The Quick Read: The cash a rehabber fronts is the closing gap on the purchase, plus fees and prepaid insurance, plus the working capital to pay contractors before each draw reimburses them, plus carry and a contingency cushion. The lender does not hand over the rehab money at closing. It releases it in draws after completed work is inspected.
- The closing gap is fixed and can be calculated before you commit.
- The rehab float is the timing gap between paying contractors and getting reimbursed. It varies with the scope of work, the draw schedule, and how quickly inspections and reimbursements are processed, so plan for it as a cushion rather than a fixed amount.
- Carry (interest, taxes, insurance, utilities) and overruns are sunk cash that no draw returns.
- Hard money loan-to-cost tops out at 93% of project cost for the most experienced borrowers, and every tier is capped at 75% of after-repair value, so the cap often decides the number.
- The better measure of BRRRR efficiency is cash left in the deal after the refinance, not cash at closing.
All program figures here vary by lender, property, and experience, and nothing here is a commitment to lend.
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What Counts as Cash Fronted
A hard money rehab loan has two pieces: an advance at closing for the purchase, and a holdback for the rehab. Your cash covers everything the loan does not. The formula is simple: the closing gap, plus costs at closing, plus the rehab float, plus carry, plus a contingency reserve.
Each bucket behaves differently.
1. Closing gap. This is the purchase price minus the acquisition advance. It is known on day one.
2. Costs at closing. These include origination charges, title and settlement items, and prepaid builder’s-risk insurance. Also known on day one.
3. Rehab float. This is the cash you spend on contractors before the lender reimburses you. It is recycled, not spent, but it has to exist.
4. Carry. This covers interest on drawn funds, taxes, insurance, and utilities while the property is vacant. These dollars are spent and do not come back.
5. Contingency. Overruns and surprises. Draws reimburse the approved budget, so overrun dollars come out of your pocket.
Only the float comes back through reimbursement. The rest is permanent until the refinance, and the refinance may not return all of it.
How Draws Create the Float
Rehab money sits in a lender-controlled holdback and comes out in stages, tied to work already finished and paid for. An investor-education explainer on draw schedules describes the same sequence: the draw packet goes in, an inspector verifies the work, and funds are released against it.
The practical sequence runs like this:
1. The borrower pays the contractor.
2. The borrower submits a draw request with invoices and line items.
3. The lender sends an inspector to confirm the work.
4. Approved funds are wired, sometimes minus a retained portion until completion.
A BiggerPockets thread on reimbursement-based draws shows an investor surprised that draws reimburse work even when the lender covers 100% of the rehab budget. A lender replying there says reimbursement is almost always how it works, and that partly finished work is typically paid in proportion. Half-done line item, half the money.
So the phrase “up to 100% of the rehab budget funds in draws” is a statement about what is reimbursable. It is not a statement that you bring nothing. On most files, the 100% figure is a rehab-budget figure only. It is never a purchase LTV, and there is no true 100% purchase program.
Draw count and fees move your exposure
Fewer, larger draws cost less in fees but demand a bigger float, because more work is paid for before any reimbursement. More, smaller draws shrink the float but add per-draw costs. One poster in a BiggerPockets thread on hard money basics puts the inspection plus wire fee at roughly $150 to $250 per draw. That is one anecdote, not a schedule, and fee policies differ from lender to lender. Another thread on draw fees has a poster advising investors to self-fund what they can and limit draws, because fees become annoying past three.
Some lenders also retain a slice of each draw until the work is complete. Ask for the retention percentage before you size the float.
A Worked Example in Index Points
The numbers below are modeled, not market data. Set the purchase price at 100 index points, the rehab budget at 30, and the after-repair value at 175. Total project cost is 130. These are index points, not dollars, so the dollar math stays with the calculator.
The leverage tiers on the hard money side are tied to completed projects. Fix-and-flip loans run up to 93% of project cost at 5 or more completed projects, 90% at 2 or more, and 85% below 2. Every tier is capped at 75% of after-repair value. These are typical guidelines from the network, and they vary by lender, property, and experience.
| Experience tier | Loan-to-cost | Borrower funds (of 130 cost) | Cap at 75% of ARV (131.25) binds? |
|---|---|---|---|
| Fewer than 2 projects | 85% | 19.5 | No |
| 2+ projects | 90% | 13.0 | No |
| 5+ projects | 93% | 9.1 | No |
In this example the cost test is the smaller number at every tier, so it sets the loan. Drop the after-repair value to 145 and the 75% cap becomes 108.75. That is below even the 85% cost loan of 110.5, so the cap takes over and your closing gap grows. The rule on these files is that the lender uses whichever test produces the smaller loan.
