What’s the Best First Project for a New Real Estate Developer?
Member since 2026 · 2 posts · 0 votes
What’s the Best First Project for a New Real Estate Developer?
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Investor · Pacific Northwest · Member since 2026 · 512 posts · 290 votes
3wFor a first development, I wouldn’t optimize for the project with the highest projected profit.
I’d optimize for the project with the fewest independent ways to fail while still forcing me to learn the entire development cycle.
That would probably lead me to a boring, by-right infill project: one buildable lot, one house — possibly a duplex if the zoning, financing and local market make it equally straightforward — existing utilities nearby, normal topography, clear access, good comparable sales and no entitlement heroics required.
The important part isn’t really “single-family versus duplex.”
It’s the adjective boring.
I would not want my first development to require a rezoning, subdivision approval, major utility extension, unusual stormwater solution, difficult grading, environmental remediation, questionable access, historic approval, five variances and a lender who has to believe six things that haven’t happened yet.
Every one of those may be perfectly manageable for an experienced developer.
The problem is that when you’re new, you don’t yet know which assumption is quietly carrying the entire deal.
That’s what I’d want the first project to teach me.
You’re really learning several businesses simultaneously.
You have to buy the land correctly. You have to understand what can legally be built. You have to figure out what can physically be built. You have to design something the market will pay for. You have to estimate it accurately enough that the spread survives reality. You have to get it approved, finance it, build it, deal with changes, carry it longer than expected and eventually sell or lease it.
The house is almost the easy part.
Development is largely the process of spending money in the correct order while reducing uncertainty faster than you increase your exposure.
That’s why I’d be careful with vacant land that looks cheap.
A $50,000 buildable lot can be substantially cheaper than a $10,000 lot that needs $90,000 worth of answers before anybody knows what can be done with it.
For the first project, I’d pay more for certainty.
I’d want to know before closing, to the extent reasonably possible, that my intended use is permitted, the lot dimensions work, utilities can serve it, access is legitimate, the soils/site conditions aren't hiding something ugly, and builders are actually capable of producing the project somewhere near my budget.
Then I’d work backward from the exit.
Say the finished house is conservatively worth $450,000.
I wouldn’t start with “I bought the lot for $70,000, so surely there’s money here.”
I’d start at $450,000 and subtract everything required to get there: vertical construction, site work, architecture, engineering, permits and fees, financing, taxes, insurance, commissions, carrying costs, contingency, and the profit I require for taking the risk.
Whatever remains is what the land is worth to this project.
That exercise alone probably saves aspiring developers from a lot of expensive dirt.
I’d also build a real contingency.
Not the ceremonial little contingency that disappears the first time somebody opens a wall or the municipality asks for something unexpected.
Development estimates are made with incomplete information. That uncertainty deserves a price.
Same with time.
If the spreadsheet says eight months, I want to know what happens at ten.
If it says twelve, what happens at fifteen?
Interest, taxes, insurance and overhead don't care that the contractor promised Tuesday.
For choosing the actual first project, I’d probably rank the common options something like this:
A straightforward infill single-family home is attractive because the construction, financing and exit are relatively easy to understand, and there are usually plenty of comparable sales.
A duplex could be even better where zoning allows it cleanly and the market supports it, because you learn more about income-producing real estate without dramatically increasing the size of the project.
I would be much less excited about making my first development a subdivision. Subdivision development introduces horizontal infrastructure, engineering, approvals, phasing, utility coordination and absorption risk before you even get to the houses.
Townhomes can be fantastic projects, but now you’re combining land development with multiple vertical units, shared systems/common elements, phasing and much larger capital exposure.
Small multifamily can also be excellent, but the jump in design, code, financing and operational complexity can be surprisingly large compared with a one- or two-family project.
The other thing I’d do differently from a lot of new developers is choose the municipality almost as carefully as the parcel.
Especially where you are in Pennsylvania, I’d want an architect, civil engineer, surveyor and eventually a contractor who have actually completed projects in that municipality.
Not just “a good architect.”
Someone who knows what the local planning staff expects, which issues keep coming back during review, how the submission process really works and what routinely slows projects down.
That institutional knowledge can save months.
And I’d spend money early on the professionals who can kill a bad project cheaply.
If a civil engineer can tell me for a few thousand dollars that my wonderful site has a $150,000 problem, that is not money I lost.
That may be the highest-return money I spend all year.
