Investing thoughts for infant 23 year old

[Idaho Ave]

Would this work?

23 year old buys a house in Boise ID, which consistently gets rated in the top ten for safety, best place to start a business best place to raise a family blah blah blah. 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.
Young man then carries on with his life, and doesn't worry about this area of his life for the next thirty years.
What would happen?

PS- I dont know anything about anything
Thanks yall
Peace

[adios]

I assume you're putting your IRA money in a money market fund of some sort. You would have built up equity in real estate, deferred some of your rental income from taxes, and saw your IRA contributions lose some value to inflation but not a lot. Would this work, yeah I think so and the results are at least decent. Might want to take on more risk than a money market fund though i.e. if my assumption is correct FWIW.

[KDuff]

[ QUOTE ]
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.

[/ QUOTE ]
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.

[Sniper]

Is young man hiring a management company to handle maintenance, find new renters, etc?

May be easier for young man to just invest in a REIT.

[BadBoyBenny]

Clarify please.

Would this young man take a mortgage on the house or does he have the cash lying around? And if so, how would he pay the mortgage payments if the rent money is being deposited into an IRA?

[GeorgeF]

It looks like agricultural subsidies may have to be cut for the US to comply with WTO agreements and common sense. Needless to say farm states will not cease to exist just because the farm programs are cut. The problem is that where people live and who the winners and losers in the rat race will change.

How exactly do/will people in Boise Idaho earn a living? That is the most important real estate related question.


In short property is appreciating.

Is it? The land might be appreciating. Your roof and other building systems are depreciating. It is also possible that the value of your home could drop, usually around the time you lose your job and have to move. And your tenant leaves and is replaced by a scum bum.

buys this house, rents it out

While it is possible that a house can be rented at a profit, usually multifamily (6+) have a lower cost per rent dollar to operate. You may be fooling yourself into thinking you are making money. Find out what it will cost to replace the roof windows, kitchen bath ect. What is the usefull life of your roof?