When interest rates increase, home prices will decrease.

There's more upside if you can increase rents further and decrease expenses, but this is my directional sense of the deal.Unit 1: 1800Unit 2: 1050Unit 3: 900Unit 4: Owner (900 after move out)Gross Rent: 45,000 (55,800)Net Rent: 40,500 (50,220)Expenses (rounded up): 18,000NOI: 22,500 (32,220)Debt Service: 22,900Cash Flow: -400 (9,320)The key to seeing solid returns on these small multis in this area is minimizing turnover costs and vacancies. 

And then decrease again as our purchases move back to replacement cost (in say 3-5 Years)

If they see your score drop significantly and that is unusual for you, they may decrease your credit limits or worst case close your accounts. 

The cold incoming water would be stored in the tank and warmed overnight or throughout the day which would decrease the total temperature rise needed.

At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices — and the bubble bursts."

You need to decrease the amount of your own cash invested to get a better return. 

So as you move up in rental price, the amount for repairs will become a decreasing percentage of the rent.Now as that applies to capex, certain capex items will be relatively fixed or fall within a small range like a water heater in @Ned Carey's example.  

., from what I can see, the first property is simply not that great of an investment unless you are able to either greatly decrease the purchase price or generate additional rental income/decrease monthly expenses.

(Excluding <5 unit properties,) The total value of your multifamily property increases as cap rate decreases.