Development Vs. Live Environment

We are currently building a network of websites on the latest wordpress multi. Once the website are built they are maintained and hosted by us. My question is, what is the best way to set up a development environment where we can build and preview the prototype websites, and then migrate to the live server.

My developer has said having two installations is a bit complicated, however I feel it is important to have a testing ground before pushing live.

Guidance?

Thanks.