05/09/2026
Not Every Good Project Is a Good Investment
In my work, I am regularly approached by partners, property owners and developers with different real estate investment opportunities.
Many of them look highly attractive at first glance.
A favourable acquisition price.
A stalled development.
A large plot with significant development potential.
Dozens of apartments or houses that could potentially be sold.
And naturally, the presentation highlights the opportunity: high potential value and attractive returns for the investor.
But for my client, the question is not whether a project sounds good.
The question is:
Do the numbers actually work?
And for me, this is where investment advisory begins.
A real example
Recently, I analysed a residential development opportunity in Spain involving close to 40 units.
The original concept proposed the development of several terraced family homes. Most of the properties were between 110 and 130 m², with their own plots, gardens and parking.
At first glance, it looked like an interesting development.
Nearly 40 homes × sales price = significant potential revenue.
But a development cannot be analysed this way.
Once I started putting the actual numbers behind the project, a very different picture began to emerge.
1. What matters is not how many homes can be built, but how much they can realistically be sold for.
First, the local market needs to be analysed.
What is the current price per square metre?
At what prices are comparable properties being offered?
How much new-build competition is there?
And perhaps even more importantly:
How many properties of this type can the local market actually absorb?
With a development involving dozens of residential units, it is not enough to establish that one house could sell for, for example, €140,000 or €160,000.
The real question is whether the entire development can be sold at that price level — and how long it would take.
That is a major difference.
2. GDV is not profit
Let's assume that, once completed, the development could generate several million euros in total sales revenue — its Gross Development Value (GDV).
At first, that sounds very attractive.
But from that figure, we still need to deduct:
land acquisition,
construction costs,
urbanisation and infrastructure,
architectural and engineering fees,
permits and licences,
utility connections,
insurance,
financing costs,
marketing and sales,
taxes,
and an appropriate contingency allowance.
In this type of project, it is not simply a matter of building the houses. New internal roads, green areas and other infrastructure may also form part of the development.
At this point, the question is no longer:
“What will the project be worth?”
but rather:
“How much will actually remain for the investor after all costs and risks have been taken into account?”
3. An old project budget is not a current development cost
The original construction budget included in the documentation was prepared more than 15 years ago.
An investment decision today cannot be based on that figure.
The entire project needs to be recalculated using current construction costs, today's technical requirements and the present planning and permitting conditions.
And this is often the point at which a project that looks extremely attractive on paper reveals something very different:
in its original form, it may no longer be economically viable.
But that does not necessarily mean the opportunity itself is bad.
Sometimes the project does not need to be rejected. The strategy needs to change.
In this case, for example, an entirely different model could be considered:
instead of developing the entire project at once, the development could be divided into phases.
Different strategy. Different capital requirement. Different risk. Different return.
This is what I actually do for my clients
My work is not simply about forwarding investment opportunities.
Quite the opposite.
With many of the opportunities that reach me, my first task is to determine whether they are even worth pursuing further.
I analyse the documentation behind the project, the local property market, realistically achievable sales prices, demand, development costs, the planning and permitting situation, the expected exit period and the potential return on investment.
And sometimes the conclusion is:
Yes, this is genuinely a good investment.
Other times:
It is a good project, but only below a certain acquisition price.
In other cases:
The underlying opportunity is interesting, but the development strategy needs to change.
And sometimes the best investment decision is simply:
not to buy.
That has value too.
Because the role of an investment advisor is not to make a transaction happen at any cost.
It is to help the client decide:
where it makes sense to put capital at risk — and where it does not.
