Community Development
What emerging developers get wrong about their first deal
Emerging developers get their first deal wrong by treating it like a real estate transaction instead of a feasibility test. They buy the site before testing it, hire the architect before underwriting it, and raise money before knowing if the project works. The result is a project that stalls at the first technical question — because no one was hired to answer it.
Christopher Pettis is the Founder and Managing Principal of nSCALE Design & Development. He has 12+ years designing and managing large-scale architectural and commercial real estate projects, including work as Associate Principal at Kohn Pedersen Fox in New York. He is a licensed architect in Ohio, New York, and North Carolina.
Published August 20, 2026
Updated September 17, 2026
What is the most common mistake emerging developers make?
The most common mistake is buying the site first. Emerging developers — especially those coming from community development or faith-based organizations — tend to approach their first project with conviction before analysis. They find a site, fall in love with it, buy it or put it under contract, and then try to figure out what they can build.
This is backwards. The site should be the last thing you commit to, not the first. A feasibility study starts at $5,000–$15,000. A site costs hundreds of thousands of dollars. Testing the site before buying it is the single highest-leverage decision an emerging developer can make.
The structural disadvantage is real and documented. The Urban Institute, studying developers by race and gender across several US markets, found that female developers and developers of color lead, on average, smaller and younger organizations with limited access to opportunities with government entities — and that burdensome city regulations are often cost- or time-prohibitive for smaller, younger development entities (Theodos et al., Housing Developers in Chicago: Examining Trends by Race and Gender, Urban Institute, August 2024). A first-time developer is not imagining the headwind.
What are the five specific mistakes?
nSCALE has identified five mistakes that emerging developers make on their first deal — all of them preventable with a Level 1 scope:
- Buying before testing — committing to a site before knowing what it allows
- Designing before underwriting — hiring an architect before knowing if the project pencils
- Raising money before knowing the gap — asking for investment without a pro forma
- Underestimating soft costs — ignoring the roughly 30% of total cost that goes to fees, permits, and financing
- Planning for one outcome — not having an off-ramp if the site doesn't work
How does "buying before testing" actually play out?
Here's how it typically goes:
- The developer finds a site that feels right — good location, right price
- The developer puts the site under contract with a 60-day due diligence period
- The developer hires an architect to design the project
- The architect produces a design that costs more than the developer expected
- The developer tries to raise money for a project that hasn't been underwritten
- The due diligence period expires, and the developer either buys the site blind or loses the earnest money
The alternative: spend $5,000–$15,000 on a Level 1 scope before putting the site under contract. The Level 1 scope tells you what you can build, what it will cost, and what approvals you need — before you've spent a dollar on the site or an architect.
What are soft costs and why do they kill first deals?
Soft costs are the fees, permits, and financing costs that aren't construction. Emerging developers almost always underestimate them — and by more than they think.
The GAO measured this directly across twelve allocating agencies. For Low-Income Housing Tax Credit projects, hard costs — land, existing structures, and construction — were roughly 70% of total project cost, and soft costs roughly 30%, for both new construction and rehabilitation. The range across agencies was 24% to 34% (GAO-18-637, Figure 4, p. 14).
The component breakdown from the same report, for new construction between 2011 and 2015 (GAO-18-637, Figure 9, pp. 23–24):
| Cost category | Share of total development cost |
|---|---|
| Construction | 56% (California) to 72% (Chicago) |
| Developer fees | 6% (Chicago) to 13% (Florida) |
| Other soft costs | 7% (Pennsylvania) to 14% (California) |
| Contractor fees | 5–9% |
| Land | ~5% typical; 12% in California |
| Architect and engineering fees | 3–5% |
An emerging developer who budgets $5M for construction and forgets the soft costs is not building a $5M project — they're building something closer to a $7M project with $5M in funding.
Note how much the ranges move by market. A national average is a starting point for a conversation, not a number to put in a budget.
How does nSCALE's three-tier structure help emerging developers?
The three-tier structure is designed specifically for emerging developers. It gives them an off-ramp at every stage:
- Level 1 ($5,000–$15,000) — answers "what can I build here?" before the site is purchased
- Level 2 ($15,000–$30,000) — answers "does it pencil?" before the architect is hired
- Level 3 ($40,000–$75,000) — answers "is it ready to fund?" before money is raised
At each tier, the developer gets a document they can take to investors, board members, and funders. The document is the credibility — it shows that a professional has tested the idea, not just that the developer has a conviction.
What should an emerging developer do first?
Call nSCALE. Not because nSCALE is the only firm that can help — but because the 30-minute screening call is free, and it will tell you whether your project is ready for a Level 1 scope or whether you need to go back and find a site first.
Christopher Pettis, nSCALE's founder, is a graduate of the Emerging Developers Accelerator Program (EDAP), Cohort III, and Project REAP Academy's 10-Week CRE Intro Course. nSCALE was built for emerging developers — not as a charity, but because the first deal is where the most preventable mistakes happen, and preventing them is the most valuable thing a development advisory firm can do.