Let me walk you through two versions of the same $60K rehab. Same property. Same scope. Same total cost. Completely different risk profiles.
Version A: The Deposit Model
You hire a contractor for $60K. They want 40% upfront. That's $24,000 before work starts.
- Day 1: You write a $24,000 check
- Weeks 1-3: Work progresses. Seems fine.
- Week 4: Crew doesn't show Monday or Tuesday. Contractor says they had an emergency on another job.
- Week 5: Crew shows 3 out of 5 days. Progress is slow.
- Week 6: You visit the site. Work quality is questionable. The electrical rough-in looks wrong.
- Week 7: Contractor asks for the second milestone payment of $18,000.
You've paid $24,000. Maybe $20,000 of work has actually been completed. The quality is unverified. The timeline is slipping. And the contractor wants another $18,000.
What do you do? Pay and hope it gets better? Hold the payment and risk the contractor walking off? Either way, you've lost leverage because they already have your money.
Version B: The Weekly Draw Model
Same $60K rehab with Seller's Little Helpers. No deposit. $4,000/week for labor. Materials purchased separately.
- Week 1: Crew works full week on demo. Friday, we submit photos and draw request. You review, release $4,000. Total paid: $4,000.
- Week 2: Framing and rough electrical. Photos Friday. You release $4,000. Total: $8,000.
- Week 3: Plumbing rough-in. Photos look right. $4,000 released. Total: $12,000.
- Week 4: Crew has a slow day Tuesday. Only 4 solid days of work. We submit honestly. You adjust the draw to $3,200. Total: $15,200.
- Week 5: Full week of insulation and drywall. $4,000. Total: $19,200.
- Week 6: You flag something in the photos. The tile work doesn't match the scope spec. We hold the draw, fix it, resubmit. No extra cost. Total still $19,200 until it's right.
See the difference? At week 6, you've paid $19,200 for exactly $19,200 worth of verified work. In the deposit model, you paid $24,000 and aren't sure what you got.
The Risk Comparison
| | Deposit Model | Weekly Draw Model | |---|---|---| | Day 1 exposure | $24,000 | $0 | | Week 4 exposure | $24,000 (possibly more) | $16,000 (verified work) | | Quality check frequency | Maybe at milestones | Every Friday | | Response to slow week | Hope it improves | Adjust the draw | | Response to quality issue | Argue over milestone payment | Hold draw until fixed | | Contractor ghosting risk | $24,000 loss | Max $4,000 loss |
Why $4,000/Week Works
The $4,000/week minimum covers a standard rehab crew for a full work week. That typically means:
- 2-4 skilled laborers on site
- Project management and coordination
- Daily documentation
- Materials coordination (if you want us to handle procurement)
On a $60K rehab over 10 weeks:
- Labor draws: $4,000 x 10 = $40,000
- Materials (purchased by you): $20,000
- Total: $60,000
Same number. But you never had more than $4,000 at risk on the labor side, and you bought materials yourself at cost.
The Cash Flow Advantage
For investors running multiple projects, the cash flow difference is massive.
Deposit model on 3 simultaneous projects: $24,000 x 3 = $72,000 in deposits before any work is verified.
Weekly draw model on 3 simultaneous projects: $4,000 x 3 = $12,000 per week, all for verified completed work.
That's $60,000 in capital you keep working instead of sitting in contractor deposits.
What We Hear From Investors
The most common reaction when investors switch to weekly draws: "Why doesn't everyone do this?" The answer is that most contractors prefer the deposit model because it's better for them. The weekly draw model is better for you. We chose your side.
Book a $150 scope visit at sellerslittlehelpers.com - see the weekly draw model in action on your next deal. Call (708) 536-6700 or email info@sellerslittlehelpers.com.