The Quick Read: Yes, hard money can pay for rehab on a flip. It does so through draws instead of cash at closing: the lender holds the renovation budget in a holdback and releases it in stages as work is finished and verified. The catch is cash flow, because you usually pay for each phase first and get reimbursed after.
- The loan splits in two. The purchase portion funds at closing, and the rehab portion sits in a holdback.
- Up to 100% of the rehab budget can fund through draws against completed work. That is a rehab-budget figure, not a purchase loan-to-value.
- You front the early costs, so your working capital matters as much as the loan terms.
- Draw rules live in your loan agreement. Read the draw section before you sign.
- Leverage, credit, and draw terms vary by lender, property, and experience, and nothing here is a commitment to lend.
How the Loan Splits at Closing
A hard money rehab loan has two parts. One part buys the property at closing. The other part is a budget the lender keeps in reserve and pays out as the work gets done.
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.
Lenders do it this way for a simple reason. They size the loan against the finished value of the house. If the borrower took all the rehab money on day one and spent it elsewhere, the lender would hold a half-finished property worth far less than the loan. The holdback keeps the money tied to the work.
Here is how the pieces look across the wholesale network Lendmire works with. These are typical ranges, and they vary by lender, property, and experience.
| Piece of the loan | Typical treatment |
|---|---|
| Purchase and rehab, 5+ completed projects | Up to 93% of project cost |
| Purchase and rehab, 2+ completed projects | Up to 90% of project cost |
| Purchase and rehab, fewer than 2 projects | Up to 85% of project cost |
| Cap on every tier | 75% of after-repair value |
| Rehab budget | Up to 100% funds in draws |
| Bridge purchase, no rehab | Up to 80% of purchase price |
Read the table carefully. The percentages describe project cost, meaning purchase plus rehab, not a plain purchase LTV. LTV means loan-to-value, the loan as a share of what the property is worth. The 75% cap on after-repair value is the ceiling that usually bites first, so the real loan is whichever number is lower.
The 100% figure applies only to the rehab budget, and only as work is completed. That is not a 100% purchase loan. No true 100% purchase program exists, and the top leverage tier is reserved for experienced investors.
What Happens in a Draw, Step by Step
A draw is a reimbursement. You do the work, prove it, and the lender releases the matching money.
1. Budget approval. You submit a line-item scope of work and budget. The lender reviews it, approves it, and sets the rehab portion aside at closing.
2. Closing. The purchase portion funds. Confirm whether your lender funds the holdback itself or expects you to bring rehab money that it then holds. Those are different structures.
3. You front the first phase. The contractor needs money for materials and labor before the first milestone. Lenders generally do not cover that start-up cost.
4. Draw request. You send invoices or receipts, an updated budget, photos, and lien waivers.
5. Verification. An inspector, a video walk-through, or a photo review confirms the work exists.
6. Release. The lender sends the approved amount. Many lenders keep back a small slice called retainage until the end.
7. Repeat. You run the loop again for each phase.
8. Final draw. This one usually ties to final lien waivers and a final inspection.
Four things usually decide whether a draw gets paid. The work must be installed and complete. The permit status must be in order. The lien paperwork must match the amounts and through-dates. And the budget line items must match the work actually done.
Why Lien Waivers Matter
A lien waiver is a signed statement from a contractor or supplier that they have been paid and give up lien rights for that amount. Lenders collect them with draw requests. Waivers are frequently exchanged during draw requests and progress payments, and a final waiver covers all remaining rights, including retainage.
There are four common waiver types: conditional progress, unconditional progress, conditional final, and unconditional final. A conditional waiver takes effect only after the payment clears. An unconditional waiver takes effect when signed, so sign it only after the money has landed.
State law governs what makes a waiver valid. A waiver that does not match the amount or the through-date can stall a draw. Treat the paperwork as part of the job, not a formality.
