So, I told the tenants that I would cover water up to $x then I will send them an invoice each for 50% of the rest. i.e.

I believe it's J Scott that says, "Beware the Ten-Percenter"As a rule of thumb, if your penciled profit is 10% (or less) of the final price you should give the deal a pass. 

My question is after I refinance the house my mortgage will go up and I will have less cash flow to manage the property and I will likely not meet the 1% rule whereby I’m renting the property for 1% of the purchase price or refinance price.

FYI: Now that the LO comp rule is in effect it's illegal for a lender to get paid more or less depending on your specific interest rate, so there's no reason not to get you the best rate out there among alt-doc loan programs, if that makes sense, meaning you're not exposing yourself to predatory behavior by being upfront about not being rate sensitive, like you would have been had you said that in 2006.

I liked the landlord friendly laws, I liked the net inward migration, I liked the multiple industries and I liked that it was easy to get something near the 1% rule.

I originally offered $600 (+$25 for dog) rent price for them to share a room and share a spare bedroom with me for storage.  50% split use of the house between myself and them (which the couple combined realistically probably uses more than 50% of the house) They counter offered this first month for $500 based on the current construction status of the house. 

Don't offer to be a birddog (where you scout for properties and they give you a few hundred dollars,) but for the same effort offer to co-wholesale for 50/50 split.

@Mike Van Arsdale, I saw a very interesting chart the other day comparing 25 year returns of real estate over all to the stock market to real estate 50% or less leveraged. 

As a quick check I use the 1% rule to determine is a deal is worth looking at.

The most logical explanation refusing to play ball by any rules but the cartel’s.