You will lose 1/2 that $20,000 just in closing costs.

And remember that stupid loses more than smart wins.

You have too much to lose here.Lastly, make sure the policy guarantees the insurance company will notify you of a cancellation within 30 days, at most.

Does the investor say sorry, there is nothing I can do about it, we both lose big time.

I can't do that with a self-directed IRA.The reason I still use the self-directed account is that I had some old 401ks that I rolled over - I use that money to invest in debt because if I invest in real estate through that account, I lose a lot of the tax advantages.Again, it's different for each person - neither of these are bad products, they just have to be used correctly.  

Are you going to cut them a check for 25% if they lose money on a deal?

Everyday that the property is vacant you lose money that can never be gained back.

Bites you every once in a while but win way more than you lose. 

RealityThis investor is basically going to lose it all.

Have you ever heard of a Landlord being sued by a Tenant and losing property?