The first row matters for first-time investors. Lower tiers apply to them, and a BiggerPockets thread on BRRRR with no money down has an answer calling no-money-down purchase-plus-rehab financing from a private lender highly unlikely. Credit also matters. A 620 score is the minimum, with additional conditions below 660.
Peak Exposure: When Your Cash Is Highest
Closing is not your peak. Your peak comes mid-rehab, after you have paid for a phase and before its draw lands. A rough picture of cumulative cash out of pocket:
| Stage | What you have paid | What comes back |
|---|---|---|
| Closing | Gap, closing costs, insurance | Nothing |
| First phase of work | Contractor payment for phase one | Nothing yet |
| After first inspection | Phase two starts | Phase one reimbursed |
| Mid-rehab | Carry accumulating | Draws in rolling fashion |
| Completion | Final contractor payment | Final draw, retained portion |
| Refinance | Payoff shortfall, if any | Cash-out proceeds, if any |
The peak equals the closing gap plus costs plus the largest unreimbursed phase, plus carry to date. Plan liquidity for that point, not for the closing statement. A second BiggerPockets thread describes the same cycle: pay, invoice, inspect, get reimbursed. Its answer to why a rehab loan is needed at all is that the loan funds the cash cycle and repays you in rolling fashion.
Carry: The Interest Basis Matters
Carry is interest on drawn funds, taxes, insurance, and utilities. Interest basis is the line most files skip. With Dutch interest, interest accrues on the whole commitment from day one. With non-Dutch interest, it accrues only on funds disbursed. The draw-schedule explainer defines both. On a six-to-eighteen-month interest-only term, the difference can run to thousands. Put the basis in writing before you sign the term sheet.
The terms on this program are interest-only with no prepayment penalty, and there are no multi-year options. Carry is therefore a function of how long the rehab and lease-up take, so a schedule that slips costs you cash directly.
Three Scenarios Side by Side
| Case | Float | Carry | Contingency use | Cash in at peak |
|---|---|---|---|---|
| Lean | Small, few phases | Short | Untouched | Lowest |
| Planned | Moderate, steady draws | On budget | Partly used | Moderate |
| Overrun and delay | Large, slow inspections | Long | Fully used | Highest |
The overrun case is where files go sideways. A Motley Fool explainer on the BRRRR method notes that unexpected repairs or code issues can wipe out a budget. Budget overruns are not reimbursed because they were not in the approved scope. Hold the contingency in cash, separate from the float.
Where the Number Lands After the Refinance
Cash left in the deal after the refinance is the measure that counts. A Nasdaq explainer on the BRRRR method frames the repair budget around leaving enough equity to refinance. That is the right order of operations.
The exit is a DSCR loan. On a DSCR cash-out refinance, the ceiling is 75% LTV, and about 6 months of seasoning from title recording is the common expectation. Coverage of 1.00 is where select programs start, and reserves are commonly around 6 months of PITIA. Both are subject to lender guidelines.
Here is the catch. The hard money cap is 75% of after-repair value, and the DSCR cash-out ceiling is 75% of the appraised value. When the appraisal lands on your after-repair value, the new loan roughly matches what you owe on the bridge. Returned cash is then about what is left after bridge interest, fees, and refinance costs. In the index example at the 93% tier, the refinance at 75% of 175 clears the bridge payoff with a little room. At the 85% tier, there is more room on paper, but you also put more in.
If the appraisal comes in below your assumption, the proceeds can fall short of the payoff, and you bring cash to close the refinance. The DSCR lender sizes on the new appraisal, never on projected value. And the rent has to cover the new loan. A DSCR compares rent to PITIA only, so clearing 1.00 does not mean positive cash flow. Repairs, vacancy, management, and utilities sit outside the calculation.
