They make it sound so easy. Earn tons of money buying foreclosures! No money down! Achieve financial freedom! Earn hundreds of thousands of dollars a year working part time! Buy valuable properties for pennies on a dollar! All you have to do is read a book, listen to a couple CDs on your drive to work, or watch a video to learn the secrets of foreclosure investing. In a short period of time, you will have amassed a portfolio of properties worth millions of dollars and be well on your way to a comfortable retirement on your own private island.

You can find plenty of these pumped up promises on late night TV infomercials, 24/7 Internet websites, and local (FREE!) foreclosure seminars. The foreclosure gurus who pitch these promises all look pretty much the same in their designer suits posing in front of their posh possessions -- their private jets (which they typically rent), their million dollar estates, and their fancy sports cars. Of course, they never tell you that they earned most of the money to buy this stuff not by investing in foreclosures but by selling their seminars, CDs, and books.

As a salesman, I have to admit that these foreclosure gurus are excellent salesmen. They tell you exactly what you want to hear, "Foreclosure investing is an easy way to make a lot of money, and you do not even need to know all that much about it." These pumped-up promises, however, are over-inflated balloons ready to pop the life savings out of the unwary investor's bank account.

Sure, you can make a lot of money buying and selling foreclosure properties. I have done it myself. But making money in foreclosures is challenging work. You have to know a lot to make a lot, and if you do not know enough and are not careful enough, you stand to lose much more than you stand to gain.

Every time a foreclosure guru holds an investment seminar in my area, I am flooded with calls from people who lost tens of thousands of dollars by following the guru's advice. In one case, a very intelligent woman attended a foreclosure auction after taking a seminar and purchased several foreclosure properties for a total of nearly $100,000. Well, at least she thought she was buying properties. She was actually buying junior liens (second mortgages or other debts that use the house as collateral). Because junior liens are typically wiped from the books after the foreclosure becomes final, she actually purchased nearly $100,000 in useless paper. And she's only one small example of the many cases I have personally witnessed.

Other novice investors get burned when they buy a property at auction that they have not even seen. They pay $30,000 for a property thinking they just got the deal of the century only to find that the property has been gutted by fire, ransacked by vandals, or teetering on the brink of collapse. They just paid $30,000 for a property that no one will buy.

To make money investing in foreclosures, do your homework, and take the following precautions:

• Research the title at your county's register of deeds prior to auction, making sure the title is in order and finding out which lender holds the senior (first) mortgage.

• Inspect the property prior to auction. Get inside to look around, if possible. If getting inside is impossible, then at least drive around or walk around the house to inspect it from the outside.

• Know the values of comparable properties in the same area and know how much you can sell the property for once you acquire it, so you are not tempted to overbid.

• Set an upper limit for your bid, and never exceed that limit no matter how excited you become during the auction.

• Bid only on first mortgages, never on junior liens.

• Realize that if you submit the winning bid, you may not be able to take immediate possession of the house. The current owner controls the property until the redemption period expires, which can last up to a year in some areas.

Foreclosure investing is a competitive, high-stakes arena that draws the savviest of real estate investors, and they are rarely concerned with keeping rank beginners out of harm's way. Do your homework. If you want to swim with the sharks, you had better be prepared to think and act like one.