There’s a tendency when starting out to view architects, engineers, attorneys, surveys and due diligence as expenses that reduce the profit.
I look at them more like options.
I’m paying a relatively small amount of money for the right to discover whether I should risk a much larger amount.
That is an excellent trade.
So if I were starting from zero, my first project would probably be the most painfully conventional deal I could find that still pencils:
One clean parcel.
By-right use.
Existing utilities.
Ordinary construction.
Strong comps.
Experienced local professionals.
Multiple plausible buyers at the exit.
Enough margin to survive being wrong about something.
Then I’d use that project to learn the entire machine from acquisition through certificate of occupancy and disposition.
Project #1 doesn’t need to prove that you’re a brilliant developer.
It needs to make you competent enough to recognize what you’re looking at when Project #2 is more complicated.
9 Replies
- 3wJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
entitlement flip
- Investor · Pacific Northwest · Member since 2026 · 512 posts · 290 votes3w
For a first development, I wouldn’t optimize for the project with the highest projected profit.
I’d optimize for the project with the fewest independent ways to fail while still forcing me to learn the entire development cycle.
That would probably lead me to a boring, by-right infill project: one buildable lot, one house — possibly a duplex if the zoning, financing and local market make it equally straightforward — existing utilities nearby, normal topography, clear access, good comparable sales and no entitlement heroics required.
The important part isn’t really “single-family versus duplex.”
It’s the adjective boring.
I would not want my first development to require a rezoning, subdivision approval, major utility extension, unusual stormwater solution, difficult grading, environmental remediation, questionable access, historic approval, five variances and a lender who has to believe six things that haven’t happened yet.
Every one of those may be perfectly manageable for an experienced developer.
The problem is that when you’re new, you don’t yet know which assumption is quietly carrying the entire deal.
That’s what I’d want the first project to teach me.
You’re really learning several businesses simultaneously.
You have to buy the land correctly. You have to understand what can legally be built. You have to figure out what can physically be built. You have to design something the market will pay for. You have to estimate it accurately enough that the spread survives reality. You have to get it approved, finance it, build it, deal with changes, carry it longer than expected and eventually sell or lease it.
The house is almost the easy part.
Development is largely the process of spending money in the correct order while reducing uncertainty faster than you increase your exposure.
That’s why I’d be careful with vacant land that looks cheap.
A $50,000 buildable lot can be substantially cheaper than a $10,000 lot that needs $90,000 worth of answers before anybody knows what can be done with it.
For the first project, I’d pay more for certainty.
I’d want to know before closing, to the extent reasonably possible, that my intended use is permitted, the lot dimensions work, utilities can serve it, access is legitimate, the soils/site conditions aren't hiding something ugly, and builders are actually capable of producing the project somewhere near my budget.
Then I’d work backward from the exit.
Say the finished house is conservatively worth $450,000.
I wouldn’t start with “I bought the lot for $70,000, so surely there’s money here.”
I’d start at $450,000 and subtract everything required to get there: vertical construction, site work, architecture, engineering, permits and fees, financing, taxes, insurance, commissions, carrying costs, contingency, and the profit I require for taking the risk.
Whatever remains is what the land is worth to this project.
That exercise alone probably saves aspiring developers from a lot of expensive dirt.
I’d also build a real contingency.
Not the ceremonial little contingency that disappears the first time somebody opens a wall or the municipality asks for something unexpected.
Development estimates are made with incomplete information. That uncertainty deserves a price.
Same with time.
If the spreadsheet says eight months, I want to know what happens at ten.
If it says twelve, what happens at fifteen?
Interest, taxes, insurance and overhead don't care that the contractor promised Tuesday.
For choosing the actual first project, I’d probably rank the common options something like this:
A straightforward infill single-family home is attractive because the construction, financing and exit are relatively easy to understand, and there are usually plenty of comparable sales.
A duplex could be even better where zoning allows it cleanly and the market supports it, because you learn more about income-producing real estate without dramatically increasing the size of the project.
I would be much less excited about making my first development a subdivision. Subdivision development introduces horizontal infrastructure, engineering, approvals, phasing, utility coordination and absorption risk before you even get to the houses.
Townhomes can be fantastic projects, but now you’re combining land development with multiple vertical units, shared systems/common elements, phasing and much larger capital exposure.
Small multifamily can also be excellent, but the jump in design, code, financing and operational complexity can be surprisingly large compared with a one- or two-family project.
