Does city or class of property affect ability to get financing?

[Dan G.]

Hello,

I'm planning on accumulating several dozen single family homes with cash over the next year, and then getting a non-recourse loan so I can leverage up the portfolio (without risk of personal bankruptcy). I am still contemplating whether or not I am going to buy mostly class C properties in the Midwest with very high cap rates and low to zero appreciation, or if I will mainly focus on class A and B properties with lower cap rates with higher appreciation potential and less vacancies and repairs. But I was wondering, does the direction I go in affect my ability to get financing to fully leverage the portfolio down the road. Let's say I, hypothetically, accumulate a $1 million portfolio of homes paid for with cash and I am earning a 10% net return, making $100,000 a year in net profit. And I want to get maximum leverage (let's say 75% LTV), is the finance company going to care if the houses are class C properties in the Midwest versus class A and B properties in the Ft. Lauderdale area? Might they say, "Sorry, since your properties are class C and aren't likely to appreciate much and could easily depreciate, we are only going to give you 50% LTV. If you wanted to get 75% LTV, you should have bought class A and/or B properties in Ft. Lauderdale".

I'm trying to learn about this now so I don't end up learning the hard way.

Thanks!

Dan