Shane Fischer, a Florida attorney, was tired of watching everyone else make money in the markets. His stocks and 401(k)s were going nowhere, and he didn't own any property. After reading a series of books called Rich Dad Poor Dad that teach people how to escape the proverbial rat race and begin living a life of financial freedom, he decided he had to own real estate. So in March of 2006, against the advice of his girlfriend, a real estate attorney, he bought an investment property in Sanford, Fla., with plans to rent it out, then later sell it and make a small fortune.

"My girlfriend said the property was in a bad location. She said I would have cash flow problems because the income would not be enough to pay outgoing expenses, but I foolishly figured everything would work out," Fischer says. "I had dollar signs in my eyes."

The realtor who sold him the property said it was in a great area and that the school system was excellent, but after he bought the property, he found out that neither of these things turned out to be true. He says potential renters would call up, and when he'd tell him where the house was located, they'd say, "Oh, my gosh! Over there?" When he'd tell them which school system, some would scoff.

"I did no research and foolishly relied on my real estate agent's representations," Fischer says. "Of course, I bought at the top of the market, in an undesirable neighborhood, with a two-year ARM, and I couldn't rent it out for months."

After six months of watching the property sit vacant, he became so desperate he took in a tenant with bad credit, at a rent that only covered about 60% of his monthly costs. The tenant wound up stiffing him and then leaving. He ultimately lost the house in foreclosure.

"Now, my credit is ruined, I have a judgment against me, and I will likely owe thousands of dollars on forgiven debt since the property sold for about $150,000 less than what I paid for it just three years prior," Fischer says.

Such is the pitfall of real estate. It's an investment that can seem like a slam dunk: Buy low, rent the property out, sell high, make $200,000. And it has seemed even more alluring for much of the last decade, when conditions in the real estate market were almost intoxicating-interest rates were at historic lows and property prices seemed to do nothing but rise.

But like sailors mesmerized by the sirens' songs, thousands and thousands of novice real estate investors have found their boats crashing into rocks. They are left holding properties they simply can't find tenants for. They're paying mortgages they didn't expect to be paying. Or they're renting out properties at rates so low they can't cover the mortgage, property taxes or insurance. And some are renting to tenants they wouldn't dream of considering in a better market, just to fill the vacancy.

"People are lowering their credit standards," says Robert Eisenstein, president of Homerun Homes, a Ronkonkoma, N.Y., company that helps home owners find renters who will eventually buy the houses. "A lot of people aren't even running credit checks or background checks."

The reason people run into problems when they invest in real estate is that they approach it from an emotional perspective rather than a rational one, says financial advisor Rich Arzaga, the founder and CEO of Cornerstone Wealth Management Inc. "People like it, instinctively, because they've seen other people get rich from it," Arzaga says, "or because it never seems to go down. It always goes up. Or because you can feel it. You can touch it. Everyone gets really excited, emotionally, about real estate."

Tracy O'Connell, 57, owns a home in Humboldt County, Calif. a region she fell in love with while taking a sabbatical from teaching a few years ago with plans to eventually retire there. When she stumbled upon a cheap property in the area, she snapped it up before heading back east to a teaching job in Wisconsin, where she currently resides in a house she bought using the equity of the California property.

She had been renting out the California place for four years without a hitch-until last year, anyway, when her tenant went "off the rails," as she explains it. He was growing marijuana in the house. It wasn't unusual for Humboldt County, but he also had a lot of unsavory visitors and a trailer parked in the side yard that made the neighbors complain. He ultimately stopped paying his rent altogether and was evicted.

But he trashed the place before leaving and then tried to break back in several times. In the end, O'Connell paid $5,000 to replace all of the carpeting, repaint the entire apartment and clean up the mold, then she boarded up windows and changed the locks so that the tenant couldn't break back in.

"By the time he was evicted and the property repaired, I was out $17,000," O'Connell says. "In the meantime, the economy tanked, there's a glut on the rental market, and I've been told I can only rent out the home for a third less than before-which is significantly less than my mortgage payment." If that weren't enough, her sewer system failed, costing her $1,200 more in repairs.

She had to put her Wisconsin house on the market to get out from under the debt burden caused by the California property, but she hasn't had a nibble.