The other thing I’d do differently from a lot of new developers is choose the municipality almost as carefully as the parcel.
Especially where you are in Pennsylvania, I’d want an architect, civil engineer, surveyor and eventually a contractor who have actually completed projects in that municipality.
Not just “a good architect.”
Someone who knows what the local planning staff expects, which issues keep coming back during review, how the submission process really works and what routinely slows projects down.
That institutional knowledge can save months.
And I’d spend money early on the professionals who can kill a bad project cheaply.
If a civil engineer can tell me for a few thousand dollars that my wonderful site has a $150,000 problem, that is not money I lost.
That may be the highest-return money I spend all year.
There’s a tendency when starting out to view architects, engineers, attorneys, surveys and due diligence as expenses that reduce the profit.
I look at them more like options.
I’m paying a relatively small amount of money for the right to discover whether I should risk a much larger amount.
That is an excellent trade.
So if I were starting from zero, my first project would probably be the most painfully conventional deal I could find that still pencils:
One clean parcel.
By-right use.
Existing utilities.
Ordinary construction.
Strong comps.
Experienced local professionals.
Multiple plausible buyers at the exit.
Enough margin to survive being wrong about something.
Then I’d use that project to learn the entire machine from acquisition through certificate of occupancy and disposition.
Project #1 doesn’t need to prove that you’re a brilliant developer.
It needs to make you competent enough to recognize what you’re looking at when Project #2 is more complicated.
- Investor · Humble, TX · Member since 2016 · 54 posts · 22 votes3w
@Michael Eskenasy , following the thread & thanks for the pearls
- Accountant · San Francisco, CA · Member since 2026 · 34 posts · 16 votes3w
Hi Nicholas, as a CPA who looks at deals through a financial underwriting and capital structure lens, I would suggest starting with a small infill spec home or a duplex.
I would not pretend to know every trade on a job site, but from a balance-sheet and risk-management perspective, here is why that scale makes sense:
Keep the Capital Stack Simple: You are not syndicating institutional equity or structuring complex waterfalls right out of the gate. However, it does force you to properly model your equity checks, construction loan draws, and interest reserves.
Timeline Risk is Cash Flow Risk: The biggest danger to a first project is not usually physical construction—it is carrying costs (loan interest, taxes, insurance) when a timeline slips. Underwrite your interest reserves conservatively.
By-Right Zoning Only: Avoid anything requiring variances or public hearings. Municipal delays destroy financial returns faster than almost anything else because your debt service clock keeps ticking while cash flow is zero.
Start small enough that a minor delay or capital call would not sink your balance sheet, but treat the pro forma math with institutional rigor from day one.
- 3wJoseph ScoreseBusiness MemberBanker · Philadelphia · Member since 2009 · 2k+ posts · 629 votes
Nicholas, great question. If I were starting today with no development experience, I would strongly consider a ground-up single-family home or duplex before moving into larger multifamily, townhomes, or subdivisions.
The first project should be about learning the development process while controlling risk. You want to understand land acquisition, zoning, permits, plans, budgeting, contractor management, inspections, construction draws, financing, timelines, and ultimately the exit strategy. A smaller project gives you exposure to all of those moving parts without creating the complexity of a much larger development.
From the financing side, one of the biggest lessons I would emphasize is to work backward from the finished project before buying the land. Know your total development cost, realistic completed value, contingency budget, carrying costs, financing structure, and exit strategy before you close.
I would also surround myself with an experienced GC, architect, real estate attorney, lender, and local agent who understands new construction. Your first development doesn't need to be your biggest win—it should build the knowledge, relationships, and track record that allow you to confidently take on the next one.
Start manageable, learn the entire process, execute well, and then scale.
- 3wAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
Nicholas, for a first development, I’d optimize for simplicity of execution, not maximum upside.
A small ground-up single-family project or a very small infill project is usually easier to understand because there are fewer moving parts: fewer units, simpler financing, less complicated construction sequencing, and a cleaner exit if something changes. Once you move into subdivisions, townhomes, or larger multifamily, the entitlement, infrastructure, financing, and absorption risk can stack up pretty quickly.
The part I’d be most careful with is underestimating the “soft” side of development. Land cost is only the beginning. You also have design, engineering, permits, utility work, site work, financing carry, insurance, contingency, and the time it takes to actually get from dirt to a sellable or rentable product.
