top of page
Search

What is a preferred return and waterfall structure in a multifamily syndication?

  • Christina Kovacs
  • Jan 24, 2023
  • 2 min read

In a multifamily syndication, a preferred return is a specific rate of return that is paid to the investors before any profits are distributed to the sponsors or general partners. The preferred return is typically expressed as a percentage of the invested capital and is paid on a regular basis, such as quarterly or annually. The preferred return serves as a minimum return for the investors and is designed to provide a level of security and predictability in the investment.


A waterfall structure is a method for distributing profits among the investors and sponsors in a multifamily syndication. The structure typically starts with the payment of the preferred return to the investors, and any remaining profits are then distributed according to a predetermined set of rules. These rules, also known as the "waterfall," can vary depending on the specific terms of the syndication agreement, but they typically outline the order in which profits are distributed and the percentage of profits that each party is entitled to receive.


For example, in a common waterfall structure, the sponsors or general partners may be entitled to receive a percentage of the profits after the investors have received the preferred return and any other agreed-upon returns. The remaining profits may then be distributed to the investors on a pro rata basis, based on their percentage ownership in the investment.


The preferred return and waterfall structure are important considerations in a multifamily syndication, as they can affect the overall return on investment for the investors and the profitability of the project for the sponsors. It is important to understand these terms and how they will be applied in the investment before committing to a syndication.





 
 
 

Commentaires


© 2025 by Christina Kovacs

The information presented on this website is for informational and educational purposes only and should not be construed as an offer to sell or a solicitation of an offer to buy any securities. Any potential investment opportunity will be made available only to pre-existing, substantive relationships as required under Regulation D, Rule 506(b) of the Securities Act of 1933. This website does not constitute general solicitation, advertising, or any form of investment advice. Any securities offered by [Entity Name] are available only to accredited and, in certain cases, sophisticated investors with whom we have a pre-existing and substantive relationship.

bottom of page