Warning: New Wholesaling Law Enacted in Illinois (& Why Your State Might Be Next!)

Warning: New Wholesaling Law Enacted in Illinois (& Why Your State Might Be Next!)

2 min read
Marcus Maloney

Marcus Maloney is a value investor and portfolio holder of residential and commercial units. Marcus has been named the “Equity King” for his impressive ability to find real estate opportunities with massive amounts of equity.

Experience
Marcus, a high school dropout, went from G.E.D. to M.B.A. Although his education has a major impact on his investment philosophy, the real impact came from his upbringing.

Marcus thrives on completing successful transactions. As a young kid, his parents and grandparents faced many challenges; as a result, it made him think of ways he could help. His mother and grandmother were avid investors—not in the market but in people. Marcus was a recipient of those investments. And his early years were hard work growing up on a farm.

Marcus was a strategist at an early age. To relieve the burden of his family buying him clothes when it was time to return to school, he decided to make a small investment that paid big dividends. Marcus decided to purchase a small piglet at the beginning of summer, feed it until it became fat, and then sell it to a local farmers’ auction before the school year started. This was one of his first transactions and the beginning of his adventure of finding equity in every opportunity.

Marcus’ hard work continues today: He has completed over $3.3 million in wholesale transactions. Currently, Marcus is a licensed agent who wholesales virtually in multiple states while building his investment portfolio. Although wholesaling provides great money, he saw the opportunity to buy some of the deals he found and convert them into cash flowing rentals.

Marcus currently holds seven rentals, two of which are commercial units. He’s also done the unimaginable and purchased a school, which was converted to a daycare center. Again, he turns what is a marginal profit into a significant equity position. He leverages the equity by using the BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategy to increase his portfolio without any money out of pocket.

Marcus has been featured on numerous podcasts, such as the Louisville Gal Podcast, the Best Real Estate Investing Advice Ever podcast, FlippingJunkie, and many others. He’s currently a featured blogger for BiggerPockets, the largest community of real estate investors in the world.

Along with completing transactions and working to build his portfolio, he provides mentorship to aspiring investors. This is done through one-on-one interactions and through his successful YouTube channel and blog.

Marcus does utilize his M.B.A. for more than real estate. As a consultant for a successful non-profit institution south of Chicago, he uses his expertise in the development of human capital. His philanthropic efforts help existing stakeholders develop in their capacity to serve those in need of assistance.

Education
Marcus completed his M.B.A. in 2011 from Olivet Nazarene University.

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I am no different than a lot of you reading this post. We were all intrigued by the concept of “no money down” real estate investing. It’s one reason many people look to enter into the real estate industry via wholesaling.

However, with new revised state regulation, I really would like to revisit the discussion: Is wholesaling illegal?

New Wholesaling Regulations

This topic has been discussed for years on BiggerPockets, and with new legislation being passed in August 2019, I would like to get some feedback from you.

Full disclosure: I am a licensed Realtor (in Arizona), so you may believe this will be a biased article. Hear me out before passing judgement.

If you’re wholesaling in Illinois, you should know exactly what I am referring to—and this may sweep the nation. SB1872 is a revision to the Illinois Real Estate License Act.

wholesaling-too-hard

Part of this act is simply clarifying what is the true practice of facilitating a real estate transaction. You may not act in the capacity of a broker.

This is not a new law. Again, it’s clarifying the roles in a transaction.

Related: Warning Newbies: Stop Wholesaling Now!

I’m sure I will hear from many of the readers trying to refute what is stated in law. However, the law is clear on this topic.

As a licensee in the state of Arizona, I understand clarifying the legalities around the law. I am not an attorney, but in speaking with my attorney, it’s clearly stated. Anyone conducting more than one transaction yearly is coordinating or structuring transactions without a license. That individual can be fined $25,000.

That is enough clarity for me to understand what the law is stating.

Why Should Wholesalers Be Concerned?

You maybe wondering by now why am I concerned about it.

I currently virtual wholesale, and one of my markets is Illinois. As such, this does affect business operations.

Although licensed in Arizona, it was always a part of the plan to become licensed in Illinois. With this bill, it will expedite my timeline on completing the course work to become a licensee in Illinois, as well.

Will Other States Follow Suit?

You may be asking yourself that question. You maybe thinking, I don’t wholesale in Illinois, so why does this matter?

I bring this up because this revision in SB1872 was initiated by the Illinois Association of Realtors, which is part of the National Association of Realtors (NAR).

dont-wholesale

NAR is a very strong lobbying body. This is just my opinion, but I believe this will be an effort the association will look to institute on a national level. If not now, in the future I’m sure.

Related: The Ultimate Beginner’s Guide to Real Estate Wholesaling

A Word of Caution

Wholesalers are hustlers by nature. I know many of you will try to find a loophole or some gray area in the law.

Again, I am not too far removed from having a similar mindset in the past. People will believe, I’ll just double close all transactions. I’ll find a way to make some provision in the contract with creative verbiage. Or I’ll use multiple LLCs to contract and close the deal.

This is totally up to you to take the risk.

I would love to hear your feedback. Is wholesaling illegal? Is it about to be?

Let’s have an open discussion in the comment section below.