What is a Construction Draw Schedule?
A construction draw schedule is a payment plan that disburses renovation or construction funds in installments (called "draws") tied to the completion of specific project milestones. Instead of paying the contractor or releasing all loan funds upfront, money is released in stages as work is completed and verified. This protects the property owner and lender from paying for work that has not been done.
How draw schedules work
A typical draw schedule divides the renovation budget into 3-6 payments, each tied to a milestone. When a milestone is reached, the contractor requests a draw. The lender (for financed projects) or the investor inspects the completed work, and if satisfactory, releases the next payment. This cycle repeats until the project is complete.
Typical residential rehab draw schedule
| Draw | Milestone | Percentage |
|---|---|---|
| 1 | Contract signing / mobilization | 10% |
| 2 | Demolition + rough-in (plumbing, electrical, HVAC) | 25% |
| 3 | Drywall + insulation complete | 25% |
| 4 | Finishes (flooring, cabinets, fixtures, paint) | 25% |
| 5 | Final completion + punch list | 15% |
Lender draw process
When using hard money or construction loan financing, the lender holds the renovation budget in escrow. To request a draw, the borrower submits a draw request with photos of completed work, lien waivers from subcontractors, and sometimes paid invoices. The lender may send an inspector to verify the work before releasing funds. Draw inspections cost $100-$250 each.
Self-funded draw schedules
Even when paying for renovations with your own funds, using a draw schedule with your general contractor is a best practice. It maintains leverage throughout the project (the contractor is motivated to complete milestones to receive payment), reduces the risk of contractor abandonment (they have not been paid in full), and creates clear documentation of project progress.
Common mistakes
Paying too much upfront (never more than 10-15% at contract signing). Not inspecting work before releasing draws. Not requiring lien waivers from subcontractors with each draw (unpaid subs can file mechanic's liens against your property even if you paid the GC). And not holding back a final retention (10-15%) until the punch list is complete and you are fully satisfied.