Simulation: a fictional property for practice.

The owner redeems on day 150: what do you get back?

You bought at an IRS sale for $100,000 and started repairs. On day 150 the owner redeems. Did you make or lose money?

A fictional house bought at an IRS sale of seized real estate. Federal rules apply in every state (26 U.S.C. 6337).

• Your price: $100,000
• Spent on repairs before day 150: $18,000
• Spent on insurance and upkeep: $2,400
• Day 150: The former owner redeems

Mission 1: What the redemption pays you

• Your price: $100,000
• 20% a year, compounded daily, for 150 days: +$8,564
• Redemption paid to you: About $108,564
• Your repairs and upkeep: −$20,400
• Result: About $11,800 less than you put in

The redemption repays your price plus 20% a year (26 U.S.C. 6337; IRM 5.10.6.8), not the repairs you chose to make.

Mission 2: What should you have done?

Pick the better plan.

• Spend only what protects the property during the 180 days, and start repairs after the deed
• Start repairs right away so the house sells faster

Ask an attorney what your state allows you to do with the property during the 180 days.

Next time, would you buy at an IRS sale?

Buy, investigate or pass? Work through the drill to see what an experienced investor would weigh.