# Equity Waterfall

*Real Estate — Finicade finance glossary*

An equity waterfall sets the order cash is distributed: return of capital, then a preferred return, then splits that shift towards the sponsor.

An equity waterfall sets the order in which cash is distributed: return of capital, then a preferred return to investors, then a split that shifts increasingly to the sponsor as hurdles are cleared. The promote is the sponsor's outsized share above those hurdles. Two deals with identical gross returns can pay investors very differently depending on where the tiers sit and whether the preferred return compounds.

**Also known as:** distribution waterfall, promote, carried interest structure

**Related terms:** [Real Estate Syndication](https://finicade.com/glossary/real-estate-syndication), [Equity Multiple](https://finicade.com/glossary/equity-multiple), [Hurdle Rate](https://finicade.com/glossary/hurdle-rate), [Private Equity](https://finicade.com/glossary/private-equity), [Sponsor](https://finicade.com/glossary/sponsor)

Source: https://finicade.com/glossary/equity-waterfall