How you pay people shapes their behavior more than any instruction you give them. Get the structure wrong and you will spend a year managing against incentives you created.
There is no single right answer, and the trade-offs are consistent enough to choose deliberately rather than by default.
The Three Structures
Compensation is the lever that quietly directs everything else in a growing investing business.
Commission only. No base, a share of the profit on deals they source or close. Costs nothing when nothing happens and produces urgency.
Salary or hourly only. Predictable for both sides. Removes the pressure that this business partly runs on.
Base plus commission. A modest base covering living costs, plus upside on results. Where most working arrangements end up.
The question is not which is best but which fits the role, since the answer differs entirely between someone doing list work and someone closing deals.
What Each One Actually Incentivizes
Worth being explicit, because the second-order effects are what bite.
Commission only produces someone who works the promising leads hard and ignores the rest. That is efficient in the short run and it means your follow-up pool goes untouched, which is where a large share of deals actually originate, per what a seller lead is actually worth.
It also produces pressure on sellers, because the person's income depends on this specific deal happening. In a business where reputation is the durable asset, that is a real risk rather than a theoretical one.
And it produces turnover. Two slow months and a commission-only person leaves, taking the training you paid for.
Salary only produces steady, unhurried work. For administrative roles that is exactly right. For acquisitions it removes the reason to make the eleventh call at five o'clock.
Base plus commission balances both, at the cost of being more complicated to administer and requiring you to define what triggers a payment, which is where disputes come from.
Matching Structure to Role
Assistants and administrative work. Hourly or salary. Their output is not deals and paying them on deals makes no sense. A small bonus tied to a metric they control, such as speed of lead entry, works better than a deal share.
Cold callers and appointment setters. Base plus a per-appointment bonus, with a quality condition attached. Paying purely per appointment produces appointments that should never have been booked, which costs you drives.
Acquisitions. Base plus a meaningful share of profit. This is the role where commission genuinely aligns behavior, and where a base is still necessary because the cycle is long and a new person will not close anything for weeks, detailed in when to hire your first acquisitions person.
Disposition. Base plus a share, usually smaller than acquisitions. Worth structuring so that speed of placement matters, since a deal placed in three days is worth considerably more than one placed in three weeks.
Defining What a Commission Is Paid On
Where most disputes originate, and the fix is writing it down before anyone starts.
Gross profit or net profit. Net is fairer and requires you to define which costs come out first: marketing, holding, closing costs, the assignment fee to another party. Gross is simpler and can produce a payment on a deal that lost money.
When it is paid. On closing is standard. Some investors pay on contract signing, which is generous and exposes you if the deal dies.
What happens if the deal falls apart after a payment was made.
What happens to deals in progress when someone leaves. This one is almost never agreed in advance, and it produces the most acrimonious conversations in this business.
Whether a deal they sourced but you closed pays differently from one they ran end to end.
None of that is complicated and all of it needs to be in writing before the first deal rather than negotiated after it.
What a Reasonable Share Looks Like
Ranges vary by market and by how much the person actually did, and the shape is consistent.
An acquisitions person who sources, negotiates and manages a deal to contract typically earns a meaningful share of the profit on it, enough that a productive person earns considerably more than a salary would have paid them.
Someone who only sets the appointment earns far less, because they did a fraction of the work.
The test worth applying: at the volume you expect, does this structure produce an income that keeps a good person. If a strong performer would earn less than they could elsewhere, the structure will not retain them regardless of how it looks on paper.
The opposite failure is also real. A share generous enough that a productive acquisitions person earns more than the business can support at that margin is a structure you will want to change, and changing compensation downward is corrosive.
Paying for Activity Versus Outcomes
The tension in every incentive design.
Outcome pay is fairer and slower. In a business with a ninety day cycle, a new person on outcome pay earns nothing for a quarter, which is untenable for most people.
Activity pay is faster and gameable. Paying per call produces calls. Paying per appointment produces appointments, some of which are worthless.
The workable middle is activity pay with a quality gate. A per-appointment bonus that only pays where the appointment met stated criteria, meaning the property is in your area, the person owns it, and they knew a buyer was coming.
Defining that gate takes an hour, and it is the difference between an appointment setter who books good meetings and one who books meetings.
The Costs Beyond the Payment
Investors budget the salary and miss the rest, then find their margin thinner than expected.
Employer taxes and insurance where someone is properly an employee, which can add a meaningful percentage on top of the wage.
Tools and access. Each person needs a seat in your CRM, a phone number, a dialer license, sometimes a data subscription. These add up faster than expected and they scale with headcount, as covered in subscription sprawl.
Your own time managing, which is real even though nobody invoices for it.
The unproductive period at the start, which for an acquisitions hire can be a full quarter before they close anything.
And replacement cost when someone leaves, the training investment written off plus the search plus the gap.
The practical implication is that the true cost of a hire is well above the headline number, and the volume increase has to clear all of it rather than just the wage, which is the arithmetic set out in setting a marketing budget.
Non-Cash Retention
Underrated, particularly for administrative roles where the pay ceiling is real.
Predictable hours. Being paid on time without chasing. Scope that grows over time. Being told when work is good, which investors do rarely.
For a remote assistant, the difference between an arrangement that lasts three months and one that lasts three years is frequently none of the money and all of the management, per managing a remote team.
The Classification Question
Not a compensation decision and it constrains one.
How you pay someone interacts with whether they are properly a contractor or an employee, and that classification is determined by the nature of the working relationship rather than by what you call it or what the person prefers.
Getting it wrong carries back taxes, penalties and interest, and the rules vary by state as well as federally. This is worth an hour with an accountant or attorney before the first payment rather than after an audit, and the detail is in contractor versus employee.
Paying Referral Sources
A separate question that comes up constantly and carries rules most investors do not check.
Paying someone for sending you a deal seems straightforward and in many states it is not, particularly where the person is unlicensed. Compensation for referring real estate business can fall under licensing statutes, and the rules differ substantially between jurisdictions and between residential and commercial.
This catches investors who set up an informal arrangement with a contractor or a property manager to pay a few hundred dollars per lead. The intent is innocent and the exposure is real.
Ask a local attorney what is permitted in your state before setting up any referral compensation, and get the arrangement in writing once you know. That hour is cheap against the alternative, which is the same standard applied throughout what not to automate.
Where paid referrals are constrained, the alternatives are worth knowing: reciprocal referrals, being useful to the source, and simply being the person they trust with a difficult client.
Reviewing It
Compensation set once and never revisited becomes wrong as the business changes.
Review annually, and specifically look at whether the structure is still producing the behavior you wanted. If your acquisitions person is ignoring the follow-up pool, that is an incentive problem rather than a diligence problem, and instructions will not fix it.
Change it forward rather than retroactively, with notice, and never reduce a share on deals already in progress.
The general principle worth holding: people do what they are paid to do, and when behavior is consistently wrong, the structure is usually the explanation before the person is.