You’ve just closed on a house and you’re ready to take your project from tear down to a model home. But let’s be honest, whether you’re a first time house flipper or a seasoned pro, rehabbing a house from start to finish and executing the right exit strategy can be intimidating and time consuming.
In this blog, we’ll discuss one of the first keys to a successful fix and flip project: the draw process. We’ll identify key steps in the draw process and how you can confidently continue with your fix and flip project to get it to the best after repair value, or ARV.
What’s the Draw Process & Why it Matters to Home Renovations
Simply put, the draw process is an easier way of doing business that allows you to get the money you need to purchase a house and renovate it, aka fix and flip. The draw process helps you quickly get out of a bridge loan and into a longer-term, fixed-rate loan.
Related Content: What Type of Loan is Best for Home Improvements?
How the Draw Process Works in 3 Easy Steps
Once you find a hard money lender, you’ll pay a set fee per draw. You can use it as little or as much as you want. For example, if you want to draw once a week, you can! If you want to draw once a day, you can! The draw process gives you the freedom you need to get your renovation project going smoothly.
With a draw process in place, you quickly get the money you need to update your fixer upper. Your lender should also be able to provide you with a list of trusted contractors to get your projects done.
Step #1 in the Draw Process
The first step of the draw process is simple enough: reach out to your loan originator and request a draw inspection. You should not need to send over any invoices or receipts.
Step #2 in the Draw Process
The second step in the draw process is to set up a draw schedule. This gives you the ability to call in as many or as few draws as you need. The reimbursement is paid out for work completed on the rehab project at the time the inspection occurs.
Step #3 in the Draw Process
Within one business day, an inspector should reach out to you to schedule an inspection at your fix and flip property and evaluate the work done based on the rehab budget submitted by the borrower prior to the appraisal.
Keep in mind that the draw reimbursement is for work that is completed and not for materials ordered. Additionally, items must be installed to receive credit for the reimbursement.
When you use the right lender, reports are typically turned in one business day after the scheduled inspection. Depending on when received by your lender, funds may even go out the same day!
The draw inspection fee is then netted out from your reimbursement wire, so there are no further out-of-pocket costs for an inspection.
Looking for inspiration? Check out this article: Fastest Residential Property Rehabs
Get Started with the Draw Process – The First Step for Successful Fix and Flip Projects
Now that you know how the draw process works, get started on your next fix and flip project today! Park Place Finance offers up to 100% financing on rehab projects and we keep the process simple and quick, so you never have to worry about wasting time and money. Better yet, our draw inspection is only $150 and we’ll connect you with trusted contractors so you can renovate your house confidently and efficiently.
We understand that getting a hard money loan can be challenging without the right advice, which is why our team is available to answer your most pressing questions before you get started. Contact one of our loan officers to get started with your next fix and flip project! The process is easier than you’d think with help from Park Place.