Property Management Company taking part of a deal?

[Craig Garrow]

I've heard this concept mentioned a couple of times now about a Property Management Company taking a small piece of a deal that they manage for the owner so that they have "skin in the game." Is this sort of thing common? As a PM myself, it's sort of intriguing. Thanks in advance!

[Joe Fairless]

@Craig Garrow I don't know if it's common but as @Michael Le  said it's something I've done with a property mgmt company on multiple, large apt community deals. It varies what each of you give/get. Some of the things I've done on deals: 

They get: 

• equity in a deal 
• A new property to manage 

I get: 

• someone to sign on a loan with me (if they have a large balance sheet and good liquidity and you don't then this is a good strategy for starting out) 
• alignment of interests on mgmt (since they now get upside) 
• additional equity in the deal (if they raise it and/or invest in the deal themselves) 

But, proceed with caution: 

As @Carlos Flores said, you need to be able to fire them as a property mgmt partner if they don't perform. However, even if you do fire them as mgmt company, you'll still be partners with them on the General Partnership side (unless you buy them out), therefore, choose your partners wisely on who you offer this to. 

Net-net, it's a great way to solve some challenges you might be coming across (ex. not enough equity, can't get approved for loans, etc.) but as with all good things there are potential downsides (ex. if they go AWOL and you have to fire them then it would get messy).