Real estate investors across the New York tri-state area are rethinking their exit strategies. As financing conditions tighten and replacement properties grow harder to find, a once-overlooked tax structure is stepping into the spotlight: the installment sale.
Unlike a 1031 exchange — which requires identifying a replacement property within 45 days and closing within 180 days — an installment sale allows sellers to spread capital gains recognition across multiple years, easing the tax burden without the pressure of a strict reinvestment timeline. That flexibility is drawing attention.
“We have actually seen an increase in installment sales recently,” says Stephanie Dominguez, Partner, Tax at WilkinGuttenplan, a tri-state-based accounting and advisory firm. Her observation reflects a broader shift: investors who once defaulted to the 1031 exchange are now exploring structures that better accommodate complex ownership arrangements, challenging financing environments, and uncertain capital deployment.
Installment Sales Gain New Traction
Installment sales have historically played a secondary role in real estate tax planning, long overshadowed by the 1031 exchange’s ability to defer gain entirely through reinvestment. But market conditions are shifting that dynamic. When a seller spreads capital gain recognition across multiple years, the tax liability is deferred rather than triggered all at once — a meaningful advantage when reinvestment options are limited.
With transaction activity in the tri-state market picking up after a slower prior period, more investors are arriving at the table with questions about alternatives to the traditional exchange structure. The result is a tool that once sat at the margins of tax planning and now occupies a more prominent place in deal conversations.
When 1031 Exchanges Fall Short
The 1031 exchange remains the dominant tax deferral strategy for real estate investors, and for many, it stays the first choice. But the structure has real limitations. When a property is held through a partnership with multiple investors, executing a 1031 exchange requires broad agreement on the replacement property — a consensus that is not always achievable. “It can be hard when you have outside investors, and you don’t necessarily have the majority control to make those decisions,” says Dominguez.
In those situations, an installment sale offers a workable path forward. The seller achieves liquidity and defers a portion of the tax liability without needing to identify a replacement property under time pressure. For partnerships where investors carry different tax situations or liquidity needs, the installment structure can also accommodate varying payment schedules — something a 1031 exchange cannot easily do.
Financing Constraints Drive Structural Workarounds
Tighter lending conditions — particularly in the office sector — are pushing more transactions toward installment sale structures. Banks are increasingly demanding new lease commitments and detailed occupancy plans before approving financing, narrowing the buyer pool for certain asset classes. When conventional loans are difficult to secure, an installment sale offers a practical alternative. The seller effectively provides financing, allowing the transaction to proceed on terms that work for both parties.
For buyers, an installment sale removes the pressure of securing traditional financing on a compressed timeline. For sellers, installment sales open the door to a wider range of prospective buyers and keep deals moving that might otherwise stall.
Sellers Exit Office and Hospitality
The rise of installment sales is especially visible in the office and hospitality sectors, where investor sentiment has shifted considerably. Hospitality owners in particular appear increasingly motivated to sell, citing the labor-intensive nature of operating those assets compared with more passive real estate holdings. For sellers in these categories, an installment sale can make an exit possible even when financing challenges limit the available buyer pool.
Installment sales are no longer primarily a tax-optimization tool — they are becoming a practical response to transaction friction, a way to close deals when conventional structures are difficult to execute.
Planning Across All Exit Structures
No single exit strategy fits every investor, and effective tax planning begins well before a transaction is underway. The full range of available structures, 1031 exchanges, installment sales, opportunity zone investments, and outright dispositions, each carries distinct implications for tax liability, liquidity, and investment timeline. “There’s a lot of planning and opportunities that go into those kinds of deals,” says Dominguez.
For investors holding assets through partnerships or navigating complex ownership arrangements, evaluating each structure against the specific tax situation of every partner, alongside financing conditions and capital redeployment needs, determines which path forward makes the most sense.
