[KDuff]

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In short property is appreciating.
After young man buys this house, rents it out, establishes a EFT from his renters checking account to be deposited directly into IRA.

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What happens? As Adios says, it depends on what you do with your money once it is in the IRA. I assume it would be a Roth IRA since you're young and your income is probably below the threshold. The most you can annually put into your IRA account is four or five thousand (maybe in 2006?). You cannot put all of your rental income into an IRA account and create such a wonderful tax shelter. I wish it were that easy. But if you contributed the max each year and you achieved an average return of 8%, you would be sitting on a nice nestegg. It is important to let the compounding process last as long as possible--so start early.