both houses are in Round Rock, TX using 5% down conventional loans with PMI prepaid.

So the tenant prepaid 3 months of rent which were supposed to go towards March, April and May of 2018. 

Perhaps a penalty if it's prepaid before 2 years? 

But the limitation of this method is " The new loan amount can be no more than the actual documented amount of the borrower's initial investment in purchasing the property plus the financing of closing costs, prepaid fees, and points on the new mortgage loan ". 

Since the appraisal was only for $400,000 we needed to supply the extra $40,000 in cash in addition to the down payment of $14,000, plus prepaid escrow and closing costs.

There should be closing costs/prepaids (attorney, lender fees, appraisal + tax/insurance paid upfront) which might altogether be in the $5K ballpark for this type of property.Gross rent is key.

Write months on them, "July, August," etc.Each month, stuff your bill in the envelope and put it in the mail.This will also highlight for yourself that you're giving an (essentially) interest free loan to a checking account, but still paying interest on however much less in debt would be it you just prepaid it early in a lump sum.

If you screen properly, collecting rent won't be a problem, but in my opinion even if you collect it ahead of time you shouldn't spend that money until you've earned it- what happens if they need to move out and want the prepaid rent back?

They prepaid the months rent a few days before the fire and have a decent security deposit i'm holding.

This was going to be prepaid to me for the two weeks at the closing.