However, it certainly is happening out there today and all in mortgage payments are beginning to level off with buyer demand diminishing due to the higher rates.

This leads to the debate of negative return on equity versus increasing cash flow over time (essentially, untapped equity results in diminished returns over time).  

You have to decide what you want out of investing and the risks you are willing to take.Tax wise if you make under $100k you can write up to $25,000 of passive losses, from $100k-$150k you have diminishing write-offs the more you make. 

It's like the point of diminishing returns.

Why exactly, does a rising interest rate diminish the appeal of owning real estate for the purpose of renting or flipping (for investors)?

Where is the point of diminishing returnsThis is my primary residence and I’ve lived here over 2 years.

I also think that some of these things have diminishing returns for people. 

Over time your return on equity diminishes as your assets appreciate and its time to sell/reinvest and make sure your capital is working as hard as it should be for you and yielding the highest risk-adjusted return possible.

But super rare and in no way diminishes the efficiency electronic payments bring. 

@Aaron Williamson - You should reach out to a short term full service property management company, then find yourself a property and have them manage for you so you can be hands off, it will diminish your returns as you will have to pay them but you will be hands off.If your goal is to be a silent investor, provide finance and be a passive investor, why do you want to specifically be in the STR business?