This is why I wanted to re-ignite the discussion and get some additional opinions. 

He said he'd want half of that 65% split in addition to the 35% since he's got the buyer.

I cannot say for sure, you can check them out www.streamlinevrs.com.It is more based for PM's to service multi owner situations, it sounds like you may be asking/looking for a solution that is employed by the owners themselves to track performance and use?

It can run $20k or more, sometimes yearly.Also they can change management companies any time, resulting in additional fees, renovations and style changes to common and in unit furniture.

Added additional unit and rehab current units to increase value.

If you can increase an additional $200-250/unit that might be something to consider.

He was an additional tenant to the lease and knew the current tenants, so after his application was approved he just simply moved in with out notice and or signing the lease. 

In addition, we had to Quiet Title (via courts) because TWO of the existing residents in this unfinished subdivision would not sign lien waivers they had against the former developer who left the road a mess - I tried to take the quick route, but they were stubborn and didn't trust me (I guess?) 

2- If I employ a full-service property manager to handle tasks such as cleaning, maintenance, booking, and guest communication, while I focus on business aspects like property search, renovation, decoration, bookkeeping, and supply procurement, would this still qualify as material participation or could it pose a risk?

My LLC for PM would be taxed as a sole proprietorship unless I had other employees, which would equate to being considered just another source of regular income for me, meaning the $1000 I paid would be taxed at my individual income rate (25%) for a total of $250, meaning I would still only keep $7500.However, if I had more than just myself employed by the LLC and made less than $50k/year, I would only be taxed at 15% on the money I allocated for PM, or in this case, $150.