Investor · Dallas, TX · Member since 2012 · 158 posts · 99 votes
I've started a property management company and need to hire on an employee to help handle the load, but I'm having trouble figuring out HOW to actually hire them. I have the person already lined up and ready to go, but I want to do this the right way.
So far it seems I will make them a w2 employee, but I want to be able to pay them according to how many properties they're working on, and not pay them hourly. We're obviously just starting out, and I only have about 20 properties ATM, which does not allow me to pay them enough to qualify as an exempt/salaried employee. Is the only other employment option "hourly"?
In short, how should I structure my employee's pay when I want to pay them 3% per property they help manage? (in Texas)
Property Manager · Tulsa, OK · Member since 2008 · 186 posts · 208 votes
13y
Hi Grant Kemp.
Why not hire them as an independent contractor? You can pay commission only based on number of properties managed initially and bring them on later on as a W-2 employee when the business expands.
Here's some good reading from the IRS to make sure you can legitimately treat them as an IC: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-(Self-Employed)-or-Employee%3F
On your website it says you are managing for 6%. Is that single family? Are you charging a leasing commission?
Investor · Dallas, TX · Member since 2012 · 158 posts · 99 votes
13y
The reason I wasn't going 1099 is because, as far as I can tell, the IRS wouldn't let me qualify them as such since I "have the right to control what the worker does and how they do their job". Because of their definition of "employee" it seems I need to w-2 her. Thus the conundrum
Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
13y
I would look at paying minimum wage + monthly bonus to get them to the agreed amount. I run into these issues in my insurance agency and it will be a payroll headache for you.
Accountant, Enrolled Agent · Grayslake, IL · Member since 2011 · 5k+ posts · 2k+ votes
13y
I concur on the minimum wage plus bonus. If performance is satisfactory then that should be perfect. Make sure there are paying tenants and it is being managed correctly. You could even structure it as a percentage of rent.
Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes
13y
I would definitely do everything you can to make them a 1099.
Your PM LLC/Company etc should remain a separate entity.
You W2 them & workers comp, unemployment etc could eat you alive. Esp if they ever get injured or you need to fire them or they become a liability.
Just the accounting for a W2 employee is an added expense & a pain.
You also negate the ability to do a solo401(k) & to do a 401(k), SEP, IRA etc you have to match them to some degree after a the prescribed probationary period.
We now have several on call as some are better &/or more reliable than others depending on the job(s) required.
Been there done that.........no thanks!!!
but then again we are in New York!!