When using hard money for a fix & flip or rehab project, the funds for repairs are often held in a rehab escrow account. These funds aren’t released all at once; they are disbursed gradually as work is completed. Understanding rehab escrow helps you plan better and avoid delays.
What is Rehab Escrow
- Defined: An account where your lender holds the rehab budget until work is completed and verified.
- Draws: Funds are released in stages — after milestones like demo, rough-ins, drywall, and finishes are finished.
- Verification: An inspector or lender representative typically confirms work before each draw.
Why Rehab Escrow Matters
- Protects both parties: Ensures rehab funds are used properly and supports project accountability.
- Controls risk: Tying draws to completed work reduces lender risk and keeps your project structured.
- Aligns financing with value growth: As repairs increase the property’s value, funds are released, preserving equity and profitability.
What Borrowers Should Know
- Initial cash needed: First draw may require some out-of-pocket funds, as funds are released after work completion.
- Clear scope and schedule: Define phases (demo → rough-in → drywall → finishes) before closing.
- Documentation: Keep photos, invoices, and inspections ready for draw approval.
- Plan for contingencies: Delays or unexpected costs can affect draw timing, so include a buffer.
Impact on Your Flip
- Cash-flow management: Predictable disbursements help manage rehab expenses.
- Structured workflow: Ensures each step is completed properly before moving on.
- Protects rehab value: Funds tied to verified work support better exit or refinance outcomes.
CoreLend Financial: Streamlined Rehab Escrow
CoreLend structures rehab escrow and draw schedules to match real-world workflows. We provide clarity, agreed milestones, and support throughout your project.
Contact CoreLend today to plan your rehab, structure draws, and fund your next fix & flip with confidence.
