Benefits Of Waterfall Equity Structure In Real Estate


Many investors are taking a closer look at the waterfall equity structure as part of their real estate investing portfolio. If you want to learn the benefits of this type of equity structure, this blog post is for you! It will help you know why this type of equity suits your finances.

There are many benefits to a waterfall real estate model:

Risk and return

Investors who put their money into real estate in a waterfall format can enjoy the benefits of investing their money in securities that include an upfront capital cost. This capital cost is known as frontloading. It protects investors from political risk, price changes, and other risks related to investing in real estate before they are ready to invest.

Get control

Investors who use a waterfall equity structure can fully control their money as early as possible. In a waterfall structure, investors only invest at the end of the project, which is when they know for sure that the project will be successful. There is no pressure to invest before you are 100% sure that you will make money because you usually don’t get your investment back in the first few years. Investors in this form of equity protect themselves from any political or economic risks that may affect the company or other pressures that could prevent them from ever getting their money back.

Company growth

‚ÄčInvestors who invest in a waterfall structure can expect their investment to grow with the company, which is known as the “pari passu” principle. In other words, each year that passes increases the value and growth of your equity stake in the company because it reduces from 50% of the net asset value (NOV) or a percentage of ownership given to investors every year.

Investing in a waterfall equity structure means your money will grow with the company and get paid back yearly. Real estate investing requires you to invest in a waterfall structure, which keeps your money in a place where it can grow rather than being stuck as a capital contribution.

Reduced financial stress

As mentioned before, investors who use a waterfall structure can have more control over their money by investing in real estate that is under private ownership and not with a publicly traded company. They can sell their shares anytime they want if unsatisfied with the business. This is an essential characteristic for investors because real estate investments can be risky and stressful for the wrong reasons, like dilution or changes in direction.


Hopefully, the article above has cleared your doubts about your real estate investment. You have seen that the waterfall real estate model is excellent for many reasons and is a good income-producing real estate investment. Reduced risks and high returns are what attract an investor to this model. Due to these advantages, investors are able to get their money more quickly, so there’s no need to worry about waiting around.






Share this

Recent articles

More like this