You fail to the systems in place, keep strong standards and the failure rate is light.

.- Understand what you value . . . do you want to have a phone call from the PM every Friday? 

I would advise you to get pre approved from your lender and make them aware as it will help them understand you are serious!

I understand that the tenants will paying me money that i will put towards paying off the house but it just seems like so much could go wrong.

I think real estate due to the amount of money you can make and how quickly you can make it attracts people who may not understand the idea of sustainability and being consistent in what you do. 

Make sure you and your mortgage provider understand "delayed financing".

The other thing one needs to understand is the laws in the state about this acitivty of talking to Owner Occ's in foreclosure some states you need to be a licensed Foreclosure agent.

If not, I completely understand.

From what I read and understand, this means I'm likely going to struggle with getting a loan, not even considering the inability to pay any down payment.On the other hand, my parents have significant liquid assets, (think on the order of > 500k), that they are potentially looking to diversify into real estate.

If the project is in Canada then I would look to an attorney that understands international law as it could be more complex.Personally for something along the lines of what you are doing I would look to partner with another developer vs trying to raise the capital as that will be less labor intensive.