Not to brag (well, maybe a little), I was able to get the seller to cover all closing costs - which, with prepaid taxes and insurance came to $16,000.  

With that in mind, if you were to move out of the property after year 5 into a new primary residence, the thought is you basically pre-paid your rent for 5 years, now you have to decide if you're willing to eat the $1,000 loss every month (difference between $3,200 rent cost, and $4,200 mortgage cost) granted there is an expense recapture on the taxes and interest that can minimize the pain.

That is a lot of "pre-paid" incomeHow much of your own capital?

For emergency savings, consider pre-paid cards.

The security deposit and pre paid rents should be transferred to the buyer at settlement and should be on the ALTA closing documents.

Prepaids  01 Homeowner’s Insurance Premium (12 months) $240.0002 Mortgage Insurance Premium ( months)03 Prepaid Interest ($33.74 per day for 23 days @ 4.125%) $776.02

In the podcast he mentioned writing the rehab costs into the settlement statement, which required an escrow account to hold the funds at closing, if I recall correctly. https://www.fanniemae.com/content/guide/selling/b2/1.2/03.html"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 (subject to the maximum LTV, CLTV, and HCLTV ratios for the cash-out transaction based on the current appraised value)."

That doesn't include any loan related costs (appraisal, origination fees, underwriting fees, pre-paids).  

Prepaid items, okay, but def no more cash, and preferably not even closing costs.

You can include all of your cash-out refinance cost (and prepaid) in your mortgage (If ARV supports).