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Equity Waterfall Calculator
Split a syndication's cash between limited and general partners across compounding IRR hurdles.
Inputs
Results
How the waterfall works
- LP and GP contribute equity at time 0. Each year's distributable cash flows through the tiers in order.
- Tier 1 (preferred return): cash is paid pro rata to capital until the LP has earned its compounding preferred return.
- Later tiers: once the LP hits each higher IRR hurdle, the split shifts so the GP earns a larger share of every additional dollar (the promote).
- Hurdle balances compound annually and shrink whenever the LP is paid, so early distributions reach the higher tiers sooner.
Reading the results
Compare the LP IRR to the project IRR: the gap is what the promote costs the LP. The GP promote figure is the GP's take above what its capital share alone would earn. Real operating agreements vary (catch-ups, IRR vs. equity-multiple hurdles, fees), so use this to model the common structure, then check it against the actual documents.
Worked example
A 5-year apartment syndication raises $1,000,000: $800,000 from LPs, $200,000 from the GP. The deal distributes $80,000 in year 1, $90,000 in years 2–4, and $1,500,000 at sale (year 5). Waterfall structure: 8% compounding preferred return, then 80/20 LP/GP split above 8%, then 70/30 above a 15% LP IRR hurdle.
Year 1: LP preferred hurdle = $800,000 × 8% = $64,000. $64,000 goes to LP as pref; remaining $16,000 splits 80/20 → LP gets $12,800 more, GP gets $3,200.
Sale (year 5): By this point the LP's higher hurdle has been reached on the compounding balance. Distribution above the 15% hurdle splits 70/30. LP total: ~$1,210,000 across the hold. GP total (including promote): ~$570,000 — roughly 2.8× its $200,000 contribution, versus the LP's 1.5× on $800,000.
Project IRR: ~17.2%. LP IRR: ~15.8%. GP IRR: ~23.4%. The promote transfers approximately $142,000 from LP to GP above what a simple 80/20 capital split would produce.
Frequently asked questions
What is a preferred return?
A minimum annual return, commonly 6–10%, that limited partners must receive before the general partner earns a promote.
What is a promote?
The general partner's extra share of profits above the preferred return, typically 20–30% once performance hurdles are met, in exchange for sourcing and managing the deal.
Formulas last reviewed . Results are estimates for educational use; not financial advice. Methodology →