I know a lot of investors that are one 20k sewer line away from being bankrupted and homeless. 

I think @Brandon Turner has said it many times - you're not going to get rich off your first deal and you're not going to go bankrupt either. 

I know 3 people who went bankrupt doing arbitrage.

It is good you are buying construction insurance as I spoke with the broker at length, and he talked about various risks investors have run into, and one even went bankrupt as they weren't insured appropriately!

Many with names we'd all recognize have gone bankrupt, been sued or died completely broke.

I have a friend who is bankrupted, his 3 room appartment forfeit by bank.

There was a company that went bankrupt so the bank foreclosed, then the bank went belly up so the FDIC swooped in.

Additionally more people go bankrupt for being cash flow negative than for being worth less than they owe.

(Solution: possibly negotiate long term lease at current Rent location) RISK of buying:  Economic downturn could bankrupt. 

We could also use that money next year for another down payment on another property if all goes well.My fear definitely arose from watching my parents divorce right before the recession, go bankrupt, and one year later my father was driving a school bus and my mom was living in a friend's spare room.