The ESA/NASA joint space mission LISA (Laser Interferometer Space Antenna), which is planned to be launched around 2015, aims at detecting gravitational waves in the frequency band 3*10-5 Hz to 1 Hz. It consists of three satellites which form an equilateral triangle in space, representing a Michelson-interferometer with an armlength of ~ 5 million kilometer. The end mirrors of the interferometer are realized by free flying proof masses. In the current baseline design--the so-called "strap-down" architecture--the laser light coming from the distant spacecraft is not reflected by the proof mass, but the beat signal with the local oscillator is measured on the optical bench. In addition, the distance between optical bench and its associated proof mass has to be measured with the same sensitivity as in the distant spacecraft interferometer, i. e. below 10 pm/sqrt(Hz) for the translation measurement (for frequencies above 2.8*10-3 Hz with an f-2 relaxation down to 3*10-5 Hz) and below 20 nrad/sqrt(Hz) for the tilt measurement (for frequencies above 10-4 Hz with an f-1 relaxation down to 3*10-5 Hz). Here, we present a compact setup of a heterodyne interferometer which serves as a demonstrator for an optical readout for the LISA proof mass position. We measured initial noise levels below 1 nm/sqrt(Hz) and 1 urad/sqrt(Hz), respectively, for frequencies > 10-3 Hz.