Is Wholesaling Real Estate Legal In Louisiana? A 2024 Guide For Investors

Are you considering diving into the world of real estate investment in Louisiana but unsure where to start? A pivotal question on the minds of many potential investors is: "Is wholesaling real estate legal in Louisiana?" This article will explore the legalities of wholesaling real estate within the state, shedding light on what is permissible and what might land you in hot water. Whether you’re a seasoned investor or a newcomer, understanding the framework of Louisiana's real estate laws is crucial for anyone looking to make profitable legal investments in today’s market. To start things off, we'll cover the following:

• What Is Real Estate Wholesaling?
• What Do You Need To Know About Wholesaling Houses in Louisiana?
• Is Wholesaling Real Estate Legal in Louisiana?
• Do You Need A Real Estate License To Wholesale Houses in Louisiana?
• What Are The Wholesaling Laws in Louisiana?
• Is Co-Wholesaling Real Estate Legal in Louisiana?
• Is Reverse Wholesaling Real Estate Legal in Louisiana?
• How Is Wholesaling Real Estate Legal in Louisiana?
• Final Thoughts

*Before we begin our guide on whether real estate wholesaling is legal in Louisiana, we invite you to view our video on How To Wholesale Real Estate Step by Step (IN 21 DAYS OR LESS)!

Host and CEO of Real Estate Skills, Alex Martinez, provides a comprehensive, step-by-step guide for beginners to start wholesaling real estate!

What Is Real Estate Wholesaling?

Real estate wholesaling is a strategy in the property market where an investor, known as a wholesaler, contracts a home with a seller and then sells the home-buying rights to another buyer, making a profit without ever actually owning the property. This method is particularly attractive for those looking to invest in real estate without a significant upfront financial commitment. There are three primary strategies in real estate wholesaling, each suited to different circumstances: contract assignment, double closing, and wholetailing.

The assignment of a contract is the most popular and straightforward approach. In this strategy, the wholesaler enters into a contract with a seller and then assigns that contract to an end buyer. The wholesaler makes money by selling the contract for a fee, known as an assignment fee, which is the difference between the contract price with the seller and the price paid by the buyer.

While double closings and wholetailing are also viable strategies, involving buying the property or improving it before resale, this article will focus primarily on the contract assignment. This approach is widely favored for its simplicity and low barrier to entry, making it an excellent starting point for those new to real estate wholesaling.

Read Also: How To Find Off-Market Properties In Louisiana

You can also check out our video on Wholesale Real Estate Contracts!

What Do You Need To Know About Wholesaling Houses In Louisiana?

Aspiring investors looking to delve into wholesaling real estate in Louisiana should be well-prepared and informed about several critical aspects to ensure their venture is both successful and compliant with state regulations. First and foremost, it is crucial to understand the real estate laws that govern transactions in Louisiana. Investors should ask, "Is wholesaling real estate legal in Louisiana?" The answer is yes, but with nuances. Wholesalers must operate within the legal framework, avoiding activities requiring a real estate license unless properly licensed.

Additionally, knowing the local market dynamics is essential. Investors should study regional trends, property values, and economic factors that influence the real estate market in different parts of Louisiana. This knowledge helps identify lucrative opportunities and understand which areas are ripe for investment.

Lastly, it is vital for wholesalers to master various exit strategies tailored to their investment goals. These can include the assignment of contracts, where rights to purchase a property are sold to another buyer, or more complex strategies like double closings and wholetailing, which involve purchasing properties before selling them.

By grasping these key areas, aspiring wholesalers can navigate the Louisiana real estate market with confidence and make informed decisions that maximize their chances of success.

Read Also: How To Wholesale Real Estate In Louisiana: Step By Step

Is Wholesaling Real Estate Legal In Louisiana?

Wholesaling real estate is legal in Louisiana, allowing individuals to engage in the transaction of property rights without holding the property itself. However, it's crucial that wholesalers do not perform any activities requiring a real estate license, such as representing buyers or sellers, unless they are licensed. Wholesalers simply acquire the rights to purchase a house and then transfer these rights to another buyer for a fee, effectively operating within the bounds of the law.

All real estate transactions are governed by rules and regulations set forth by the Louisiana Real Estate Commission (LREC) in Baton Rouge.

Two official publications regarding Louisiana's real estate rules and regulations are the Louisiana Administrative Code (LAC) and the Louisiana Register (Register).

The LAC is published biennially and is current through the compiled publication date, which may vary by title. The Louisiana Real Estate Commission Rules and Regulations are found in Title 46.LXVII: Professional and Occupational Standards.

The Louisiana Register is published monthly and contains rules and regulations that have been adopted, amended, or repealed after the most current LAC has been published.

Updates in the Register immediately become part of the LAC and are included in the specific title’s next compilation.

Do You Need A License To Wholesale Real Estate In Louisiana?

To wholesale properties, you don't need to have a Louisiana real estate license, but you must understand the limitations that you work under as a wholesaler.

The most important of these is that you can’t market an actual property if you want to assign a contract.

You can only market the rights to the contract assignment.

