I am talking about spendable cash and limiting exposure to tenants and cap ex. 

Already have 2 house under the belt, so debt to income is already over 50%, how would I go about refinancing this home if I'm already reach my limit in debt to income ratio?

Cap rates have some flaws, but they are one of the good measurements of real estate return.It is fair to include closings costs into the purchase price, to determine your cap rate. 

But there are some limitations on over deduction of expenses too. 

Most say they do but later realize they don’t or have done limited 203ks in past 5 years.

It seems foolish to do something like this but where else can I get cash Flow; I understand appreciation is probably good no to be limited to none.

You want to make it very easy for the tenants to renew early (limits their leverage) and inconvenient to leave.  

It is not a good measure of determining whether or not a particular deal is good, especially small rentals, except as a potential hurdle for further analysis.On paper your deal looks OK.

Given the FHA limit of 468k, I am hoping I will end up with about 100k for renovation. 15% of this reno cost would be set aside as contingency fund to comply with FHA reno regulations.

However, you need to consider that over time taxes and insurance do go up, so if the margins are very thin in its present state with limited expected rental growth it might not be a viable deal.