Investment firm structure

[Nicholas Burch]

One day I hope to own or be a co-owner of a real estate investment firm. I have noticed that some investment firms do not have salaried employees, their investment Analysts/Underwriters are 1099. Other firms have all of their employees under salary. Is this due to portfolio size or business structure or some other factors I have not considered?

[Ronald Rohde]

Quote from @Scott Mac:

Quote from @Nicholas Burch:

Quote from @Scott Mac:

W2 vs 1099 depends on how the owner wants to do business, and how much control the owner wants to have over the workers.

It's less costly to the owner to have 1099 and cut Vendor Checks vs running Payroll (that is due to not having to pay certain employment taxes on the workers).

Class your Employees as 1099's and if they are not true 1099's the IRS will fine you big time.

Good Luck!

What do you reckon is the typical payout for all team members? Per deal basis or Annual NOI? I can see how you can pay your employees after refinancing or HELOC an investment or flip. But, those payouts can take half a year or more depending on equity build-up and available refinance products.

There is no typical in this arena, there are so many variables.

If you are wondering how to fund a payroll ongoing, you will need to work that out with your CPA and with someone who knows the payroll laws for to the area the employee is located in (all states are different). FICA, FUTA, SUTA, required OT, required benefits, etc...Many businesses of all types use a payroll service such as ADP when they get over 5 or so employees.

Payroll is detailed and has a lot of details to it...

If you are asking about to keep the payroll being paid in the face of little or no cash flow for it...the way I have seen it done is [1] Additional cash injections into the business, and [2] Layoffs.

The additional cash injections can be planned for during budgeting, and if you pockets are not deep enough to swing that ball bat... choice number [2] comes up as soon as the well is dry.

Most of the "Labor" is piecemeal and will bill you...Sewer inspections, electricians labor and supplies, landscaping.

The "Labor Burden" of an onsite maintenance person should be in the cash flow budget for the property.

If you are talking about the Management side of the deal... they will be members in an LLC with fair pay to each for what they bring to the table.

It's up to them as to how they want to set up the splits, and the timing of cash pays to themselves.

In America you are free to contract.



Good Luck!

 Unless you want non-competes for hourly workers! No non-competes for lawyers!