You are not allowed to engage in any public advertising, either online or in newspapers, that directly publicizes the property or that it is for sale.

But you can work with your pre-existing buyer relationships and personal network and have private conversations with those who may want to cut a deal with you to have the contract assigned to them. There is a big difference!

As a wholesaler, you’ll collect a fee when you assign a contract. As a licensed Realtor, you will earn a commission when you sell a property.

Some wholesalers choose to become a licensed agent to avoid any potential constraints. Those who want to conduct real estate activity under the umbrella of a real estate license can make an application with the LREC.

Read Also: Louisiana Real Estate Classes: Wholesaling, Flipping & Licensing

What Are The Wholesaling Laws In Louisiana?

There don’t appear to be any laws specifically related to wholesaling in Louisiana, so you need to interpret existing general laws about real estate transactions instead.

RS 37:1436

For example, RS 37:1436 requires active real estate professionals to be licensed when engaged in real estate activities.

In part, the statute states, ”It shall be unlawful for any person, partnership, limited liability company, association, or corporation, foreign or domestic, whether pursuant to a power of attorney or otherwise, for a fee, commission, or other valuable consideration, or with the intention, in the expectation, or upon the promise of receiving or collecting a fee, commission or other valuable consideration, to engage in any real estate activity relating to any portion of a real estate transaction performed for another, unless exempted, as specified herein.”

That is why it is critical to engage in only marketing the assignment of a contract and not the actual property.

Penalties can be stiff for non-compliance.

“Whoever violates the provisions of this Section shall be guilty of a misdemeanor and fined not more than five hundred dollars per day of violation, beginning from five calendar days from service by certified mail of the cease-and-desist letter issued by the commission, or imprisoned for not more than three months, or both.”

RS 37:1446

Under RS 37:1446, brokers can also get into trouble if they pay non-licensed wholesalers a commission. As such, you must identify any payments as a fee for services.

RS 37:1459

By statute, the LREC can initiate enforcement actions on unlicensed persons as well. That is covered under RS 37:1459, which states in part, “the commission may issue a subpoena to any person or persons who the commission has probable cause to believe has engaged in real estate activity without a currently valid license.”

The statute also declares, “The commission may impose a civil penalty of no more than five thousand dollars upon any unlicensed person…”

These are just a few examples of the statutes and penalties that a wholesaler can face by not following Louisiana laws. That’s why, when in doubt, retaining an experienced real estate attorney is a wise move in all cases. You may also be able to get guidance by contacting a local real estate investors association.

*For in-depth training on real estate investing, Real Estate Skills offers extensive courses to get you ready to make your first investment. Attend our FREE training and gain insider knowledge, expert strategies, and essential skills to make the most of every real estate opportunity that comes your way!

Is Co-Wholesaling Real Estate Legal In Louisiana?

Co-wholesaling real estate in Louisiana is legal because it is governed by the same laws and regulations that make traditional wholesaling legal. Consequently, it involves partnering with one or more entities to either do more wholesaling deals or bring added strength and skills to complete deals you may attempt to wholesale.

For example, a joint venture between partners may mean that one person actively searches for properties to place under contract.

The other partner may act as a lender or provide financing resources, legal advice, contract expertise, or other elements needed to facilitate the deal. That works well when one party has limited cash reserves or cash flow.

Often, the equitable interest in these deals is a 50-50 split. However, any terms can be put in place, depending on the nature of the relationship and what each party brings to the deal.

The key to co-wholesaling is to be transparent and identify all parties when drafting real estate contracts; otherwise, the steps and laws governing co-wholesaling are the same.

Is Reverse Wholesaling Real Estate Legal In Louisiana?

Reverse wholesaling is legal in Louisiana, following the same regulatory framework as traditional wholesaling. In reverse wholesaling, the investor secures a buyer before finding a property, ensuring a quicker and more targeted transaction process. This method complies with Louisiana's real estate laws as long as the wholesaler does not engage in activities that would require a real estate license, such as marketing the property themselves without a license.

Read Also: Direct Mail Marketing - The (Ultimate) Guide for Real Estate Investors

Final Thoughts

Is wholesaling real estate legal in Louisiana? Yes, it is legal. However, unlicensed wholesalers must adhere strictly to the guidelines and avoid any actions requiring a real estate license, such as actively assisting in buying, selling, or marketing properties. Instead, their role is confined to acquiring the contractual rights to purchase a home and subsequently transferring these rights to an end buyer for a fee.

Now that you understand the legal framework for wholesaling in Louisiana, consider taking the next step. Real Estate Skills offers a free training program that can help you navigate and capitalize on Louisiana's current real estate opportunities; this could be your gateway to mastering the art of wholesaling within legal boundaries.

*Disclosure: Real Estate Skills is not a law firm, and the information contained here does not constitute legal advice. You should consult with an attorney before making any legal conclusions. The information presented here is educational in nature. All investments involve risks, and the past performance of an investment, industry, sector, and/or market does not guarantee future returns or results. Investors are responsible for any investment decision they make. Such decisions should be based on an evaluation of their financial situation, investment objectives, risk tolerance, and liquidity needs.