The Quick Read: A hard money draw is a reimbursement for work that has been done and verified, not a cash advance. The lender releases each draw only after it confirms the work exists, matches the approved budget, and is free of unpaid-contractor claims. A remote investor passes those checks with clean paperwork and credible evidence from the site.
- Rehab money is released in stages after verification, not at closing.
- Expect to pay contractors first and be reimbursed afterward.
- The inspection result is usually the deciding signal for release.
- Lien waivers are a common reason a draw package stalls.
- A remote investor needs a local representative and a payment trail that can be documented.
Most remote investors do not get stuck on the construction. They get stuck on the draw package. This article walks through what a lender checks, in order, and how to set up a rehab so each check clears from another state.
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.
What Is a Hard Money Draw?
A draw is a release of rehab funds against completed work. At closing, a hard money lender funds the purchase. The rehab portion sits in a reserve. Under the program parameters Lendmire’s brokerage works with, up to 100% of the rehab budget can fund in draws against completed work, though this varies by lender, property, and experience. That figure is a rehab-budget share, not a purchase leverage number.
The practical effect is a cash gap. The contractor works, the investor pays, the lender verifies, and then the lender reimburses. Investors on a BiggerPockets thread about paying contractors in draws or lump sums describe funding the first phase of the rehab themselves and waiting for reimbursement after inspection. Treat that as typical practice, not a rule. Each lender’s loan agreement controls.
The Draw Cycle, Step by Step
The cycle runs the same way on most files, though the details change by lender.
1. Budget approved at underwriting. The rehab budget is broken into line items. Keep the same line items in every draw. Renumbering them is one of the easiest ways to confuse a draw analyst.
2. Draw schedule set. Schedules are usually tied to milestones such as demolition, rough-in, drywall, and finish work. The number of draws varies by lender. More draws mean more fees and more inspections, so fewer, larger milestones are often easier to manage.
3. Work completed and paid for. The contractor finishes a phase. The investor pays for it. This is the cash gap.
4. Draw request submitted. The packet usually contains a completed draw form, an updated budget tracker, dated photos, invoices, lien waivers, and any permits tied to that phase.
5. Lender document review. A draw analyst checks the packet against the budget. Missing invoices, unsigned waivers, or unclear photos lead to a request for more material before anything is released.
6. Verification. An inspector, a video walk-through, or a photo review confirms the work. More on this below.
7. Release, less any holdback. The lender funds the approved amount. Holdback terms come from the loan agreement, so read that section before closing.
8. Final draw. Final lien waivers, a final inspection, and permit closeout release whatever remains.
The Checks a Lender Runs
Each check answers one question. Knowing the question tells you which document to build.
| Check | What it verifies | Evidence that clears it |
|---|---|---|
| Work exists | The phase was actually done | Dated photos, inspection report |
| Percent complete | How much of the line item is finished | Inspector estimate against budget line |
| Scope and budget match | Work follows the approved plan | Updated budget, change-order paperwork |
| Payment proof | The investor paid the contractor | Invoices, wire or ACH records, cancelled checks |
| Lien waivers | Nobody holds a claim on the property | Signed waivers from contractor, subs, suppliers |
| Permits | Work needing permits has them | Permit copies for that phase |
| Title or lien status | No new claims were recorded | Date-down or lien search on larger draws |
The inspection is the check with the most weight. Built, a construction-inspection vendor, says the inspection result is what decides whether a lender releases funds. Note what the inspector is not doing: the visit confirms progress, not code compliance or a permit sign-off.
Inspection Methods and What They Mean for a Remote Owner
How the lender verifies work changes how much you must manage from a distance.
| Method | How it works | Remote-owner angle |
|---|---|---|
| On-site third-party inspector | Independent person visits and reports | Strongest evidence, but a local scheduling dependency |
| Remote video-guided | A technician walks someone on site through the property by video | Needs a contractor or rep present and willing |
| Self-capture photos | Smartphone photos with location and tamper checks | Lowest friction, not accepted by every lender |
Land Gorilla describes the video-guided and self-capture models. RAZE notes that most lenders require a lender-ordered inspection by someone independent of the borrower, and that remote verification is not suited to every project. Built says geolocated remote photos can replace routine progress checks while full on-site inspections stay standard for milestone draws. Ask which model the lender uses before you close, not after the first draw.
Lien Waivers: Where Most Packages Stall
A lien waiver is a signed document in which a contractor, subcontractor, or supplier gives up the right to record a mechanic’s lien once paid. The Construction Financial Management Association describes four types: conditional and unconditional, each for either a progress payment or a final payment.
For the investor, the safer document while a draw is pending is the conditional waiver, which only takes effect once payment clears. The unconditional waiver comes after funds have actually landed.
One point catches remote investors in particular. The California Contractors State License Board warns that paying your general contractor, or getting a release from that contractor, does not prove the subcontractors and suppliers were paid. California is the example here, and its waiver forms are set by statute. Other states differ, so waiver form and timing rules vary by state. Collect waivers from every tier that touched the phase, not just the general contractor.
How to Run This From Out of State
This is the part most draw explainers skip. You cannot walk the site, so the system has to produce the evidence for you.
Put a local representative on the project. That might be a project manager, a trusted agent, or a contractor with a reporting habit. Their job is access, photos, and a weekly update. Before the first draw, make sure they know the milestones that trigger a release.
Control site access. Inspectors and video technicians need to get in. A lockbox and a written access plan prevent a missed visit from becoming a delayed draw. One investor on a BiggerPockets thread about rehab draw requirements reported a lender that promised an inspector and never sent one. Confirm the process in writing.
