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When Thomas and Narichica Handy bought their first home in Hawaii in 2003, they weren't thinking of becoming landlords.

A year later, duty called. Deployed to Afghanistan, the military couple turned the house into a rental.

It's a pattern they've repeated over the course of several more moves.

Now they hope the income from their four rental properties scattered around the country will allow Thomas to retire from the military before age 50 and pay for college for their kids, Thomas III, 6, and Hannah, 2. (Narichica, who goes by Richie, left the military in 2006 and is now a schoolteacher.)

The Handys believe the housing market is more likely to appreciate over the long term than stocks, and neither gets an employer match.

They stopped contributing to their retirement plans a few years ago and funnel 10% of their income into a savings account, which they use to fund real estate purchases.

Thomas will get a military pension of half his pay, and the couple expect that two of the properties will be paid off before he retires. He'll also get $30,000 for his kids' college, thanks to GI Bill benefits.

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For now, though, the homes kick out only a small income when fully rented, and the Arizona house lacked a tenant for four months last year.

Occupations: Army major; teacher

Goals: Retire from the military within 10 years, fund college for two kids

Total income: $147,000

Total assets: $383,700
Retirement savings:$141,000
Home equity: $214,000
Cash: $24,000
529 college savings plans: $4,700



Betting too much on real estate is a risky proposition, says Kathy Stepp, a principal with Stepp & Rothwell in Overland Park, Kans. "One long-term vacancy could torpedo everything," she notes.



Take a break from real estate. Hold off on buying more homes, says Stepp.

She understands the Handys' frustration with the stock market but points out that since the couple bought their first house in 2003, the S&P 500 has gained an average of about 7% a year while the housing market declined. "Look at stocks over the long run," she urges.

Richie sides with Stepp: "More properties would spread us too thin," she says.

And the real estate fund that accounts for 11% of the couple's retirement savings needs to go.

Thomas isn't convinced: "We have a lot in real estate, but this market is low," he says.

Create a flexible account. Nearly all Thomas and Richie's wealth is tied up in retirement accounts and houses. "They can't access their cash if they need it," says Stepp.

She suggests the Handys save in a taxable account using low-cost, tax-efficient index funds so they won't be stuck with big capital gains bills but can tap some of the money if they need to (such as for college). Once they've built up that account to the level of their real estate equity, they can go back to saving in retirement accounts.

Related: Five top-rated 529 plans

Assuming a 3% annual increase in rents, the fully rented homes should earn about $30,000 a year a decade from now.

That, plus a part-time job and his pension, should allow Thomas to retire from the military early.

Add another stopgap. Their $24,000 emergency fund might not cover unexpected maintenance costs on their homes. A home-equity line of credit can serve as a backup.

Good idea, says Thomas: "We'll start the paperwork right away."