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

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

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

So far all of my tenants have paid this months rent except for 1 tenant that was laid off prior to Coronavirus nuisance, who pre-paid for 4 months using his tax return so is still covered... for now. 

Since you are cashing out you could take a portion of the proceeds of the cash out and buy down the rate with prepaid mortgage interest/points as well as cover the closing costs. 

You should increase the rate and get a lender credit to cover all your costs, the upfront MIP, and all your prepaids. 

Whereas with an owner occupied home I do the check once and then they stay for years and years.Also tenants have no pride of ownership - so that means more work for me noting Park rules being broken and then pestering you about how your tenant keeps putting foil in the windows.Unless I had a severe occupancy issue I would not allow renters either, and would not do your pre-paid lot rent deal.  

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

Then the purchase of the life estate or prepaid rent or however you choose to structure it washes out to you as good NOI.  

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.