First Flip Cash Needed Beyond the Down Payment

The cash needed for a first flip includes more than the down payment. You also need money for closing costs, ownership expenses, repair surprises, and bills due before rehab funds arrive. A project can show a profit on paper while running short of cash during construction.

Open the first-flip cash worksheet as you work through this example. Its A–H categories separate the closing wire from the cash needed afterward. If you already have a property, the First Flip Funding Review explains what to prepare for a financing discussion.

Set one starting date for your available cash

Line A is cash available for this project on a specific date. Use funds you can access, after excluding money committed elsewhere. A bank balance shared with household needs or another renovation is not automatically the project’s budget.

Record the account balance, amount allocated, and any conditions on access. Partner funds require a clear contribution amount and timing. Proposed borrowed funds require disclosure and review; a potential credit line is not the same as money available today.

Keep a separate record of costs already paid. They still matter to total project cost and profit, but they have already reduced your current balance. Adding them again to future cash needs would count them twice.

Calculate the remaining closing contribution

Line B is your total closing contribution: acquisition equity, fees, prepaids, and any reserve collected at closing. Use the proposed settlement and loan funding schedule. Ask how much loan money is actually available for acquisition and how much is held for later work.

Line C is closing deposits paid before recording A that will be credited toward B. Confirm the credits rather than assuming every earlier payment reduces the wire. Contractor deposits belong in the rehab records, not C.

The worksheet calculation is:

D = A − (B − C)

D is cash remaining after the closing wire. If you pay a new earnest money deposit after recording A, update the starting balance and date before entering that deposit in C. Otherwise, subtracting C from B while leaving the earlier, higher bank balance in A overstates cash remaining.

Give each post-closing cash need a place

Use these four categories to protect the cash left after closing:

• E — Carry: interest, property taxes, insurance, utilities, and upkeep through the planned sale or refinance. Exclude costs already covered in B, and add a delay case.
• F — Repair contingency: money for uncertain or additional work outside the approved budget. Tie it to unresolved conditions and scope questions.
• G — Peak cash gap before reimbursement: the largest amount of future rehab payments you must advance before draw receipts catch up.
• H — Additional required reserve: a lender-required amount not already included elsewhere. Confirm whether it stays in your account or is collected.

The planning cushion is D − E − F − G − H. This is a conservative allocation of cash, not a loan approval formula. Check a dated cash forecast as well, because different obligations may overlap.

G is also not an extra permanent repair expense. It measures the peak cash committed to repairs before eligible reimbursements arrive; some costs may remain unreimbursed. Counting the full rehab budget and G as two separate construction costs would distort the profit estimate.

Work through a hypothetical cash plan

Assume you have $90,000 available today, after paying a $5,000 earnest money deposit that will be credited at closing. For this illustration, the total closing contribution is $40,000: $30,000 acquisition equity, $6,000 fees and prepaids, and a $4,000 interest reserve.

The reserve is assumed to pay $4,000 of the project’s planned $16,000 carry. That leaves $12,000 to set aside in E. Confirm how an actual reserve can be used before making that deduction.

Worksheet line	Hypothetical amount
A: Current cash available	$90,000
B: Total closing contribution	$40,000
C: Earlier closing deposit credited	$5,000
Remaining closing wire: B − C	$35,000
D: Cash after wire	$55,000
E: Carry not already covered in B	$12,000
F: Repair contingency	$8,000
G: Peak rehab advance, calculated below	$22,000
H: Separate required reserve	$3,000
Planning cushion	$10,000

The final calculation is $55,000 − $12,000 − $8,000 − $22,000 − $3,000 = $10,000. Remaining allocated cash needs are $80,000 against today’s $90,000 balance. The earlier $5,000 deposit is already spent and credited; it is not new money available to pay a contractor.

These amounts are invented planning assumptions. They do not represent a required down payment, approved reserve, or quoted financing terms.

Find the largest gap between payments and draws

Put every remaining contractor payment, material deposit, and applicable draw fee on a timeline. Add expected reimbursements on receipt dates, not request dates. At each step, subtract cumulative receipts from cumulative future payments. The highest positive result becomes G.

The OCC’s construction lending guidance describes disbursement controls involving inspections and documented progress. It also describes releases tied to the loan agreement. This explains why a construction funding commitment and immediately spendable cash can differ; your particular agreement determines the process. OCC commercial real estate lending handbook, page 48

Here is the hypothetical $45,000 rehab schedule behind G. All payments occur after the worksheet’s starting date. Assume all $45,000 is reimbursable and no draw fees for this example; replace both assumptions with actual terms.

Stage	Cumulative cash paid	Cumulative reimbursement received	Cash advanced
Week 1: Pay $12,000	$12,000	$0	$12,000
Week 2: Pay $10,000	$22,000	$0	$22,000
Week 3: Receive $15,000	$22,000	$15,000	$7,000
Week 4: Pay $14,000	$36,000	$15,000	$21,000
Week 5: Receive $12,000	$36,000	$27,000	$9,000
Week 6: Pay $9,000	$45,000	$27,000	$18,000
Week 7: Receive $18,000	$45,000	$45,000	$0

The largest advance is $22,000, even though no single bill exceeds $14,000. Do not use only the largest invoice as the cash-gap estimate. Include payments that overlap before the earlier work is reimbursed.

The rehab draw guide provides process background. Confirm the eligible costs, inspection requirements, fees, and release conditions for your proposed loan before relying on a schedule.

Test a delayed reimbursement and a longer hold

Suppose the first $15,000 reimbursement arrives after the week-four payment. You would have advanced $36,000 before receiving anything. G rises from $22,000 to $36,000, reducing the worksheet cushion from $10,000 to a $4,000 shortfall.

Now assume the ownership period also runs two months longer, at $2,000 per month in additional costs not covered by the closing reserve. E rises from $12,000 to $16,000. The combined result is an $8,000 shortfall.

The delay is a stress test, not a forecast. Use it to discuss payment milestones, accessible capital, project scope, and timing before committing. Future sale profit does not pay a bill that comes due during repairs. Test the overall budget with the fix-and-flip calculator, then check the dates separately.

Reconcile reserves and earlier contractor payments

Ask which requirements can be met with the same designated cash. If a lender verifies a reserve already included in E, adding it again in H may double-count it. If the lender requires an additional, separate amount, show that separately. Funds controlled by the lender are not freely available for other bills.

For a contractor deposit paid before A’s starting date, do not add that payment to G again. It has already reduced A. Include any eligible reimbursement only at the stage when you expect to receive it. A nonreimbursable cost still belongs in total project cost and affects profit.

Bring the cash timeline to your first-deal review

Complete the first-flip worksheet with one starting date, supported closing figures, and a delayed-draw case. Save the quotes and payment schedules behind each number. Update the plan when actual bills or funding terms change.

Use the First Flip Funding Review to organize the property and financing questions. When you have a target deal, submit your first-flip scenario with the purchase price, scope, available cash, and any funding gap. Identify estimates clearly so the discussion starts with the cash the project can actually use.