Escrow

In escrow, an outside company keeps funds or papers safe and releases them only once each side has done what the deal requires. In real estate the word covers two things BRRRR investors meet: the escrow that runs a purchase or refinance, and the escrow account a lender uses for taxes and insurance.

During a purchase, the escrow or title company holds the earnest money, collects the loan funds and pays everyone at closing. Some rehab lenders also hold the renovation budget in a similar way, releasing draws after each stage of work is inspected.

After the refinance, most long-term lenders collect one-twelfth of the annual property tax and insurance with each payment. On the default deal that is $500 for a $6,000 tax bill plus about $208 for $2,500 of insurance, which raises the monthly payment from about $2,558 to about $3,266.

Further reading: Escrow on Wikipedia.