How Real Estate Waterfalls Actually Work (and What It Means for You) | Ep 72

(Watch the YouTube video of this episode here)

In this episode, we dive deep into the concept of waterfall structures in passive real estate investing. Learn the intricacies of who gets paid what and when, the capital stack, and how profits are split among different tiers of investors. We explore the technical details using relatable analogies, making complex ideas more understandable. Tune in and get a clear picture of how to structure your investments for successful returns.

// Key Moments

• 00:00 Intro
• 02:06 Understanding the Capital Stack
• 03:45 Exploring Different Types of Debt
• 06:35 Simple and Complex Waterfall Structures
• 09:36 Tiered Profit Splitting
• 12:47 Understanding IRR and Cumulative Returns
• 15:21 Simplifying Investment Returns

//Key Lessons

1. Understand your stack before you invest: Know your place in the capital stack to understand how risky your position is—and how sweet your returns might be.
2. Don’t just invest—interrogate: Ask your sponsor where exactly you are in the waterfall structure. Vague answers mean vague returns.
3. Preferred returns are nice—but only if they’re cumulative: If you’re promised 8%, make sure you know if that compounds over time or disappears like a ghost if missed early.
4. If the waterfall doesn’t make sense, don’t go swimming: Complicated splits and tiers may sound fancy, but if they’re not clearly explained, they’re probably hiding something.
5. The riskiest floor has the best view: In the capital stack high-rise, the penthouse (common equity) has the biggest upside—but it’s also where you ride out the storms.

// Let's build your wealth and improve housing, together.

I spent 12 years as a data scientist at HP and purchased $5M worth of real estate over 15 years using my own money. Now, I'm partnering with busy professionals to diversify their investments and generate passive income through real estate syndications and short-term flips—without dealing with tenants, toilets, or tantrums.

At Furlo Capital, we believe real estate isn't just a transaction; it's a partnership. Our value-add approach creates win-win situations where residents thrive, and investors build wealth. We're not just in this to make money—we want to make a difference.

If you're ready to diversify from stock market volatility and want reliable, steady returns, let's build your wealth and improve housing, together.

Want to dive deeper into my investing thesis and strategy?

👉 Learn more: https://furlo.com

Curious about the critical questions to ask before investing?

👉 Get my 196-question due diligence vault: https://furlo.com/good-deals-only-ebook//

Disclaimer

Please note that investing in private placement securities entails a high degree of risk, including illiquidity of the investment and loss of principal. Please refer to the subscription agreement for a discussion of risk factors.