It just adds extra expense and lowers your credit rating.B. 

Buy in either: - Established, affluent areas: Pacific Heights, Presidio, Cow Hollow, Sea Cliff OR- Tier 2 areas that might become more affluent: Mission Bay, Potrero, Dogpatch, MAYBE "Outer Sunset" (although yes - it's probably in a lower tier than the others) 2) Are we likely to make money if we invest in a cosmetic renovation of an older place or is the cost of labor and materials in SF likely to diminish our potential profits to a negligible amount. 

@Ben Granja, the above advice that a bank will lend 80% of lower of appraised value or purchase price is incomplete. 

FHA does not mean the value will come in any lower.

Could this be negotiated with a lender and would they be open to accepting a lower down payment?

Their rent to "all in" ratio is much lower than what I want, but somehow they use this strategy to get up to 100 houses.

You probably aren't going to find any markets in Maryland with a lower price-of-entry then Baltimore, so if "low budget appeal" is your driving factor then focus on Baltimore and maybe Dundalk.  

However, typically if you buy cash, that percentage tends to be lower than if you borrow.

A hard money lender or private lender may have different down payment options but don't expect anything much lower than 20%.

If anything it would help lower your DTI.