Prepaid 1 year in advance looks wonderful if all your other conditions are met.

FHA 203K and cash for Settlement and prepaids was from Savings.

It sounds like you need to sit down with a lender....there may be other givens that you are missing (5% or so closing costs/prepaids).

., Prorations and prepaids are generally best paid outside of closing. 

@Will Triplett you have to ask a lender for a quote because it will vary from place to place, and the closing costs will include prepaids that are unique to your property (daily interest, taxes, insurance). 

We developed a punch list of things to be done, deposits and prepaid rent owed to me at closing etc.

You should get the security deposits and any "prepaid" rent that applies to days after closing.

Yes, FHA is still 3.5% down payment for up to 4 units....but you Will have 5-6% typically in closing costs and prepaid taxes/insurance.  

I would also need to have about 6 months reserves saved in an account (in the event any repairs should be needed or something unfortunate were to happen), and would need about 2-4% of the Loan Amount for Prepaids (Property Taxes, Hazard Insurance, etc.) and Closing Costs (Title Commitment, Attorney Fees, Application Fee, etc.)....I do not have the extra 2-4% of the loan saved up to afford this. 2: The pricing on an investment property would likely be in the 7% range.

@Josh Raikin....1)  refinancing a  property  has   closing costs / prepaid taxes , interest and insurance / loan fees   associated  with it  ..these  will  vary  based on many  factors  -  location / type of loan /  loan amt /  credit score /  current  market rates /  type of  property  etc ..2) yes - you  should be able to refinance  to a lower rate in the future  should the  option  present itself and  also assuming you qualify 3) what is the  purpose of  possibly  doing a refinance  now  ?