Understanding Draw Fees Before Starting a House Flip

 

A renovation budget should account for more than materials, labour, permits, and unexpected repairs. Financing-related charges can also affect the amount available to pay contractors. Investors considering fix and flip loans should understand whether their lender charges fees for draw inspections or fund transfers. Although individual fees may appear small compared with the overall project budget, repeated deductions can influence cash flow over several renovation stages.

A draw is generally calculated using the project's verified completion percentage and the renovation funds held back for future releases, with previously released amounts accounted for according to the loan's calculation method. The amount deposited into the borrower's account may then be reduced by applicable fees. This distinction between the calculated draw and the net payment is important when arranging contractor invoices. If a contractor expects a particular payment, the investor should make sure the amount available after deductions will cover the obligation.

The exact charges depend on the lender and the loan agreement. Under the process described by InstaLend, each draw includes a $270 inspection fee and a $30 wire transfer fee, deducted from the draw amount. These figures should not be assumed to apply to every lender or every fix-and-flip financing programme. Investors should confirm the current fees, how frequently they apply, and whether other charges are listed in their loan documents. A simple cash-flow worksheet can help track expected draws, deductions, outstanding invoices, and the reserve needed for upcoming work.

Selecting a fix and flip lender therefore requires reviewing the complete financing structure rather than focusing only on the advertised rate. Ask for a clear explanation of inspection costs, wire fees, draw calculations, and any conditions that may affect release timing. InstaLend outlines its inspection procedures and draw-related charges in its guide to renovation loan draw releases. Reviewing these details before closing can help investors prepare a more realistic project budget and avoid treating the gross draw amount as money that will necessarily arrive in full.