In what is billed as a case study, the Another F@cked Borrower blog relays the story of a 24-year-old real estate investor who is chronicling his experience going through foreclosure on his own blog, www.iamfacingforeclosure.com. This investor got in way over his head thanks to a mixture of pride, greed and loose lending requirements:

“In the last 6 months I bought 7 houses in 4 different states, mostly with the help of 100% LTV stated income (liar’s) loans. Most are fixers. I was going to rehab and flip each one within a month or so. Buying was easy, but man was I in for a surprise (or a lesson?).”

The investor goes on to document how his finances spiraled further and further out of control — even when he bought houses for substantial discounts, he leveraged out all the equity just to get more cash to cover other investments — until he finally ran out of the seemingly endless supply of lenders willing to give him money. It’s a brutally honest recounting, and the investor takes full responsibility for his situation.

“It’s embarrassing to talk about this. Yes it’s my fault and I deserve the consequences. It sure is a tough way to learn though. This will teach me to be more responsible and play smart next time.”

There’s no doubt that many aspiring real estate investors, including some of those searching the RealtyTrac foreclosure database, will fall into the same trap of having eyes too big for their finances. On the other hand, new investors who start small, and bite off only as much as they can chew, can be extremely successful. Take for example, Michelle Mangione, a former real estate agent who decided to switch careers and invest in distressed real estate:

“I always liked to buy houses and fix them up, but I really didn’t take it seriously until about three years ago,” said the Fallbrook, Calif., resident, who now owns a business that buys pre-foreclosure properties below market value, fixes them up and resells them for a profit — what’s known as flipping properties. “I should have started sooner. … I love this.”

Mangione, like other smart investors, realizes that the market is changing. That means more bargains are available, but it also means her investment strategy will need to change.

“Now you have to add a unit or add square footage or something,” she said. “The market has changed where you can’t just expect equity to go up overnight.”