A Draw-by-Draw Example
Here is a modeled flip. These are illustrative assumptions, not market data or a quote. The rehab budget is split into four phases, and the table tracks your cash against the lender’s.
| Stage | Share of rehab budget | Your cash out | Lender releases |
|---|---|---|---|
| Start-up and demo | 25% | Fronted by you | After inspection |
| Rough-in and structure | 30% | Fronted, partly covered by draw 1 | After inspection |
| Finishes | 30% | Fronted, partly covered by draw 2 | After inspection |
| Punch list and final | 15% | Fronted, partly covered by draw 3 | Final draw, after final waivers |
At every stage you spend first and recover after. Your cash exposure peaks in the middle of the project, not at the start or the end. Each release also raises the loan balance, because on most files interest is charged only on the money the lender has actually sent. How interest accrues and what draw fees apply vary by lender, so read that clause in your agreement.
Plan the gap, not the average. A common way to size it is to add up what you owe contractors between one release and the next at the busiest point of the job, then keep that much in the bank.
Types of Draw Schedules
Lenders structure releases in different ways. Ask which one your loan uses.
| Schedule type | How a draw is triggered | Watch for |
|---|---|---|
| Milestone | A named stage is finished | Partial completion often releases nothing |
| Percentage of completion | Inspector estimates work done | Inspector’s estimate may differ from yours |
| Line-item | Each budget line is paid when done | Scope changes can leave lines short |
Milestone schedules are the easiest to run. Percentage schedules reward steady progress, but you are relying on an inspector’s judgment. Line-item schedules give the lender the tightest control. Partial completion often means nothing releases until the phase is finished, though exceptions can sometimes be requested.
What Goes Wrong (and How to Plan for It)
Most draw problems are cash problems that started as paperwork problems. These are the common failure points.
- A failed or short inspection. The inspector does not credit work that is not complete or not on the approved budget. Your next draw comes in short.
- Scope changes. You find rot behind a wall after the budget was approved. Unless the lender has agreed to the change, that repair may not be credited. Build a contingency line into the original budget and ask whether unspent amounts can move between lines.
- Mismatched waivers. Amounts or dates that do not line up with the invoices stall the release.
- Out-of-state access. If you are not nearby, the verification method matters. Ask how inspections happen and who schedules them before you sign.
- Stacked projects. Running two rehabs at once means your cash peaks add together. Your total need is the sum of the peaks, not the average.
- A stalled schedule. Loan terms on this product run 6 to 18 months, interest-only, with no prepayment penalty. If draws drag, your exit date gets squeezed.
In practice, this is where deals are won or lost. Strong rehab files usually show a budget with contingency, a contractor who can float the first phase, and a borrower with real cash held outside the loan. Thin files often stumble on the same point: the investor assumed the lender would fund the first stage.
The Cash You Need Between Draws
Because draws reimburse, your working capital is a second loan requirement you set yourself. The lender sizes the loan. You size the cushion.
Market data shows how much flipping depends on financing. ATTOM’s first-quarter flipping report counted 64,348 flips and found 38.9% were bought with financing. Per The Title Report’s coverage of ATTOM’s full-year data, the average flip took 163 days from purchase to sale.
Margins make delays costly. HousingWire’s flipping report put the typical gross profit at $62,000, a 23.6% margin, the lowest quarterly margin in many years. Every week a draw sits unpaid adds carrying cost to a thinner cushion.
Questions to Ask Before You Sign
Draw rules are contractual. No regulator sets them for private hard money, so the loan agreement, the approved budget, and the lender’s draw policy control. Ask these before you commit:
- Does the lender fund the holdback, or do I deposit rehab money at closing?
- How many draws are allowed, and is there a minimum draw size?
- Who inspects, and is it in person, by video, or by photos?
- What documents does each draw request need?
- Are there draw or inspection fees, and does interest run only on drawn funds?
- Is retainage held back, and when is it released?
- What are the rules for the final draw?
- How are scope changes approved, and can unspent lines move?
- Can I self-manage, or must a licensed contractor run the job?
