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Apply when you feel like you have the strongest package. R1/R2 preferred
Having just been through this I would recommend applying to 2-3 “in range” schools in R1, then saving your moonshot/dream schools for R2. I took the opposite approach with the assumption that there are more spots open in R1 so better to apply to the hardest schools first, but ended with rejections from the top schools (I did interview with one top 3, but ultimately didn’t get it). It could just be circumstantial, but I did feel by the time I got to round 2 I had sharpened my story and made it much more unique which ultimately helped me land admission. Still starting at an M7, but feel I could’ve had a better shot at H/S/W if I had applied in r2 when my story was more refined. Just my two cents! R3 is a total no go unless you’re a super star (or applying to lower ranked programs), though this years R3 may be different with all that’s going on.
I applied R1 and R2 this year and definitely felt like my apps (and especially my interviews) were better R2. Keep in mind though that most R1 schools have an enrollment deposit deadline before R2 results come out. I would definitely apply for your dream schools R1 if you feel like well-prepared, but if not R2 is fine. Don’t apply R3.