Building Scenes with Waterfalls
Pick one of the highest points on your lay-out for the start of the waterfall. Especially if it’s above eye level, it will look like it’s coming from somewhere beyond eyesight – a very intriguing focal point.
Using all the basic building techniques, carve out an indentation in the scene the waterfall will follow. Make it rugged and craggy and slightly crooked. Remember, nature is messy. And very few things follow straight lines.
Put the foliage on the scene as always. If you get some on the waterfall track, don’t worry about it. Some, I think, is good. Anyway, after you apply a second coat of water you’ll never see any foliage mixed in the water. Just try to keep the waterfall track fairly free of too much foliage.

For the water, I like to use either clear caulking or Water Effects by Woodland Scenics. Both work well.
Squeeze out the stuff along the waterfall track and make a bit of a mess. Few waterfalls just dump one stream of water over a cliff. Besides it looks much more interesting if there are several streams of water falling in a slightly chaotic fashion.

After you’ve applied the water, use the end of a paintbrush to make it look even messier. Don’t just let untouched streams of water out of a tube fall down your waterfall. Mess it up. Use your imagination.
Let it dry. This stuff seems to take longer than most things to dry. Give it a few days – and then do it again. This time it will have a much more three dimensional look when it’s done.

Let it dry again.

Then add one last thin layer of water in the lake. It will look like the water from the waterfall is churning under the surface of the lake water.