If you're using hard money, you already know the lender holds your rehab funds in escrow and releases them in draws as work gets completed. Here's what most investors miss: your contractor payment structure should match your lender's draw process. When it does, your out-of-pocket shrinks dramatically.
How Hard Money Rehab Draws Work
Most hard money lenders structure rehab funding like this:
- You close on the property. Purchase price funded by the lender. Rehab funds held in escrow.
- Work gets done.
- You submit a draw request with documentation (photos, invoices, proof of completion).
- Lender sends an inspector or reviews documentation.
- Lender releases funds for the verified completed work.
- Repeat until rehab is complete.
The key word is "verified completed work." Lenders don't release money for promises. They release money for work they can see.
Why Weekly Draws Match Perfectly
Most hard money lenders process draws every 1-2 weeks. Weekly contractor draws align with this cadence:
- Friday: Your contractor submits the weekly draw request with photos and completion details
- Monday: You submit that same documentation to your lender
- Wednesday-Friday: Lender reviews and releases funds
- Following Friday: You pay the contractor from the released funds
When the cycles sync, your out-of-pocket on the rehab stays minimal. The lender's money funds the work, and your contractor gets paid weekly.
The Deposit Model Breaks This
With a deposit-based contractor, the math doesn't work:
- You need $15,000 for the contractor deposit on Day 1
- The lender won't release $15,000 for work that hasn't been done
- You front the $15,000 from your own pocket
- That's $15,000 you have to carry until enough work is completed for the lender to reimburse it
With weekly draws, you never front a large amount. Your first draw request to the lender covers one weekly draw after Week 1. That's your maximum out-of-pocket before the lender release cycle catches up.
Lender Documentation Requirements
Hard money lenders typically want:
- Photos of completed work (before and after for each draw period)
- Invoices or draw requests from the contractor
- A comparison to the original scope of work
- Sometimes a third-party inspection
At Seller's Little Helpers, our weekly draw packages include all of this. We produce it every Friday as part of the standard process. You can forward it directly to your lender.
We've worked with enough hard money lenders to know what they need. Our documentation format is designed to get your draws approved fast.
The Numbers on a Real Deal
$200K purchase price. $55K rehab budget. Hard money lender funds 90% of purchase and 100% of rehab in escrow.
Deposit model:
- Contractor wants $16,500 deposit (30%)
- Lender won't cover it until work is done
- You front $16,500 from your own cash
- You carry that $16,500 for 3-4 weeks until enough work is complete for a lender draw
- Your capital is tied up
Weekly draw model: Example at a $4,000 weekly draw (the minimum; larger projects have larger draws):
- Week 1: $4,000 draw. You submit to lender.
- Week 2: Lender releases Week 1 funds ($4,000). You pay Week 2 draw ($4,000) from your pocket while waiting for the release cycle.
- Week 3 onward: Lender releases are funding contractor draws. Your out-of-pocket stays around one to two weekly draws at any time.
You just freed up $8,000-$12,000 in capital compared to the deposit model. On multiple simultaneous projects, that adds up fast.
What to Tell Your Lender
Most hard money lenders will work with weekly draws. Some prefer it because they can verify progress more frequently. When you set up the loan, tell your lender:
- "My contractor works on weekly draws, no big upfront deposit"
- "I'll submit draw requests weekly with photo documentation"
- "Each draw covers one week of verified completed labor"
This is usually an easy conversation. Lenders like frequent verification. It protects their collateral.