From the tax side, development also gets treated very differently from just buying a rental. If you’re building primarily to sell, you’re generally dealing with active business/dealer income rather than long-term investment treatment. As that activity grows and becomes consistently profitable, an S-Corp may be worth evaluating for the active development business to see whether it improves the overall tax picture, but that decision should be based on the actual profit level, payroll requirements, and reasonable-compensation rules rather than set up automatically.
If you’re building to hold instead, then basis allocation, placed-in-service timing, depreciation, and potentially cost segregation become much more important.
For a first project, I’d rather see you learn the full development cycle on something small enough that one surprise doesn’t wipe out the entire deal.
Happy to connect!
INVESTOR FRIENDLY CPA®5241 Reviews - 3wDan HandfordPro MemberInvestor · Lexington, SC · Member since 2018 · 779 posts · 501 votes
Nicholas, for a first development I would prioritize a project with fewer ways to fail rather than the format with the highest projected return. That often means a small infill project where zoning is already clear, utilities are available, the exit buyer is easy to identify, and the construction scope is familiar to local contractors. Entitlement risk, horizontal infrastructure, environmental issues, and multiple product types can make a small-looking project surprisingly complex. The first project should help you learn budgeting, approvals, contracting, draws, and sales without one mistake threatening the entire plan. Do you already have a market and a local contractor or civil engineer in mind?
- 3wStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
I am going to approach this differently. What's most important is how you keep the lights on, present favorably to lenders and comfortably cover your living expenses. What are your skills that are transferrable to real estate development? What is your background and experience level? Those are important considerations. Next question, how are you planning to cover your living expenses and pay yourself given real estate is inherently an illiquid asset class and no, rent revenue is rarely feasible and even if it becomes feasible that takes time.
For me, I began purchasing SFH's when I was employed as a W2 worker. I borrowed from local community banks and formed banking relationships I still rely upon today, 13 years later. When I decided to leave the W2 job, I continued with contract work for my previous employer, took on legal work from new clients and also obtained a brokers license in PA to generate commission income because I did not have the skills to generate revenue from development beyond exits and refinances when available. Those capital events are sporadic and to a certain extent out of your control and do not recommend anyone placing reliance on them.
At minimum, I strongly recommend you carve out time in your day to generate enough income to cover your lifestyle comfortably without relying on development. The lone exception I can think of, and have seen others implement this and grow very quickly are those with real construction management experience who can oversee construction as a self performing GC from day one with projects that have meaningful construction budgets where there is real construction management revenue coming in. This is generally reserved for people with years of experience.
If you want to be a developer, and don't have a marketable skill that allows you to generate enough income to cover your living expenses outside of development and truly want to make development a career, I recommend becoming proficient in construction management as a pre-requisite. It's the most interconnected skill you can have and easiest path to generating income without reliance on the real estate performance.
- Developer · Mount Juliet, TN · Member since 2017 · 16 posts · 5 votes1d
If I were starting over with zero development experience I would do a minor subdivision. Take a parcel that already has decent road frontage and utility access and split it into 2 to 5 lots and get them approved and sell finished lots to a builder or build one spec on one lot to learn vertical. It teaches you the entire entitlement process in miniature. Survey. Civil engineer. Planning department. Health department if youre on septic. Utility letters. Plat approval. Bonding. All the same muscles a 100 lot subdivision uses just with a fraction of the capital at risk and a shorter timeline.
The reason I would steer you away from starting with a spec home is that vertical construction hides the actual developer skill set. You learn to be a builder which is a real trade but it is not the same as learning to create lots out of raw dirt. The money in development is made on the horizontal side. If you can turn a 10 acre piece into 30 approved lots a builder will buy them from you all day. That is the seat you want to sit in.
Things I wish someone had drilled into me before my first deal. Do the perc test and get a will serve letter from the utility before you are hard on earnest money. Septic and sewer capacity kill more deals than price ever will. Tie up the land with an entitlement contingent contract so your due diligence period covers the time it takes to get preliminary approval and not just a 30 day inspection window. And build the relationship with the planning department before you own anything. Walk in and introduce yourself and ask what they hate seeing in submittals. That one coffee saves you months.
Start small enough that one mistake does not end you but complex enough that you actually learn entitlement. A 3 to 5 lot split on infill dirt in a growing submarket is close to the perfect first at bat.
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