401(k) Letting You Down? Try a Foreclosed Home

David and Michelle Haisley of Fort Wayne, Ind., weren’t happy with the performance of their retirement funds, so they made another investment—a foreclosed home for $27,000. David, a heating and air-conditioning technician, worked on the house before it went into default, then decided to make an offer when he saw it listed at about a third of the price of surrounding homes. The Haisleys found tenants for the house, who pay $900 a month, giving them an annual return of more than 20 percent. They plan to buy another foreclosed home if they can find the right deal. “It’s an income stream for us, and when it’s time we’ll sell it and make more money than we could from our 401(k),” says David. “There’s nowhere for prices to go but up, so it seemed like a pretty safe bet.”

As the housing market recovers, individual investors like the Haisleys are returning to real estate investing. “The typical small-size mom-and-pop investor has two or three properties, looking at it as an income supplement,” says Lawrence Yun, chief economist at the National Association of Realtors.