Pay contractors on a documentable trail. Wires and ACH leave records. A handed-over check you never see does not. Tie every payment to an invoice and a line item. The same thread discussing lump sums suggests a deposit of 10% or less followed by milestone payments, with a larger share held back for the final stretch as an incentive to finish. Treat that as one practitioner’s approach.
Do not rely on paperwork alone. A desk review cannot show whether work was installed correctly. Photos and a local set of eyes catch defects a spreadsheet cannot.
Keep a communication cadence. A weekly call or message with the representative and contractor, tied to the draw schedule, keeps small problems from stacking up before an inspection.
Why Draws Get Cut, Delayed, or Denied
| Cause | What happens | Fix |
|---|---|---|
| Missing or unsigned waivers | Package pends | Collect conditional waivers with every request |
| Scope change after underwriting | Inspector ignores new work, draw comes in short | Add a contingency line and document changes |
| Unclear photos | Analyst asks for more | Dated, labeled photos of each line item |
| Inspector delay | Release slips | Confirm access and scheduling early |
| Remote or rural location | Longer turnaround | Build extra carry time into the plan |
The scope-change problem deserves attention. A poster on a BiggerPockets thread about a hard money draw question found the lender’s inspector did not credit repairs discovered after the scope of work was submitted, so the next draw came in short. The top reply suggested a contingency line item and shifting unspent amounts between lines. That is a sound habit regardless of lender.
When a draw is cut, treat it as a to-do list. Find the line item that failed, cure the gap, and resubmit with the inspector’s note attached.
Planning the Cash Gap
Delay is expensive. Every extra week adds holding costs, insurance, and taxes. Investors in a BiggerPockets thread on flip stress describe slow draw approval as something that hurts deals. Plan liquidity for the first phase plus a buffer, because the reimbursement lags the spend.
Across Lendmire’s wholesale network, hard money leverage on a fix-and-flip is measured against project cost and after-repair value. It runs up to 93% of project cost at 5+ completed projects, 90% at 2+ completed projects, and 85% with fewer than 2, with every tier capped at 75% of after-repair value. The top tier is reserved for experienced investors, and all of it varies by lender, property, and experience. Those figures do not remove the cash gap on each draw. Plan for it separately.
Draw fees add up too. Budget for a fee per draw and for inspection costs, and ask the lender who pays for them and how they are netted from the release.
Key Terms Defined
Draw: a release of rehab funds after the lender verifies completed work.
Holdback: a portion of funds the lender keeps back until the work or the paperwork is finished.
Lien waiver: a signed release giving up the right to file a mechanic’s lien after payment.
Percent complete: the inspector’s estimate of how much of a budget line item is finished.
Retainage: a share of each payment held until the project ends. Freddie Mac’s multifamily rehab guidance shows retainage on advances, but that is a contrast point only and does not govern hard money loans.
Date-down: an updated title search showing nothing new has been recorded since the last check.
What Happens After the Rehab
Hard money is short-term, interest-only financing. Terms run 6 to 18 months, with no multi-year options, subject to lender guidelines. Many investors who plan to keep the property refinance out into long-term rental financing once it is stabilized, and Lendmire brokers that path. Lendmire’s complete DSCR loans guide covers how that long-term loan is reviewed, and the brokerage’s piece on how an out-of-state investor vets hard money for a DSCR exit covers the lender-selection side. Qualification on the long-term loan rests primarily on property-level rental income covering the payment, subject to lender guidelines.
Frequently Asked Questions
Does the lender fund the rehab upfront?
No. The usual model is reimbursement after verified work. The purchase funds at closing, and the rehab portion releases in draws as phases are completed and checked. Plan to carry early costs yourself.
Can photos replace an inspection?
Sometimes. Some lenders accept geolocated photos or video for routine progress checks, while others insist on an independent on-site inspector, especially for milestone draws. Ask which applies before you close.
Do I still need lien waivers if I pay the general contractor?
Yes. Paying the general contractor does not prove subcontractors and suppliers were paid, and they can still file claims. Collect waivers from every tier that worked on the phase.
What if the inspector ignores work I added mid-project?
The draw can come in short. Document change orders, keep a contingency line, and ask the lender how scope changes are approved so the inspector measures against the current plan.
What does a remote investor need that a local one does not?
A local representative, a site access plan, and a payment trail that can be documented. Those replace the walk-through you cannot do yourself.
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. Nothing here is a commitment to lend, and program terms vary by lender, property, and experience.
For current guidelines and terms, see Lendmire’s hard money loan programs page.
About Lendmire
Lendmire is a DSCR-focused mortgage brokerage, NMLS# 2371349, placing investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed by the lender around a property’s rental income rather than personal income documentation, which fits LLC-held rentals, self-employed investors, and portfolios scaling past conventional financed-property limits. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 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. BiggerPockets: For Flippers, Do You Pay Contractors in Draws or Lump Sums
3. Land Gorilla: Draw Inspections
5. CFMA: Lien Waiver Essentials
6. California CSLB: Waiver and Release Forms
7. BiggerPockets: Private and Hard Money Lender Rehab Draw Requirements
8. BiggerPockets: Hard Money Draw Question
9. BiggerPockets: What Part of a Flip Creates the Most Stress
10. Freddie Mac Multifamily: Moderate Rehab Best Practices
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Is There a Minimum Credit Score for a Hard Money Loan? · Can a First-Time Flipper Get a Hard Money Rehab Budget Increase? · How to Time a Two-Step DSCR Cash-Out After a Hard Money Flip
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.