Seasoning is lender policy, not law. High rent does not shorten it. An early exit may be sized on cost basis instead of appraisal, which cuts what comes back. For the return side in more depth, see Lendmire’s piece How Much a BRRRR Cash-Out Refinance Returns After Hard Money Payoff. For the program path out of the bridge, see the hard money exit refinance page. The complete DSCR loans guide covers the long-term side of the file.
Where the General Rule Breaks
- Bridge without rehab. A bridge purchase with no rehab budget runs up to 80% of purchase price, so the gap is smaller and there is no float.
- Experience tiers. The top tier is reserved for experienced investors. A borrower with fewer than 2 completed projects sits at 85% of project cost.
- Ground-up construction. Up to 90% of cost and 75% of completed value at 3 or more completed projects. The draw mechanics are the same, only larger.
- Over-borrowing on the bridge. A bigger bridge means a bigger refinance payoff, and rent has to carry the new loan. That is a coverage problem, not a leverage problem.
- Property type. Hard money covers non-owner-occupied residential, 1-4 units. Manufactured homes, log homes, and barndominiums are not offered on the DSCR exit.
- Equity above the cap. A larger down payment can lift coverage, but it never erases leverage caps, credit floors, or reserve rules.
Ways to Shrink the Float
Each of these works, and each has a cost.
1. Sequence the scope. Front-load work that gets inspected sooner, so reimbursement comes earlier. The cost is that cheap cosmetic work may come last and the high-dollar phase lands first.
2. Negotiate contractor terms. Smaller deposits and milestone payments match draw timing. The cost is contractor goodwill.
3. Use more, smaller draws. This lowers peak exposure and raises fees, so run both.
4. Self-perform some work. This cuts cash out but adds your time.
5. Hold a cushion in cash. It costs nothing in fees and covers most surprises.
Pre-Closing Liquidity Checklist
Before you commit, line up:
- the closing gap and itemized closing costs
- the interest basis (Dutch or non-Dutch) in the term sheet
- the draw schedule, inspection process, retention percentage, and per-draw fees
- a float sized to your largest single phase
- contingency held in cash
- carry for the full term plus a delay buffer
- the post-refinance coverage test on the finished unit
Tax treatment varies; consult a qualified professional.
Key Terms Defined
Holdback. The rehab portion of the loan, held by the lender and released in draws.
Draw. A release of holdback funds after completed work is inspected.
Dutch interest. Interest that accrues on the full commitment from day one.
Loan-to-cost. The loan as a share of purchase price plus rehab budget.
After-repair value (ARV). The projected value once the rehab is done. It caps the bridge loan at 75%.
Seasoning. The ownership period a lender wants before a cash-out refinance. About 6 months is common.
Frequently Asked Questions
Who pays for the first phase of work?
The borrower does. The lender reimburses completed, inspected work. That is why the float exists even when the rehab is 100% financed in draws.
Does the lender fund the whole rehab at closing?
No. Up to 100% of the rehab budget can be available in draws, but each draw follows finished work. Your closing cash covers the purchase gap and costs only.
What if I go over budget?
Overruns come out of your pocket, because draws reimburse the approved budget. Keep a contingency in cash, separate from the float.
Do I get my down payment back?
Only through the refinance, and only if the appraisal supports it. A DSCR cash-out caps at 75% LTV, so the proceeds depend on value, payoff, and costs. Nothing is guaranteed. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Does first-time experience change the cash I need?
Yes. First-time investors qualify at the lower leverage tiers, which means a larger share of project cost comes from you. Leverage and terms vary by lender, property, and experience.
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.
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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References
1. YieldStack – Fix and Flip Draw Schedules
2. BiggerPockets – Hard Money Draws on a Reimbursement Basis
3. BiggerPockets – Teach Me About Hard Money
4. BiggerPockets – Draw Fees While Rehabbing a House
5. BiggerPockets – Using the BRRRR Method with No Money Down
6. BiggerPockets – Rehab Draws with an HML
8. Nasdaq – BRRRR Method Explainer
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 to Recoup Cash on an All-Cash Purchase After a Low DSCR Appraisal · DSCR Cash-Out Now vs Waiting for Hard Money and Rehab Card Payoff · How Long Each Step of a DSCR Refinance Takes to Pay Off Hard Money
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.