A waterfall distribution is the tiered structure that determines exactly who gets paid first, how much, and in what order when a real estate syndication generates profit , and reading it correctly is one of the clearest signals separating an educated passive investor from one who is guessing. Here is how every tier works, with a real example and the red flags to watch for.

: A preferred return is the minimum return passive investors receive before a syndicator earns any share of the profits , and it is one of the most important investor protection mechanisms in any real estate syndication deal. Here is exactly how it works and what to look for when evaluating one.