A lender who answers these plainly is usually easier to work with once the project is moving.
Not Every Hard Money Loan Is a Rehab Loan
Some hard money loans are acquisition-focused. A straight bridge loan with no rehab component funds a purchase, up to 80% of the purchase price on the network’s typical program. It carries no holdback, so you pay for repairs from your own cash. If you plan renovations, make sure the product you are quoted includes a rehab budget.
For eligibility, hard money here is for non-owner-occupied residential property, 1 to 4 units, with ground-up construction up to 10 units. Credit typically needs a 620 minimum, with added conditions below 660. First-time investors can qualify at the lower leverage tiers. Underwriting stays asset-based: the property, the plan, and the exit. Loan amounts run up to $5,000,000, and larger by exception. All of this varies by lender, property, and experience.
What Happens After the Last Draw
The loan is a bridge. It is interest-only for 6 to 18 months, so the exit has to be ready before the final draw.
The exit is either a sale or a refinance. Many investors who plan to keep the property refinance out of hard money into long-term rental financing once it is stabilized. Lendmire brokers that path through select lenders in its network. The complete DSCR loans guide explains how that rental loan is reviewed. DSCR means debt service coverage ratio, a test of whether the property’s rent covers its full monthly payment.
Keep your draw records. Invoices, waivers, inspection reports, and permits help show the work was done. They can also support a later appraisal. Improvements may support a higher appraised value, depending on comps and underwriter review. Tax treatment varies; consult a qualified professional.
Key Terms Defined
Draw: a release of rehab money from the lender after you finish and document a phase of work.
Holdback: the part of the loan the lender keeps in reserve and pays out through draws.
Scope of work: the line-item list of repairs and costs the lender approves before closing.
Lien waiver: a signed statement that a contractor or supplier has been paid and gives up lien rights for that amount.
Retainage: a small slice of each draw the lender holds back until the work is complete.
Loan-to-cost: the loan as a share of purchase price plus rehab budget.
After-repair value (ARV): the estimated worth of the property once the renovation is finished.
Frequently Asked Questions
Does hard money pay the rehab money at closing?
Usually not. The purchase portion funds at closing, and the rehab portion is held back and released after verified work. Some structures ask you to bring rehab funds to closing, which the lender then holds for draws. Ask which one applies to your loan.
Who pays the contractor first?
You do, in most cases. Draws reimburse completed work, so you front each phase and request payment after. A lender advancing a small portion for long-lead items is uncommon, so plan to cover early costs yourself.
Do I need a licensed contractor?
It depends on the lender, the scope, and your experience. Some lenders allow experienced investors to self-manage. Others want a licensed contractor on larger scopes. Confirm this before you submit the budget, because it can affect draw approval.
What if the work is only partly finished when I request a draw?
Partial completion often means nothing releases until the phase is done. Exceptions can sometimes be requested, but you should not count on them. Break the budget into phases small enough that you can finish each one cleanly.
Is a hard money loan the same as a fix and flip loan?
No. A fix and flip loan includes a rehab budget released through draws. A straight hard money bridge loan funds a purchase and nothing more. Both are short-term, interest-only products, but only the first helps with renovation costs.
If You Are Planning a Rehab
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. The call number is 828-256-2183.
For current guidelines and terms, see Lendmire’s DSCR loan programs page.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker that arranges hard money and DSCR investor financing through select lenders in its wholesale network, in 41 markets, including Washington, D.C. Lendmire is not a lender, and every file is reviewed by the lender under its own guidelines. Nothing here is a commitment to lend. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Getbuilt: Conditional and Unconditional Lien Waivers
3. ATTOM: Home Flipping Trends by State
4. thetitlereport.com: Attom Homes Flipped by Investors Accounted for
5. HousingWire: Home Flipping Report
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Buy a House Through an LLC With a Hard Money Loan? · Can You Use Hard Money to Flip a Triplex or Fourplex? · Can You Buy a Flip in an LLC With a Hard Money Loan?
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.