Then, after they have moved out and returned possession of the unit to us, we calculate "pre-paid rent" for the days following the actual date they vacated the unit and it becomes a credit on their account.

They will also look at your real estate resume, they will vet your property manager, require one year prepaid insurance, and ask for every possible document from the sellers!  

If the landlord properly raised your rent to $550 while you were living in the rental unit, you can expect to owe the landlord $50 for rent during the last month of your tenancy (that is, the current rent [$550] minus the prepaid amount [$500] equals $50 owed).If your rental agreement calls your entire up front payment a "security deposit" and does not label any part of it "last month's rent," or "security for last month's rent," then you will have to pay the last month's rent when it comes due.

Other components of the total deal cost would be the purchase price, estimated rehab, and any closing costs associated with the hard money loan (points, pre-paid interest, insurance, inspection[s], survey, appraisal, etc.).

For example do I estimate 29 days of prepaid interest, or 4?

I seems like you could handle that through the title company.Maybe a pre-paid visa debit card?

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.

Well, let's say the house as appreciated a bit and Bill and Diane built a deck and fenced in the backyard, so the value has increased to $550,000.Jane nets $502,000 ($550,000 - $2000/month x 24 months), or about $27,000 more than if her agent had sold it 2 years earlier, plus her mortgage has been paid down.Bill and Diane have already paid $24,000 toward purchasing the house ($12,000 in pre-paid rent at the begnning + $500/month x 24 months) so they owe $526,000.

You can use your $10k for FHA 3% down, negotiate with seller to pay up to 6% of purchase price towards closing cost, prepaids & propery tax & ins escrow.

There is a quarterly adjustment to the prepaid utilities.