property manager part owner

[Patrick Liska]

I have a Property Management co. i have been using for the past 4 years, they have been great, but they were bought out this year and now the new owners have sent me new management agreements for all my properties, Garbage. I went through it and marked it up and it's now in an attorneys hands to write a new one. i have to negotiate with the PM co. yet but i am talking to another one in the mean time. my question is, if i brought someone on and made them a 10% partner in each business ( with no rights to the properties themselves), which would make them part owner of the co. my thought is they would be legally able to negotiate contracts and they would run the businesses side of the co. i see this as a way around them getting a broker license and they would not be considered an employee. that person can then do the same for other big investors in the area and make a decent living on it. anyone have any thoughts if this is a good idea or bad idea? or if i am looking at this wrong and legally can not do this?

[Keith Leckey]

Hey Patrick, hopefully we get a PA lawyer or CPA to chime in. This is something I’ve thought about also. My question about the 10% (or 1%, 5% or whatever), wouldn’t that person be responsible for their percentage of the expenses and receive their percentage of the rental income also? Even if they didn’t actually take that income or pay those expenses, they would probably have to show it on their taxes. You had also mentioned that the partner would have “no rights to the properties themselves”.  Technically I would think that’s where the percentage of ownership comes in that allows them to manage those properties. And being any percentage owner, wouldn’t that need to be recorded on the deed as well?  My understanding is that person could just be an employee of the property owner also and do it that way, but then I’m assuming that opens up another whole layer for taxes, etc. This is a great topic Patrick! Looking forward to the feedback.