How much cash your fix-and-flip really needs before the first draw

Closing is not the liquidity finish line

A common mistake is calculating cash as purchase price minus loan amount and treating the remainder as the project requirement. The real number is a sources-and-uses schedule that follows cash through closing, demolition, inspections, reimbursements, monthly carry, and resale.

Many rehab structures reimburse completed work through draws. That means the investor may need to fund labor and materials before the lender releases the next tranche. A profitable project can still stall if the cash timing is wrong.

Build the cash stack

At minimum, model each category separately rather than hiding everything inside a round contingency number.

• Equity required for acquisition and any gap between eligible cost and the contract price.
• Lender, title, appraisal, inspection, legal, insurance, and transfer costs due at or before closing.
• Rehab cash required before the first reimbursement, including deposits and long-lead materials.
• Interest, taxes, utilities, insurance, security, lawn or snow care, and association costs during the hold.
• A real construction contingency for hidden conditions, change orders, theft, rework, and price movement.
• A liquidity reserve that is not already committed to this project or another closing.

Draw speed is part of the loan price

Two loans with similar rates can produce very different project economics if one draw process is predictable and the other is slow or documentation-heavy. Ask how requests are submitted, what evidence is required, when inspections occur, whether draws reimburse or advance, and how quickly funds typically release after approval.

Then underwrite a slower version. If one delayed draw stops the job, the capital plan is too thin.

Protect the exit

The contingency is not your profit. Preserve enough liquidity to finish cleanly, carry the property through a longer listing period, and respond to buyer or appraisal issues without accepting a distressed exit.