I put a pair of apartments over my garage for much the same reason.
Here's another good plan.... I've done a couple of these. In OKC, 125k will buy a 1500 sq ft house 20 years old or so. You buy the house and pay cash for it. You sell it to someone with marginal credit. Someone that traditional lending institutions won't lend to. There are people who make mistakes during their 20's and get into their 30's and get their act together. They have money and jobs but not good credit yet. You sell to them for 135k. And they give you 10 to 15k down. You loan them the balance at 6.5%. You amortize the loan on 20 or 30 years but balloon it in 10. Their plan is to repair credit and eventually refinance. You're out of the deal in 10 years either way. You collect their taxes and insurance just like a mortgage company would and escrow it etc. YOu can manage the whole thing on one excel spread sheet.
If you've picked the right couple... and you'll have lots of couples to choose from.... you've just set up a 6.5% investment with a real asset behind it. Not the obama market behind it, and not some municiple bond from a city that may file bankruptcy some day. They own the house so you don't have the traditional landlord "fun". Honestly, I could sell a house every single day like this. if Finding people to buy them is EASY EASY EASY. And if they default, you get the house back and start over. You can't get a better deal.