The most common and most likely answer to this crossword clue is the 8 letter word LAKESIDE
I've seen this crossword clue in The Guardian
L
A
K
E
S
I
D
E
More clues leading to the result LAKESIDE
Buddy explains!

The straight part
We know that "by the water" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case by the water = lakeside.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.
What does LAKESIDE mean?
LAKESIDE noun- The ground near the edge of a lake; the land adjacent to a lake.
- By the side of a lake.