Hard Money Draws on a reimbursement basis

[Jose Bordes]

I recently financed a deal using Hard Money with the typical LTV 80% and they cover 100% of rehab. My question is "Is it standard practice that the Draws are on a reimbursement basis?" This totally messed up my calculations because now I have to come up with the rehab costs even though they say they will reimburse.

[Dave Schmidt]

@Jose Bordes Although most lenders fund construction in "arrears" or after the work is complete, it does not necessarily mean the investor has paid for the work yet. In many parts of the construction business work is billed on a "net 30" schedule, meaning you have 30 days to pay the invoice. 

Also, even if you do pay for the work out of pocket immediately, depending on the length of the project many investors/developers want their money back to invest back into another part of their business such as lining up the next project.

Lastly, getting your draws should not be too difficult. If your lender is resistant and you are not able to get the draws in a timely manner then there is a problem. A true local hard money lender should be able to disburse funds in a matter of a few days.