From the course: Real Estate Deal Structuring: Introduction to the Waterfall Framework
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Two-tier waterfall
From the course: Real Estate Deal Structuring: Introduction to the Waterfall Framework
Two-tier waterfall
- Alright, now, let's look at what the investment would look like for Albert and friends for a two-tier waterfall structure. And in this case, Albert is doing all of the work, he's putting the project together, he is doing all of the sweat equity. Everyone else is just providing money. Aright, so, in this case, we're going to say he is a project manager, and when you click Yes here, the two-tier structure will come out. And what we see here is the two-tier structure with the preferred return and the split. So, in this case, for our purposes, we're going to assume a 8% return with a split, then, of 65 to the investors and 35 to Albert. Notice that he is no longer getting 14% IRR anymore. And notice that all the other investors, the returns dropped slightly. Not a lot, but it dropped slightly. The reason for that is, now, Albert is getting some carried interest or some additional incentive for getting this investment done in a way where he's returning good profits to the investors. He…
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