It seems half of my total closing costs were prepaid items, i.e. prepaid taxes, prepaid homeowners association for 1 year, prepaid interest.Including all of these prepaid items decreases the gross yield if I include them. 

It prevents issues afterwards such as "I gave two months security", or "I prepaid my rent last month".This is something your closing company should be able to handle, if not, your own attorney can draw one up. 

I purchase a home I was living in that was foreclosed on and because I was so difficult with the bank they would not sell me the home it sat on the market and auction after auction with no bids because we had a 5 year  pre-paid lease and the only way we could be evicted by law was is if a owner occupier bought the house .

However, we are trying to see if there is a way to reduce this monthly expense.The only alternative option that we have found is a secure pool phone box that uses a pre-paid wireless cell phone.

If you don't think your teen can handle a credit card, there are other options available like prepaid cards or debit cards that are linked with checking accounts that can be monitored by the parents.

My first project took six month because the contractor I used was slow, incompetent, and in the end, walked away from the project with $10K of work & materials I pre-paid (stupidly) for and didn't receive.

@Alexis Hassun Escrows for taxes and insurance are something to be concerned about if you do not escrow but that is not a 'cost of doing the loan' and nether is the prepaid interest.

@Jon Holdman uses a great description of the differences.Hard money terms are commonly65 LTV , 10 pre paid points, 16% Interest Only not paying down principal, 12 month call (due in full)Like WE BUY UGLY HOUSES, Hard money could be called WE LOAN UGLY MONEY. lolPrivate Lender Money terms are commonly70-80% LTV, no points, 6-8% simple interest, 1-5 year note, then due in full or rolled overJoint Venture with Credit Partner - Down Payment Partner - Rehab Cost Partner terms are commonlyStart a LLC together with an Operating agreement and a JV Agreement with every deal, person bringing credit - cash to the deal gets all money back, expenses are split, net profits are split, sometimes not 50 50 .  

Why don't you let everyone know about the benefits of Prepaid Legal???

So, you should figure another 2% or so for closing costs.You will also have pre-paids that you will have to pay at closing.