Is hourly billing the right incentive structure for a condition inspector on a rental portfolio?

Working through licensing now and the fee structures come up constantly in the study groups. The argument I hear from the people already doing it is that flat fees on purchase inspections survive because the scope is defined by a standards of practice document. Maintenance walks don't have that, so there's nothing to flat price against. You're paying for judgment and time because nobody has written down what the job is. Which suggests the fix is defining the scope, then either structure works.

Genuinely new here so tell me if this is naive, but couldn't you just ask him how many hours he expects and then compare that to what he bills? Seems like the disagreement only exists if nobody asks.

Rigging, they always tell you the hours and it is always more, because a building does not cooperate. Take a 9 unit in a soft submarket where the annual walk goes from six hours to eleven the year the roof starts moving. That is the correct amount of time. On a flat fee the inspector writes "monitor" and goes home. Sable, the incentive worry cuts the other direction too. Flat fee inspectors on repeat work start scheduling three buildings a day.

I'll ask the embarrassing one. What stops him from writing a longer report full of low severity items to justify eleven hours? You'd never know the difference from where you sit as an LP reading an invoice.

Compass, you'd know across years. A report that repeats the same forty minor items with no change in condition language is a report nobody looked hard at. A report where three items move from monitor to act and two drop off is somebody actually comparing to last year. That's the only quality check available at your distance, Sable, and it needs two cycles minimum before it tells you anything.

Underwriting is where this question lands, so ask what the inspection number does to the model. $2,900 on 14 doors is $207 a door annually. If that line moving to $350 changes whether the deal works, the deal doesn't work. If it doesn't change anything, then pay hourly and stop managing it, because the value of the walk is entirely in whether the deferred item got caught before it became a capital event. The cap structure Arbor's version implies is the one worth writing. Flat per door with hourly above a stated hour count, and the overrun has to come with a written reason before he bills it rather than after. That preserves the incentive to keep looking and puts one decision point where you can see it. Confirm how you're allowed to charge that back to the property with whoever handles the operating agreement, since that varies by how the entity documents are written.