmire arranges financing through select lenders in its wholesale network across 41 markets, including Washington, D.C.
For current guidelines and terms, see Lendmire’s hard money loan programs page.
About Lendmire
A DSCR-focused mortgage broker, Lendmire (NMLS# 2371349) places investor financing across 41 markets — 40 states plus Washington, D.C. — with DSCR eligibility generally reviewed by the lender on property cash flow instead of tax returns, subject to lender guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in 2025 and 2026.
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References
1. Yieldstack: Fix-and-flip loan draw schedule explainer
2. Sellers Little Helpers: The contractor deposit problem in fix-and-flip
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Should 10+ Doors in LLCs Move to a Blanket DSCR Loan? · Should a W-2 Investor Scaling Rentals Use Seller Carry With DSCR? · How to Document Gap Funding so a DSCR Lender Accepts the Source
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.