I am a career federal employee (not in DC) and I remember very few changes in terms of spending during the recession.

Might not be a bad option but I called and you have to be a state employee or a state employee family member- I have neither.

@Kim Meredith Hampton, Nick did say his friend has a real estate license in his original post, but that was my concern as well, usually it's not a realtors license but a brokers license you need to have, if he is not doing this under a Broker.as Kim said, check the laws in the state. a way around that is to hire him as an employee, but he can not sign leases for you, you would still have to do that.

@Jose Perez, having a live-in manager and a maintenance tech in a 8-30 units apartment complex is an overkill.Generally speaking, you should have one full-time employee for 50 units.

Currently I am working as a full time employee and want to start investing on the side. 

Transferring the RE to the shareholders will trigger capital gain(if held in a partnership it would not trigger a gain).onto your question.If the person is being paid is an officer of the S-corp - I would switch him to receive a W-2.If he is not an officer - I would look to employee vs independent contractor laws to determine if w-2 or 1099 is appropriate(does the s-corp provide the tools to the shareholder to do his job, is anyone else reviewing his work, etc).

In your construction company, if you have an employee or contractor who falls and gets hurt on your job, they can come after your flips if they're within the same entity.  

I will be the only onsite employee other than the maintenance man.

@Alex Zemianek I would recommend calling other vacation rental property management companies in your state and asking if their employees are licensed real estate brokers.  

Second:Per IRS:"If you are a member of the Uniformed Services or the Foreign Service, or an employee of the intelligence community in the Unites States, you may choose to suspend the 5-year test period for ownership and use if you are on qualified official extended duty.