Knowledge or sweat equity is shown in your waterfall.

I could give two hoots about state law, there are 50 states, none are exactly alike, so throwing out state requirements is like shooting a water pistol over a waterfall.

Just Google syndication waterfall and you'll have a better understanding of how deals work.

As I understand it:A "syndicator" who is familiar with a market and strong management teams finds deals that require capital primarily for real estate acquisition (but not exclusively: I have heard of funding the launch of mobile home parks, public storage facilities, and other relatively low-complexity real-estate based operations)The syndicator then sources capital from a list of people who are qualified for being able to write a certain check size (in the cases I've heard, this ranges from $20k to $100k)Each of these people can opt in or out of the deal, which is funded on a first-come / first-serve basisThe deal is structured as an LLC, with a distribution waterfall that starts with the capital invested plus 8-12% accrual in a "preferred tier" followed by a common tier which is diluted by management (~15%) and by the syndicator (~20%)Is this a common practice? 

Since you already have investors and experience, you can setup a fairly generous waterfall allocation for yourself.

Again, other might feel differently here.b) Skin in the game: as a conservative investor, I understand that the dirty secret of industries that the waterfall compensation is in the line with me and incentivizes sponsors to take more risk.

Again, other might feel differently here.b) Skin in the game: as a conservative investor, I understand that the dirty secret of industries that the waterfall compensation is in the line with me and incentivizes sponsors to take more risk.

If you have a bit more consider adding granite counter tops, water fall shower heads, and sheet glass. 

You can ask for the closing statement from the title company to determine the net amount that was made off the sale, then ask him for the waterfall calculations he used.

I have seem a few waterfalls, but they seem rare in the group.