Ask an investor what a rehab costs and you'll get the construction budget. Ask how much cash it takes and the honest answer is usually more, and it depends less on the budget than on timing: when money leaves your account, and when it comes back.
That timing is why two investors with the same deal can need very different amounts of cash. Here's how to plan it.
The five places your cash goes
1. Closing cash. Your down payment, closing costs, and any points or fees on the loan. With a purchase loan, this is the biggest single check, and it's gone on day one.
2. The reimbursement gap. Most rehab lenders fund the construction budget in draws, released after work is done and documented. That means you pay the contractor first and get reimbursed later. The gap between the two is cash you carry, and it's where payment structure matters most (more below). See how lender draws and contractor draws fit together.
3. Contractor deposits. Anything you pay before work starts. Lenders don't usually reimburse a deposit until there's completed work to show for it, so a deposit is cash you front out of pocket.
4. Holding costs. Interest, taxes, insurance, and utilities, every month until you sell or refinance. A delay adds to this line and nothing else. How slow contractors inflate holding costs.
5. Reserves. Contingency for what's behind the walls, plus a cushion for a longer timeline. This is money you hope not to spend, and it's the line investors most often skip.
Where the peak comes from
Your cash need isn't spread evenly. It peaks early: you've paid closing costs, the contractor wants money to start, and the lender hasn't reimbursed anything yet. That peak is the number that decides whether you can do the deal, and whether you can do the next one at the same time.
The biggest lever on the peak is the contractor's payment schedule.
A worked example
This is a hypothetical rehab to show the mechanics, not a market figure or a quote.
- Rehab contract: $80,000, labor paid to the contractor; materials bought separately.
- Your lender funds the rehab budget in draws, reimbursing completed work. Assume reimbursement arrives about two weeks after the work it covers.
With a 30% deposit: you pay $24,000 before work starts. The lender won't reimburse it until there's $24,000 of completed work to show, which on this job could take weeks. Your peak rehab cash is at least $24,000, on top of closing.
With weekly labor draws: say the draw is $5,000 a week (on a real project, the draw is sized to its contract, scope, schedule, and labor). You pay the first draw to reserve your start date, then weekly as work progresses. With a two-week reimbursement lag, you're carrying roughly two to three weeks of draws at any time: about $10,000 to $15,000. Same contract, same lender, lower peak.
Run three of these rehabs at once and the difference multiplies: $72,000 in deposits before any work, versus a few weeks of draws on each job.
How to lower the cash you need
- Keep upfront payments tied to something real. Materials, permits, or mobilization, not labor that hasn't happened. See how much to pay a contractor upfront.
- Line the contractor's schedule up with the lender's. Ask your lender how often they release draws and how long an inspection takes, then ask your contractor for a schedule that fits.
- Buy materials as each phase needs them, not all at once at the start.
- Keep the timeline honest. A realistic schedule costs less than an optimistic one that slips, because every extra month is holding cost. How long a full rehab really takes.
- Budget contingency on purpose, and more of it on older buildings.
Planning several rehabs at once
The investors who scale aren't always the ones with the most cash. They're often the ones whose cash isn't sitting in contractors' accounts. When each project's payments track its own progress, the same capital can cover the next acquisition, the next project's closing, or a reserve that lets you say yes to a good deal. Managing multiple rehabs at once.
How we fit in
At Seller's Little Helpers, there's no 30–50% labor deposit. Under Pay As We Build™, your first weekly labor draw reserves your start date, and after that you pay weekly while work is in progress, with each draw credited toward your contracted price. Draws are sized to each project's contract, scope, schedule, and labor requirements, with a $4,000 weekly minimum. You buy materials directly from suppliers at cost. It's how we schedule payment for our own labor, not financing: the project price is the same either way, and what changes is when your money leaves your hands.