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%.

Success Rate Gross Proceeds Net Proceeds IRR
100% $26,000 $16,000 80%
90% $23,400 $13,400 67%
80% $20,800 $10,800 54%
70% $18,200 $8,200 41%
60% $15,600 $5,600 28%
50% $13,000 $3,000 15%
40% $10,400 $400 2%
30% $7,800 ($2,200) (11%)
Assumptions
  • Principal is $10,000.
  • Projected net return is 80%.
  • The case resolution time is 2 years.

Projections

  • $500,000 investment in the first and second year, then $80,000 each year thereafter.
  • The target IRR is 75%.
  • 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%

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.