Write an  addendum they both sign and specify what happens with the pre-paids like the security deposit.

The property I owe $1800 on is worth approximately $80K, so I have been looking into doing a cash out refi for a cash injection to help with the purchase of more properties, but I feel that the closing costs are excessive.My question is, is there such a thing as too much to pay in closing cost/prepaids for a refi or is it just the cost of doing business?

You cannot keep their excess prepaid rent and move another tenant in.

This is on top of the $4,672 in closing costs a d $5,861 in "prepaids and initial escrow payments".

We have no origination fees on refis over 100K, but you still have prepaids, title, transfer taxes, and appraisals that will need to be paid.

.- on 203k loans make sure your loan officer connects you with a local HUD consultant who can review the property to let you know the min required repairs that will be required by FHA so that you can decide your "wants," and "must haves," and find a fine balance in between the two to arrive at the highest and best use of your proposed purchase- 3-4 units with FHA also need 3 months of reserves- 3.5% down payment is 3.5% of the total cost which could consists of purchase price + reserves + inspection fee's + rehab costs + closing costs + prepaid interest up to 6 months.The cool thing with 203k's are that you can use the ARV rental income with the after improved property as well so in a way 203k FHA's have an easier time meeting the self sufficiency rule with FHA 3-4 financing since regular FHA financing on 3-4 units without 203k will have to use the lower of current rents or market rent.

= ~$2400 (Estimate)Pre-paid insurance?

I am working on adding credit card payments as an option because several of my tenants have the prepaid cards that their pay is direct deposited to and they have requested this payment option.

You will need to have SOME type of savings in order to show reserves and/or have any funds for closing costs and/or prepaids that are not covered by the Seller's contribution.In the meantime, I would open up an account with a local credit union. 

I've had tenants do just that and leave two month's prepaid rent in escrow!