Investor Returns Calculation

[Alex Webster]

Hi All,

I am new into real estate and have recently taken on outside investors. I would like to hear feedback on the best way to calculate investor returns. I will write out an example below to see if anyone can help me answer my questions.

Example: You receive $100,000 from outside investors to purchase a couple rental properties. Q1 you pay out $5,000 to your investors; Q2 you reinvest $5,000 as part of a down payment on another property and original amount invested doesn't change; Q3 you pay out $5,000 to your investors and Q4 you pay out $5,000 to your investors. 

1. After Q2, does the basis for calculating returns stay at $100,000 or increase to $105,000?

2. What is the basis for calculating returns for year 2. Does it change year over year or does the basis for investor returns always stay at $100,000?

These are probably simple questions to most on here, but would appreciate the feedback.