{
  "slug": "syndication-waterfall-promote",
  "title": "Syndication Waterfall Promote Split Calculator",
  "heading": "Syndication Waterfall & Promote Split Calculator",
  "category": "financial",
  "url": "https://www.revenuelab.fyi/toolbox/syndication-waterfall-promote",
  "summary": "Model how profit splits between LPs and the GP through a preferred return waterfall.",
  "description": "Real estate syndications split distributable profit through tiers, not a flat percentage. Limited partners (LPs) get their capital back and a preferred return first — commonly 6-8% annually — before the general partner (GP, or sponsor) earns anything beyond a base fee. Above the preferred return, remaining profit splits at an agreed ratio, often 70/30 or 80/20 in the LPs' favor, sometimes stepping to a second tier (like 50/50) once returns cross a higher IRR hurdle. This calculator models a simplified two-tier waterfall: it pays the preferred return to LPs first, then splits everything above that between LPs and GP at your specified promote percentage. The GP's slice above the pref is called the 'promote' or 'carried interest,' and it's the sponsor's main compensation for finding, underwriting, and operating the deal beyond their own equity check. Run this against your actual projected total profit to see whether the promote structure meaningfully dilutes your LP return before you sign a subscription agreement.",
  "formula": "Pref owed = LP capital × pref rate × years; LP pref payment = min(pref owed, total profit); Remaining profit = Total profit − LP pref payment; GP promote = Remaining profit × promote%; LP total = LP pref payment + Remaining profit × (1 − promote%).",
  "dateModified": "2026-09-30",
  "run_url": "https://www.revenuelab.fyi/api/public/calc?tool=syndication-waterfall-promote",
  "inputs": [
    {
      "id": "lpCapital",
      "label": "LP capital invested",
      "kind": "number",
      "hint": null,
      "default": 1000000,
      "unit": "$",
      "min": 1,
      "max": null
    },
    {
      "id": "prefRate",
      "label": "Preferred return rate",
      "kind": "number",
      "hint": null,
      "default": 7,
      "unit": "%/yr",
      "min": 0,
      "max": 15
    },
    {
      "id": "holdYears",
      "label": "Hold period",
      "kind": "number",
      "hint": null,
      "default": 5,
      "unit": "years",
      "min": 1,
      "max": 15
    },
    {
      "id": "totalProfit",
      "label": "Total distributable profit (all-in, including sale)",
      "kind": "number",
      "hint": null,
      "default": 900000,
      "unit": "$",
      "min": 0,
      "max": null
    },
    {
      "id": "promotePct",
      "label": "GP promote above preferred return",
      "kind": "number",
      "hint": null,
      "default": 30,
      "unit": "%",
      "min": 0,
      "max": 50
    }
  ],
  "outputs": [
    {
      "id": "lpTotal",
      "label": "Total LP distribution",
      "format": "currency",
      "hint": null,
      "primary": true
    },
    {
      "id": "gpPromote",
      "label": "GP promote earned",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "lpPrefPaid",
      "label": "Preferred return paid to LPs",
      "format": "currency",
      "hint": null,
      "primary": false
    },
    {
      "id": "lpEffectiveReturn",
      "label": "LP total return on capital",
      "format": "percent",
      "hint": null,
      "primary": false
    },
    {
      "id": "prefOwed",
      "label": "Total preferred return accrued",
      "format": "currency",
      "hint": null,
      "primary": false
    }
  ],
  "worked_example": {
    "inputs": [
      "LP capital invested: 1000000 $",
      "Preferred return rate: 7 %/yr",
      "Hold period: 5 years",
      "Total distributable profit (all-in, including sale): 900000 $",
      "GP promote above preferred return: 30 %"
    ],
    "outputs": [
      "Total LP distribution: $735,000",
      "GP promote earned: $165,000",
      "Preferred return paid to LPs: $350,000",
      "LP total return on capital: 74%",
      "Total preferred return accrued: $350,000"
    ]
  },
  "how_to": {
    "title": "How to use this",
    "steps": [
      "Enter lp capital invested ($).",
      "Enter preferred return rate (%/yr).",
      "Enter hold period (years).",
      "Enter total distributable profit (all-in, including sale) ($).",
      "Enter gp promote above preferred return (%).",
      "Read your total lp distribution on the right — it updates as you type.",
      "Hit Share to keep the scenario or send it to someone."
    ]
  },
  "scenarios": [
    {
      "name": "Conservative",
      "description": "Lower-end numbers — what if things land soft?",
      "values": {
        "lpCapital": 600000,
        "prefRate": 4.2,
        "holdYears": 3,
        "totalProfit": 540000,
        "promotePct": 18
      }
    },
    {
      "name": "Typical",
      "description": "Defaults — the most common real-world setup.",
      "values": {
        "lpCapital": 1000000,
        "prefRate": 7,
        "holdYears": 5,
        "totalProfit": 900000,
        "promotePct": 30
      }
    },
    {
      "name": "Ambitious",
      "description": "Higher-end numbers — what if things really pop?",
      "values": {
        "lpCapital": 1600000,
        "prefRate": 11.200000000000001,
        "holdYears": 8,
        "totalProfit": 1440000,
        "promotePct": 48
      }
    }
  ],
  "limitations": [
    "Results are estimates before tax, fees, and inflation unless an input explicitly covers them.",
    "Rates are treated as fixed for the whole period — variable-rate products will drift from this projection.",
    "This is educational maths, not financial advice. Check anything contractual with the lender or your accountant."
  ],
  "faq": [
    {
      "q": "What if total profit doesn't cover the full preferred return?",
      "a": "LPs get whatever profit exists, up to the pref amount, and the GP gets nothing beyond any base asset management fee — the promote only kicks in once the pref is fully satisfied. Unpaid pref in many deals accrues (sometimes compounding) and must be caught up in a future distribution or at sale before any promote splits happen."
    },
    {
      "q": "Is 70/30 or 80/20 more common?",
      "a": "80/20 in the LPs' favor above the pref is common for stabilized, lower-risk deals; 70/30 or a stepped structure (e.g., 70/30 up to a 12% IRR, then 50/50 above) is typical for value-add or ground-up deals with more sponsor work and risk. Always check the actual PPM — marketing decks sometimes simplify structures that have more tiers in the operating agreement."
    },
    {
      "q": "Does this account for a GP catch-up provision?",
      "a": "No, this is a simplified two-tier model. Many real deals include a 'GP catch-up' tier after the pref where the GP takes 100% or 50% of profit up to a target split before reverting to the stated promote ratio — that materially increases GP take versus this simplified version, so check your PPM's actual waterfall language."
    },
    {
      "q": "How does this differ from IRR-based hurdles?",
      "a": "This model uses a simple annualized pref rate times years, which approximates but doesn't exactly equal an IRR hurdle calculated on actual cash flow timing. For precise IRR-hurdle waterfalls with interim distributions, you need year-by-year cash flow modeling, not this simplified aggregate version."
    }
  ],
  "related": [
    "https://www.revenuelab.fyi/toolbox/preferred-return-accrual",
    "https://www.revenuelab.fyi/toolbox/equity-multiple-vs-irr",
    "https://www.revenuelab.fyi/toolbox/1031-exchange-boot-basis"
  ],
  "license": "CC-BY-4.0",
  "citation": "RevenueLab — Syndication Waterfall Promote Split Calculator (https://www.revenuelab.fyi/toolbox/syndication-waterfall-promote)"
}