The project pencils out. The appraisal is strong, the units are moving or leasing, and your tax return shows a healthy gain. So why does your New York real estate development cash flow feel so tight? If you’re juggling land, construction loans, and an operating business on the side, the answer is usually timing… with cash leaving long before the profit arrives.
Here are five warning signs we see in New York developers, and what to do about each.
Land, interest, property taxes, insurance, and soft costs all go out the door during development. Under the uniform capitalization (UNICAP) rules in Section 263A, you must add many of those costs to the property’s cost rather than deduct them when you pay them, including pre-development carrying costs and interest during development.
The result can feel backward: you’re spending real cash, but your taxable income is higher than your bank balance suggests, because the deductions are delayed until the property is sold or placed in service. Whether and how UNICAP applies depends on your facts, such as whether you build to sell or hold.
Forecast cash and taxable income side by side, project by project, so a tax payment never arrives on a project that hasn’t generated any cash.
Lenders fund development in stages, and every draw depends on your budget matching reality. If cost codes are inconsistent, change orders aren’t logged, or you can’t say how much of the interest reserve remains, draws get delayed, and delayed draws mean contractors wait for payment.
As the owner paying contractors, you also have rules to track. For private New York construction contracts over $150,000 entered into on or after November 17, 2023, retainage is capped at 5%, is due within 30 days after final approval, and accrues 1% monthly interest if it’s late (National Law Review summary; see also NY Senate Bill S3539). Unplanned retainage releases are a classic cash surprise.
Run a monthly budget-to-actual and draw-to-cash reconciliation for every active project, including retainage payable and the remaining reserve. (General information, not legal advice.)
Most developers set up an entity per project, plus an operating company, a management company, and maybe a contracting arm. In practice, the money often moves between them informally: one account covers another’s shortfall, and developer fees or reimbursements aren’t recorded. Months later, no one can say which project owes what, or whether the lender’s covenants are being met.
This is the same pattern we describe in What Messy Tax Bookkeeping Is Actually Costing You. Clean, entity-level books are the foundation for everything else, from lender reporting to tax planning.
What to Do
Give each entity its own bank account and ledger, and document every intercompany transfer as a loan, contribution, or fee.
If you hold properties, a cost segregation study can reclassify parts of a building into shorter-lived assets, accelerating deductions. Federal 100% bonus depreciation was restored for qualifying property acquired after January 19, 2025, which makes timing even more valuable. We walk through the basics in A Cost Segregation Study Could Save You Six Figures, and IRS Publication 946 covers the federal depreciation rules.
Two cautions. First, New York has generally decoupled from federal bonus depreciation, requiring an add-back on the state return, so the state benefit may look very different from the federal one. Second, properties you build to sell are typically inventory rather than depreciable assets. Confirm both with your tax advisor before you plan around them.
Decide which properties you’ll hold and which you’ll sell, then model federal and New York deductions separately before you commit.
New York offers an optional pass-through entity tax (PTET) for partnerships and S corporations that can reduce federal tax by working around the SALT deduction cap. You must make the election by March 15 each year, and it affects your cash because you must fund the payments. If you find out about it in April, the window has closed.
What to do: Review projected income by entity every quarter, and decide on elections like PTET early.
These five signs share one thing: a missing forward view. That’s what our CFO Services & Coaching provides. We build project-level and consolidated cash forecasts, reconcile budgets to draws, and track the money moving between your entities. Then we coordinate with our tax planning and strategy work so your deductions, elections, and estimated payments fit the cash you’ll actually have. We work with New York clients remotely, year-round.
Pick your two biggest active projects and write down, for each: cash spent to date, cash still needed to finish, expected draws and sale or refinance timing, and the tax you expect to owe. If you can’t finish the list in an afternoon, or the numbers don’t tie to your books, you’ve found your gap.
Book a call, and we’ll walk through your projects with you, or contact us here to start the conversation.
Christine Gervais
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.
