Background

Due to a recent change in my investment strategy, I have to reassess my asset growth over the next few years. I start with an initial investment of $1,000,000 in the first 2 years, followed by an additional investment of $80,000 every year. The average case resolution time is 2 years with a 75% target IRR. Profits are taxed at long-term capital gain rates. All after-tax returns will be reinvested.

Expected Return

The platform target is 75% IRR. The actual success rate as of April 2017 is little over 90%, which translates to 85% IRR.

Success Rate Gross Proceeds Net Proceeds IRR
100% $30,000 $20,000 100%
90% $27,000 $17,000 85%
75% $22,500 $12,500 62.5%
50% $15,000 $5,000 25%
33% $10,000 $0 0%
Assumptions
  • Principal is $10,000.
  • The target return is 100%.
  • The case resolution time is 2 years.

Projections

Conservative

  • $500,000 investment in the first and second year, then $80,000 each year thereafter.
  • The target IRR is 75% (83% success rate).
  • The case resolution timing is spread over 3 years.
  • Avoid long-term capital gain tax
  • Avoid state income tax
  • All after tax fund will be reinvested.
Year New Investment Capital Gain Current Investments Tax Rate
2017 $500,000 $0 $500,000 0%
2018 $500,000 $125,000 $1,120,250 3.8%
2019 $80,000 $446,729 $1,630,003 3.8%
2020 $80,000 $1,003,140 $2,675,024 3.8%
2021 $80,000 $1,506,276 $4,204,061 3.8%
2022 $80,000 $2,272,466 $6,470,173 3.8%
2023 $80,000 $3,708,773 $10,118,013 3.8%
2024 $80,000 $5,687,632 $15,669,515 3.8%
2025 $80,000 $8,801,003 $24,216,079 3.8%
2026 $80,000 $13,714,074 $37,489,019 3.8%

Speculative

  • All conservative conditions
  • Increase the target IRR to 85% (90% success rate).
  • Obamacare Repeal
Year New Investment Capital Gain Current Investments Tax Rate
2017 $500,000 $0 $500,000 0%
2018 $500,000 $125,000 $1,141,667 0%
2019 $80,000 $452,083 $1,734,028 0%
2020 $80,000 $1,036,285 $2,988,484 0%
2021 $80,000 $1,628,834 $4,914,496 0%
2022 $80,000 $2,592,069 $7,932,174 0%
2023 $80,000 $4,410,663 $13,010,926 0%
2024 $80,000 $7,100,225 $21,137,847 0%
2025 $80,000 $11,535,351 $34,291,245 0%
2026 $80,000 $18,842,954 $55,726,592 0%

Commentary

If all goes well, I’ll reach my retirement net worth target of $5M in 4-5 years. IRR may drop over the next few years as the platform loosen case underwriting standards to meet the demand from investors seeking diversification and long-term capital appreciation. Leveraged investing with credit card balance transfers brings higher investment profits. Higher risk equals greater return.