Prepared by Pillar Private Lending
Investor Resources
Cash needed is more than the down payment
Investors often underestimate flip liquidity by focusing on purchase equity alone. A workable cash plan usually covers the equity contribution, closing costs, any unreimbursed rehab spend between draws, carrying costs, and a contingency for delays or overruns.
Program leverage, draw structure, and experience can change how much cash must stay in the deal—and how quickly it returns at sale or refinance. Requirements vary by lender and project.
Build the cash stack component by component
Start with acquisition equity required by the loan structure. Add buyer closing costs, prepaid items, and any assignment or option costs already spent. Then estimate rehab cash timing: even when a lender funds draws, soft costs, deposits, and work completed before the first draw may sit on the investor’s balance sheet.
Carrying costs—interest (if not fully reserved), taxes, insurance, utilities, and HOA—continue until exit. Sale costs or refinance costs belong in the same plan so exit friction is not a surprise.
| Category | What it covers | Planning question |
|---|---|---|
| Acquisition equity | Down payment / required skin in the deal | What leverage does this program allow? |
| Closing & prepaid | Title, escrow, lender fees, taxes/insurance prepaid | What is due at funding vs. later? |
| Rehab timing gap | Costs before draws or outside the budget | How are draws inspected and released? |
| Carry & contingency | Interest, taxes, insurance, overrun buffer | What if the project slips 30–60 days? |
Leverage, ARV, and why “max LTV” is not a cash plan
Loan sizing may reference purchase price, cost basis, after-repair value, or a combination depending on the program. A higher advertised leverage figure does not automatically mean lower cash need if fees, reserves, or unreimbursed rehab expand.
ARV supports exit pricing and sometimes loan sizing; it does not pay contractors next week. Separate valuation assumptions from liquidity timing.
Illustrative cash-need walkthrough
The following example is illustrative for teaching the cash stack. It is not a Pillar quote or commitment.
Worked example
Illustrative flip liquidity plan
Assume a $300,000 purchase, $60,000 rehab budget, and an investor equity contribution of 20% of purchase plus full closing costs paid in cash. Rehab is lender-funded by draws after inspection, with the first draw delayed until work begins.
- 1Acquisition equity: 20% of $300,000 = $60,000 (illustrative structure only)
- 2Buyer closing costs and prepaid items: model a separate cash line rather than burying them in ‘misc.’
- 3Initial rehab float: materials deposit and early labor before the first draw
- 4Carry: taxes, insurance, utilities, and any borrower-paid interest during the hold
- 5Contingency: buffer for scope gaps, price increases, and a longer marketing period
Total cash needed often exceeds acquisition equity alone once closing costs, early rehab float, carry, and contingency are included.
Draw timing creates hidden cash demand
Draw schedules are not universal. Some projects reimburse completed work after inspection; others use staged budgets with retainage. Slow inspections, incomplete invoices, or rejected line items can force the investor to advance funds temporarily.
Plan liquidity for the gap between paying vendors and receiving draw proceeds. A project can be “fully financed” on paper and still strain cash in month two.
- Confirm what percentage of rehab may be financed
- Ask how inspections, photos, and invoices trigger releases
- Identify soft costs that may not be draw-eligible
- Keep a contingency outside optimistic contractor timelines
Cash through sale or refinance
At sale, net proceeds must clear the loan payoff, selling costs, and any vendor retainage before equity returns. At refinance into a rental hold, cash-out or rate-and-term proceeds depend on value, seasoning, coverage, and program rules that may differ from the short-term loan.
A BRRRR plan should model two cash events: funding the flip/bridge phase, then satisfying permanent-loan closing requirements—including reserves that may not recycle dollar-for-dollar from the short-term loan.
Pressure-test the deal before you bid
Use the fix-and-flip calculator to connect purchase, rehab, ARV, profit, and capital needs. Then overlay a month-by-month cash calendar for draws, interest, and listing delays.
Investors who underwrite profit without underwriting liquidity often discover the shortfall after earnest money is hard.
Soft costs that often sit outside draws
Architectural or engineering fees, permits, utility deposits, dumpster and temporary facilities, staging, and certain contractor deposits may be required before meaningful hard-cost draws begin. Depending on the program, some of those items may be only partially reimbursable—or not draw-eligible at all.
Build a soft-cost schedule with dates and funding sources. A rehab budget that looks fully financed on the term sheet can still leave the investor advancing cash for items that settle outside the draw process.
- Permit and inspection fee timing
- Utility hookups, deposits, and temporary power
- Design, engineering, or specialty consultant invoices
- Material deposits that precede installed-and-inspected work
Earnest money, due diligence, and pre-close cash
Cash already spent on earnest money, option fees, inspections, appraisals ordered early, and travel for contractor walkthroughs is part of total project liquidity even when it does not appear as a line on the loan settlement statement in the same way as down payment.
If a deal dies or financing is delayed, some of that cash may be at risk. Underwrite both the cash required to close a funded deal and the cash at risk before funding so bidding pace matches liquidity reality.
Build a hold-cost calendar through exit
Taxes, insurance, utilities, HOA or condo dues, landscaping, and security can continue for the full hold—including listing and escrow periods after rehab ends. If interest is borrower-paid rather than fully reserved, rising or ongoing interest joins that calendar.
Extend the model past contractor completion to include days on market, buyer inspection contingencies, and a refinance timeline if the exit is a rental hold. Liquidity plans that stop at “rehab done” often understate cash still needed before payoff.
This guide is educational and is not individualized financial, legal, tax, or investment advice. Exact requirements and terms vary by lender, property, borrower, and transaction.
Discuss the actual transaction
Move from research to a deal-specific review
Educational examples are useful for planning. Actual eligibility, structure, and terms depend on the property, borrower, lender, and transaction.