Ep 241 – The Feasibility Lies Developers Tell Themselves

Introduction

Are you accidentally lying to yourself to make a property deal look good on paper? It is the most common, and most expensive, mistake new developers make.

In this episode of the Property Mastermind Podcast, Hilary Sacks and Bob Anderson dissect the “lies” developers tell themselves when running a feasibility study. From assuming you can negotiate a builder’s quote down by $250k, to inflating future sale prices just to make the numbers stack, Bob explains why emotion is your worst enemy in development. They discuss the difference between a project being “profitable” versus “viable,” why financiers will reject a deal even if it makes money, and why “luck” (like a booming post-COVID market) is not a sustainable business plan. If you want to learn how to crunch the numbers like a professional and ensure your next project gets funded, this episode is a must-listen.

Episode Highlights

01:07 – Bob’s Tip of the Week: Don’t trust the weather forecast (or a bad feasibility study). A story about getting caught in the rain highlights the danger of relying on inaccurate information.
03:00 – The Biggest Issue: Bob reveals the #1 problem with new developers—they simply don’t understand the numbers or what needs to be included in a feasibility study.
04:02 – The Danger of “Small” Errors: Why death by a thousand cuts applies to your feasibility. Leaving out small costs will ultimately destroy your profit margin. 
04:36 – The Build Cost Delusion: Why you cannot just assume you can “work a builder over” to shave $250k off a quote just to make your deal work.
06:55 – The GST Trap: A cautionary tale of a developer who agreed to a build price, only to discover the builder hadn’t included GST—a massive 10% blowout before construction even started.
08:33 – Time is Money: Why being overly optimistic about your construction timeline in your feasibility is a lie that will erode your profits through daily interest charges.
10:53 – The Sale Price Lie: The temptation to inflate your estimated sale price based on what it might be worth in two years, and why the bank valuer will tear that assumption apart.
14:38 – Self-Sabotage: On the flip side, why being too conservative (overestimating costs and underestimating sales) will kill perfectly good deals.
18:14 – The Finance Reality Check: A story of a naive developer who thought he could fund a major student accommodation project with a 10% deposit and mortgage insurance.
23:22 – Profitability vs. Viability: Why a project that makes a $250k profit might still be rejected by a financier if the profit margin percentage is too low for the risk involved.
29:21 – The Right Tools: Why you cannot rely on a generic spreadsheet from a friend; you need a proper property development feasibility calculator that handles GST and compounding interest accurately.