When doing a fix and flip, I always bake in a little cushion in my deals that the market will soften a little during the hold resulting in either a slight reduction of sold comps or longer holds.      

Incidentally and contrary to the belief of many rental unit owners, I tell every tenant I am the owner of the property and every tenant has my telephone number and my wife's telephone number.When I have to deal with tenant issues i.e. evicting a tenant, charging a late charge, or increasing rent I always soften my part of dealing with the issue by telling my tenants that I have partners I have to answer to and I tell tenants that I get audited every year by my lenders so my lenders know that I am managing my properties (their investments) properly.

The market is not going to soften in the next weeks, but you are now damaged goods, because you have been under contracted before and everyone knows it. 

Rate increases may slightly decrease demand, but I don't believe it will soften demand enough to make up for the lack of supply.  

FOMO at work, don't wait because they could continue to climb to rates that move monthly payments out of an acceptable range, which should create the softening.    

You can offer to work with the tenants to soften the blow.If market rate is $750 and they're paying $500, that's 50% below market.

You provide running water and a water softener, but the Tenant provides salt and conditioners.

Ideally if you all meet the requirements, you all might be able to qualify for a 5% down conventional product on a 2-4 family instead of using FHA which a lot of times will soften your offer based on seller/listing agents opinion.

Were your markets softening prior to covid?  

Now a high appraisal could help soften the blow of budget overruns but that's purely good fortune for the investor that ended up with the issue in the first place.