Investor returns waterfall calculator

Investors want to know exactly how they get paid back. This walks the money through each step so you can explain your structure in one table.

How the calculation works

The calculator uses a European, whole-deal waterfall in four steps. First, all capital is returned pro rata. Second, the preferred return is paid on all capital, compounding yearly over the years held. Third, if there is a preferred return and catch-up is on, the sponsor takes the catch-up rate of each dollar until it holds the carry percentage of all profit paid so far. Fourth, the rest splits between all capital and the sponsor's carry.

The investor yearly return is a simple approximation that assumes one investment and one exit. If cash returned is below the capital invested, everything goes to return of capital and the return is negative. GP capital earns returns like LP capital.

Keep your structure simple enough to explain in one minute. If an investor needs a lawyer to understand how they get paid, you've already slowed the deal down.

Related: How do I raise capital for a real estate deal? and the glossary entries for preferred return and catch-up.