Paying Property Manager in Equity

[Pope Lake]

Hi BP! 

I have a family friend who is supportive of me investing in real estate. This is such the case that they are willing to potentially manage the first property I purchase, which is looking like it'll be a SFR.

I am trying to cut costs as much as I can, which is why I love the idea of getting help from a close friend on the property management side. However, I am unfamiliar with proper compensation with a situation like this. 

I want to pay my friend their due, but I also want to leverage the scenario as a potential point of cost savings. Fortunately, they aren't looking to have this position replace their current job, they are mainly interested in helping. 

For this reason, what do you guys think about me giving them an equity stake in the house, in exchange for a smaller amount I'd give them monthly for helping me out?  

Further, what percentage would you deem appropriate if you're familiar with this exchange? 

Thank you! 

[Frank Geiger]

Few problems with this:

1) They don't get paid unless you sell (what if you hold for 30 years?) No one wants to work for free that long.

2) What if they suck and you want to fire them in Year 1. That's an expensive PM fee.

3) They have no experience and that will be a pain. They will likely mess up the contract, not screen correctly, hire the wrong vendor, etc. That will cost you more than a 10% legit PM.

You can get a operating agreement to clarify all these friction points but it's easier just to pay them a discounted management fee monthly if you decide to go that route.