Understanding Draw Management
Lenders must help borrowers understand the intricacies of draw management for their rehab projects, including how draws are tied to budgets, timelines, inspections, and other common issues.
Draw management is a significant factor in whether a rehab project is successful. The process of draw management starts before the loan is closed, when a repair list and timeline for various phases of the project are agreed upon. Rehab lenders hold the rehab funds for a project in reserve after loan closing. As borrowers complete work on the property according to the agreement, the funds are released.
They key here is the specificity and preciseness of the repair list. The more precise the repair list is, the easier it is for the lender to release funds.
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By Susan Naftulin
Private Lender, The Official Magazine of AAPL
Summer 2023 (Q3), p. 80-84
Published on July 6, 2023