b'Partial Payback of Investors on Refinance When you do a cash-out refinance, you should always use the proceeds to return investor capital contributions. The very nature of a refinance results in higher leverage on the property, and if prices drop (due to interest rate increases, oversupply, lack of financing, etc.), you could be left short when it comes to paying back investor capital contributions on sale. Additionally, if there is a preferred return for investors, from that point forward, you only owe it on their unreturned capital contributions.For example, its common for a syndicate or fund to pay back 50% of investor capital from a property refinance. From that point forward, you would only owe investors a preferred return on the 50% of their original capital contributions that remains invested, leaving more cash available to split between Class A and Class B; that is, more for the asset manager.Forever-Hold Models In the typical waterfall models described above, you would typically count all cash flow returns as a return on investment, and returns from capital transactions are usually always classified as a return of capital.If you want to have a forever hold model, then you may need to classify all cash flow distributions as a return of capital until all capital contributions arerepaid,afterwhichanyfurtherreturnsare classifiedasareturnon investment. The nice thing about this model for investors is that they dont gettaxedonreturnedcapital,buttheyalsodontgettheircapital contributions back in chunks that they can then re-invest. The best way to 217'