Brian Burke discusses the structure of his investor waterfall

[Justin Elliott]

Monthly we’ve been doing deep dives into multifamily deals. On August 4th we have our next guest, John Boriack coming to our August Multifamily Deep Dive to discuss his 264 unit property, built in 1960, located in Pasadena, TX. Learn about finding one of the last untouched value-add deals left in Houston. We do about 45 minutes of presentation with question and answer and we network in Zoom rooms afterwards. You can sign up for it at Below is a snippet from a past deep dive with Brian Burke.

Justin Elliott: Hey, Brian, your investor waterfall. Has that changed?
You mentioned before, obviously, IRRs have dropped since this deal has been done.
Has your waterfall structure changed?

Brian Burke: We've kept the waterfall structure the same.
You can see here.
We used in this case, We used in this case, we used an 8% preferred return, and then we had three waterfall hurdle tears.
The investors got 70% to 12 60% to 15.
And then after 15, they got 50 50.
And we've essentially I've been using this waterfall almost since I started way back in the beginning.
Every once in a while, we might alter something here or there because we feel the need to.
But too many times I've done that and been completely wrong.
We had a deal that we did about three years ago where when we underwrote the deal, I felt that we needed to juice the
return a little bit more.
And so we switched the waterfall to an 80 70 60 instead of 70 60 50.
And at the end of the day, when we sold that property, we delivered to our investors like a 32% IRR.
And now I'm kicking myself like we really didn't need to do that.
We could have left it.
Just as this waterfall is here, our investors would have got a 28 IRR or whatever and been thrilled to death.
So I tend to leave the waterfall alone most of the time.