How does a construction draw work?

[Jonathan Orr]

Hello all. I am in need of some help. I have a few properties that I am rehabbing and one property that I would like to build on.

I have been talking with banks about construction loans with fund controls. However I am a little new at the rehabbing portion and I am wondering about how I go about the draws. From what I can gather is that if I have a rehab project that lets say costs $50k. I have a contractor draw up a bid that has each cost involved (I am right that a contractor does this?) then I provide that to the fund control. However I am learning that I need to come out of pocket again to buy materials and have them installed and then I am reimbursed for this. Is this typical and standard? is this also how a new construction project is?

Basically, if I put $50k into a rehab fund control do I then need an additional $50k to go then be reimbursed?

Any insight or guidance would be helpful. This is in California FYI