What's the worst thing than can happen in Real Estate Investing?

[Ava G.]

I have been investing in the stock market for quite some time and since I'm in for the long-run and I'm not obligated to pay monthly dues, I have some peace of mind. If, for some reason, I stop working and don't have a monthly income, it's no big deal. I can add more investments when I'm earning again. I can also take out my money anytime I want with just a click of a button.

Now, I began to take interest in REI but the prospect of being tied up to a 20-year debt (just an assumption, can be 15 or 30 instead) seems scary as a lot of things can happen in a span of 20 years.

But to make my fears clear, I'll give an example scenario. (Please bare with my me as I'm a total newbie and just familiarizing myself with the terms.)

Say, I bought a property worth $100,000 and put a DP of $20,000. Now, I owe $80,000.

Assuming fixed-mortgage, let's say, I need to pay $900 monthly for 20 years (mortgage + fixed expenses). These scenarios can happen (1 - being the best, 5 - being the worst):

1: I will have tenants all the way (with minimal vacancy) and great cash flow (at least 10%).

2: I will have tenants all the way (with minimal vacancy) and low to average cash flow (2-8%). It's as if I invested in money market / bonds / average return of the market.

3: I will have tenants but negative cash flow. Say, the market's rental rate is below what I need to have a positive cash flow. Therefore, I need to come out with some cash from my own pocket.

4: No tenants. I have to come out with the full amount monthly from my own pocket.

5: No tenants. No money out of my own pocket to pay the mortgage. Doom and gloom!

(Note that the above scenarios don't account for long-term appreciation, as I've read, it's not so predictable.)

Thinking about it, I can bear No. 3 scenario and I do think there may be periods when in this can happen. As with No. 4, I can just consider it as transferring my money to an illiquid bank (like forced savings). In the end, I still have a house worth $100,000 (+ whatever interest I paid). Now, it's the No. 5 that truly scares me. What if No. 5 happens in Year 10, for instance.

Again, going back to stocks / bonds, as long as I buy an index (local and foreign), there's very little possibility that everything I've invested would disappear (at the cost of a smaller returns). Worst thing that can happen is there's a total collapse of the entire market (like the Great Depression).

But when it comes to REI, the possibility of losing everything seems more likely as there are many foreclosed properties.

My question is, how do I avoid having the rental property foreclosed and losing everything I put into it?

Anyone can give their thoughts, especially those who have been doing this for very long? I may have a very shallow and highly unrealistic analysis as a newbie, that's why I need help from more experienced investors here.