I know everyone prefers higher quality locations, but those areas are quite frankly way out of my ability to acquire and the investment ROI doesn't add up unless I take a lot of debt financing (which incurs even more downside risk-- solve a problem; create a new problem issue).

And I always point out the downside that if I need to sell or do something with one property, the entire loan has to be redone, and they agree that is a danger.Nice description from @Jennifer Donley as to the reasoning she used when she decided to go with a portfolio loan - you should have a strategy and it should be financially advantageous.

Too much downside. 

As long as I'm aware of and accept the risk, is there a downside to doing this I'm not considering? 

Until I reach REI position of knowing our downside potential.  

The downside is that as a landlord, you will not be aware of the tenant stops paying and in comes the lien in your name on your property...and this gets paid by you...Just keep in mind this is a local issues...most of the time you will deal with the city, but sometimes its a township or village...or even the county.

Biggest downside is loan term-likely 5yr fixed with either balloon or variable rate, plus 15-20yr amort schedule meaning much higher monthly payments Private loan/seller financing-find a place where the seller is willing to finance, or find a rich friend/family member to act as the bank.

And let's not forget that it's one of the cleanest cities in USA.Google it's opening it's Chicago headquarters in Spring in one of the hottest neighborhoods in the Country: West Loop/Fulton Market.Sinatra said it best, “… And each time I roam, Chicago is calling me home, Chicago is why I just grin like a clown – It’s my kind of town…”The only downside: the winters...

You might have to open up your pool of applicants to voucher holders and see if you can find a better qualified (read: less indebted) applicant. the downside will be that their score and income will be lower, but guaranteed by voucher. 

The downside is that with respect to maintenance costs, you won't enjoy as much of an economy of scale as people often think.