Ep 242 – When To Walk Away From A Development Deal

Introduction

Walking away from a property development deal can be incredibly difficult, especially after you have invested significant time, emotion, and money. However, pushing forward with a flawed project or hoping the market will miraculously save your margins is a recipe for disaster.

In this episode of the Property Mastermind Podcast, hosts Hilary Saxton and Bob Anderson discuss exactly when and why you need to walk away from a deal. Drawing on real-life examples, including a “shonky” industrial site and a joint venture that didn’t align with their values , they unpack the dangers of letting emotion override logic. You will learn why “cheap insurance” like flood reports can save you millions , why you must always calculate your feasibility on today’s numbers , and how to ensure you always have a contractual “back door” exit strategy before committing.

Episode Highlights

01:59 – Bob’s Tip of the Week: Dress for the weather! A lesson learned the hard way after a freezing, rainy walk following a wedding in Queenstown, New Zealand.
03:17 – The sunken cost fallacy: Why developers find it so hard to walk away after investing time and emotion into finding a site.
06:20 – The “Hope Strategy”: A cautionary tale of a developer who bought an 11% margin deal, hoping the market would lift it to the bank’s required 15% (it didn’t).
10:28 – Emotion vs Logic: How desperation causes developers to doctor their feasibility numbers, falsely inflating sale prices or artificially underestimating build costs.
14:42 – The “Field of Dreams” myth: Why “build it and they will come” does not work in property. You must research what the market actually demands.
16:44 – Managing time delays: How unexpected council holdups erode your profits through accumulated interest holding costs.
18:15 – Big developers make big mistakes: Bob shares a story of a 400-lot subdivision error that required a massive 1-kilometre stormwater pipe.
20:22 – The “Shonky” Sellers: Why Hilary and Bob walked away from a $10,000 due diligence investment because the sellers and their conveyancers were dodgy.
23:26 – Cheap Insurance: How a $4,000 flood assessment report saved Bob from a disastrous 22-townhouse overland flow nightmare.
24:12 – Walking away from people: The story of Mint Developments walking away from a joint venture partner over misaligned ethics and values.
27:02 – The ultimate safety net: Always ensure you have a “back door” (like a due diligence clause) before signing a contract.