b'Step 2: Calculate Your Annual Cash on Cash Return From Cash Flow To start these calculations, you need to calculate the annual cash on cash return from cash flow that the property will generate on a $1.5M investment over the period you expect to own the property. At this point, we arent trying to determine how much to give investors or to keep for yourself, because the deal may not even be viable if the overall return is insufficientwe are looking for the overall return the property will generate. For this example, well select a hold period of 5 years, which is what most of our clients use. Todothis,youwillprepareapro-formaprojection,showingthe propertys anticipated income and expenses for each year of the 5 year hold period. The amount left after payment of expenses is your net operating income. For the operations period, you will make a further adjustment, deducting the loan payment and withholding operating capital and reserves, to determine distributable cash.You will then add up your projected distributable cash for all 5 years of ownership (well call this overall cash flow distributions). Hold on to this number; you are going to use it later.Make sure to note the assumptions you made in generating this pro-forma and your overall cash flow distributions, as you will need to disclose these to investors in your offering materials.197'