It can reduce borrowing costs like the origination fee, points and pre-paids. 

Question for the experts: is there any reason to not accept prepaid utilities and monthly pet fee?

Rough numbers are as here: Purchase price : $155k, Interest rate: 6%, Down : 25%, Closing Cost: about 7k (including 2k of prepaid and escrow), also Closing costs can't be rolled into the loan.

Plus, they understand that $ in the bank in pre-paid rentals is better than a signed lease.

I had a PM get all excited (me too) about 9 months of prepaid rent. 

The few that fight it in court will swear the rent was prepaid for 2 years.  

That said, in my experience, most  folks who are seasoned contractors don’t ask for prepaid payment in full.

And section 5-02-080(e) of the Chicago Residential Landlord Tenant Ordinance (also known as the RLTO), states that "...the successor landlord of such property shall be liable to that tenant for any security deposit, including statutory interest, or prepaid rent which the tenant has paid to the transferor."  

In regards to closing costs, I should have said "closing costs & prepaids" - but either way this is money I have paid out of pocket already for my single family primary residence, and money I will have to pay out of pocket when purchasing the multi.The root of what I am trying to accomplish is trying to use the capital I have "stuck" in my single family I.L.O saving and waiting or using another creative financing avenue.

You would probably be obligated to mitigate your damages after evicting her, which would mean finding a replacement tenant, giving the evicted tenant grounds to demand a refund of her prepaid rent.