Most investment models include a host of fees, splits, inversions, waterfalls, lockups, tails, etc. which can be complicated and confusing for investors. 

I've seen straight %% split, preferred return with waterfall, preferred return without a waterfall, return of capital, return on capital, and every other mix and match.Every deal has an operating agreement that should spell out all the ways the money is distributed, what constitutes return on capital vs return off capital, splits between sponsors and investors, etc.

Don't always agree and yes sometimes it makes me want to run the other way but a lot of times they were at least trying to be fair.For instance, the classic waterfall of hit X IRR and the split goes to a different number is done so I get to hit a certain number before they get a bigger share of the profits.

A DST is hard to structure to accommodate syndicator waterfalls and uneven payouts at sale. 

Everything works like a waterfall in this business.

Generically, the waterfall of the fund is Manager Fee then Investor Distribution then Equitable Splits.

In the equity waterfall, I recently learned that the preferred return is distributed based on the amount of capital invested in the deal.Then, as the capital is paid back, the preferred return is adjusted to the amount still invested in the deal.

I usually put a waterfall into place that allows for a more favorable split once certain returns are made for the investor. 

Neda Navidnia There is a 25 acre piece of land with frontage on Lake Conroe, waterfall, personal boat launch, 2 storage barns, fence with horses, round pen, bass filled pond, gated entrance.

In the event you were managing other people's capital, the above allocation, which commonly gets referred to as a waterfall will dictate what is mandated to be paid from the total return, which then leaves essentially 'free' cash to reinvest.