Investor Encyclopedia

Waterfall Structure

Waterfall Structure: a practical Canadian real estate investor guide to definition, deal math, underwriting use, common traps, and Realist.ca implementation.

Definition

A waterfall structure defines how cash flow and sale proceeds are distributed across investors and sponsors after return of capital, preferred returns, catch-ups, and promote splits.

Formula

Distributions follow tiers: return of capital, preferred return, catch-up if used, then promote splits.

Example

Investors receive capital back, then an 8% preferred return, then remaining profits split 70/30 until a 15% IRR, then 60/40 above that.

Why It Matters

waterfall structure decides control, downside, upside, investor rights, and who gets paid when the deal performs or disappoints.

Investor Interpretation

The structure is the deal. Before chasing headline returns, map who controls decisions, who writes more cheques, who gets paid first, and who is left holding the bag.

Realist Tie-In

Realist.ca can make waterfall structure searchable as an encyclopedia entry, link it to property underwriting, and show it beside listings, saved analyses, market pages, and investor lead magnets.