Success fee on a repositioning engagement, or a flat retainer
Take a consulting engagement on a 96-unit 1980s garden complex, 71 percent occupied, in-place rents about 380 under a comp set the owner doesn't fully trust. They want advice on whether to reposition or sell as-is. Scope runs roughly six weeks: unit-by-unit condition review with the PM, a renovation cost build from two GC walkthroughs, a rent premium test on units already turned, and a hold or sell model. Say a flat fee of 22k is quoted, and the owner counters with 8k retainer plus 1.5 percent of the lift in appraised value if they follow the recommendation and it works. Two problems with that structure are worth naming directly. First, the measurement problem: appraised value moves with cap rates, so if the market compresses 50 basis points, most of that lift has nothing to do with the consultant's work. Second, the incentive problem: getting paid on lift creates a structural bias toward recommending the reposition, even in cases where the honest answer is sell. A contingent structure can work on advisory engagements, but usually only when it attaches to something the consultant actually controls, like realized rent premium on the first 20 renovated units, rather than a valuation number that moves on market forces alone. That framing also protects the credibility of a recommendation that might honestly be to do nothing.
