It sounds like the beginning of a joke: An auto consultant loses 40 percent of his portfolio and decides that with his livelihood and his nest egg both in jeopardy, he needs to find a better way to make money. So he turns to real estate. In Detroit.

But Dennis P. Fassett s strategy has him laughing all the way to the bank. The 47-year-old has bought 11 starter ranch and bungalow homes, for half of what they sold for five years ago. He s focusing on homes in the state s best school districts, where he can get reliable rents right now he s clearing $3,000 a month after paying the mortgages and other expenses and a chance to see the homes value grow when the economy turns around. I call it my set-it-and-forget-it plan to salvage my retirement, Fassett says.

Putting your cash into real estate may seem like a risky move right now, but economists and real estate analysts say the timing could be just right. With the sharp drop in home prices and mortgage rates hovering near record lows, housing affordability is almost at a 40-year high, according to the National Association of Realtors. Some advisers think real estate will prove to be a particularly smart buy if, as many economists expect, interest rates begin to march higher. Real estate s value has typically kept pace with inflation. That s good news if you own the real estate, bad news if it s your rent bill that s rising. Locking in your own housing costs so they don t rise with inflation frees up more assets to be invested elsewhere, says Farrell, of NorthStar Investment Advisors. Bottom line, he adds: You may be kicking yourself in two to three years if you don t.

Investors over 59 who have a sizable sum in a Roth IRA have another advantage: They can use a self-directed Roth IRA to buy a home in full with cash and reap the rental income tax-free, as long as they don t live there, says Holly Hunter, a fee-only financial planner in New Hampshire. Don t have enough in a Roth IRA to purchase a home? Consider converting a traditional IRA into a Roth. You ll owe income tax on any amount you convert, but one benefit of a low IRA balance is a lower tax bill. What s more, the income restrictions on Roth conversions disappear in 2010.

Even a single second home can provide a steady source of income as well as a weekend getaway. Buyers typically do a little basic math before buying. They make sure that rental income easily covers expenses (including someone to take care of the property if the owner isn t able to). Hunter has a rule of thumb for becoming a landlord: Compare the return you re getting with what you d earn from a similar-size portfolio. If it s not bigger, then don t bother.

Also See:

• Put Your Cash to Work: Stocks
• Put Your Cash to Work: Bonds
• Put Your Cash to Work: Alternative Assets