One of the tenants has prepaid rent through August 2017.

Rents: $2,350 per monthTop Unit: rented through August 2017 at $1,250 per month (prepaid = no worry about collecting)Bottom Unit: assume it can be rented for $1,100 per month based on Trulia comps with a 2-car garage included and washer/dryer Monthly Expenses: $650 per month$80 Water & Sewer$60 Trash$71 Insurance$200 Taxes$98 Allowance for vacancy$141 Allowance for maintenanceElectricity and heat are separate and covered by tenants.

I then also prorate the last month based on the days of occupancy, and it is all spelled out in the lease.If we are within a few days (generally less than a week) then I won't prorate- say they move in on the 3rd, I just charge one month's rent each month, then the last month they move out on the 3rd and don't owe anything for that month since they prepaid up front if that makes sense. 

My inclination is to refund her within 30 days after the moveout date but she is citing that that is illegal in TX as prepaid rent can't be used as a security deposit.

Don't forget to consider the Prepaids for your taxes and insurances as well. 

He has been late on rent one time which we worked through.When he received his income tax refund he wanted to be extra responsible so he pre-paid rent until October.  

You need to master real estate before lending in real estate, sounds like you may not be there yet.The website you mentioned is following the law, private or individual lenders may not charge pre-paid interest (points) or loan fees, you would need to be a registered lender in your state, in the business of lending, I doubt you want to go there.Best is to find a mortgage broker or established lender and work with them.

If the house sells and you still have prepaid rent then that would be transferred to the new owner to decide.

Then you'll have title fees which will depend on the title company, I'd say $900-$1500 and prepaids which will depend on the property.

Thanks.Purchase Price (B23) $100,000.00Repairs (B24) $50,000.00Points Charged by Lender 3.00%Points Added to Loan $3,000.00Purchase Closing Costs (@ 2.5%) $2,500.00Out of Pocket (includes closing costs and payment) $7,750.00Holding Costs (Taxes/Insur/Util/HOA/Lawn @ 2.5%) $2,500.00Inspection/Appriasal Fees $600.00Total Invested $165,750.03Total Cash Needed From Lender $153,000.00Hard Money Monthly Payments (16%) $2,031.84Total HML Payments (@ 6 months) $12,191.04Lender Loan to ARV 67%Total Loan Owed Lender $165,191.04After Repair Value (B25) $230,000.00Home Warrant $450.00 Termite Letter $100.00Realtor Fees (@ 6%) $13,800.00Our Closing Costs $1,500.00Their Closing Costs $1,500.00Total Debits at Closing $16,800.00Total Cash Received if Sold Now $213,200.00Total Invested (B41+B49) $177,941.07Total Profit $35,258.93I have the rehab costs at $42,500 however I increased the allowance to $50,000 to cover any unexpected costs.