NAICS Code for Note Wholesaling

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NAICS Code for Note Wholesaling

Sean Mcintire
Phoenix, AZ · Member since 2018 · 103 posts · 18 votes

Hi all and thanks.

NAICS Code for Note Wholesaling - what is it?

Is it 531390???

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OTHER ACTIVITIES RELATED TO REAL ESTATE

Wholesaling could arguably fall under the following extended SIC Codes

SIC 6531054 - Real Estate Buyers Representatives (wholesaler/non-licensed)
SIC 6531026 - House Buyers (wholesaler/non-licensed)
http://siccode.com/en/siccodes/6531/real-estate-ag...

These are cross-referenced with NAICS 531390
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Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
4y

@Alexandra Beard

If you run your business legitimately the Chances of an audit are most likely very low.

Whether you need a LLC you should review with your attorney as it will also depend on how you are wholesaling and what processes you are using.

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  • Brian Frasier
    Flipper/Rehabber · Bluffton, SC · Member since 2022 · 16 posts · 9 votes
    4y

    ***UPDATE*** 5/31/22

    These codes below no longer exist. As far as I can tell there are no longer any codes that are for Real Estate Wholesaling in any way. Probably due to the restrictions that the gov are trying to place against Wholesaling & Assigning Contracts. I have spoken to 3 Real Estate Attorneys, 3 CPA's, Credit Suite and 11 other Wholesalers as well as extensive digging throughout the NAICS website. Also, if you are a new wholesaler or Flipper trying to form an LLC and want to get funding, it is very wise NOT to have anything whether it be "Business Purpose" or an NAICS code that has any relation to Real Estate whatsoever. It will put you in a "High Risk" category with the credit bureaus and lenders and you will most likely be denied.


    SIC 6531054 - Real Estate Buyers Representatives (wholesaler/non-licensed)
    SIC 6531026 - House Buyers (wholesaler/non-licensed)

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  • Malikah Planas
    Member since 2022 · 5 posts · 1 vote
    4y
    Quote from @Brian Frasier:

    ***UPDATE*** 5/31/22

    These codes below no longer exist. As far as I can tell there are no longer any codes that are for Real Estate Wholesaling in any way. Probably due to the restrictions that the gov are trying to place against Wholesaling & Assigning Contracts. I have spoken to 3 Real Estate Attorneys, 3 CPA's, Credit Suite and 11 other Wholesalers as well as extensive digging throughout the NAICS website. Also, if you are a new wholesaler or Flipper trying to form an LLC and want to get funding, it is very wise NOT to have anything whether it be "Business Purpose" or an NAICS code that has any relation to Real Estate whatsoever. It will put you in a "High Risk" category with the credit bureaus and lenders and you will most likely be denied.


    SIC 6531054 - Real Estate Buyers Representatives (wholesaler/non-licensed)
    SIC 6531026 - House Buyers (wholesaler/non-licensed)

     Hey @Brian Frasier did they mention what code can be used or any similar codes? I was also having a hard time finding a code that would be applicable.  I was thinking 531390 Other Activities Related to Real Estate

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  • Brian Frasier
    Flipper/Rehabber · Bluffton, SC · Member since 2022 · 16 posts · 9 votes
    4y

    Hi @Malikah Planas I just now got off a call with my Tax Advisor CPA and he told me that 531390 is the NAICS code to use as a wholesaler. 

    1Reply
  • Alexandra Beard
    Member since 2022 · 17 posts · 3 votes
    4y

    @Brian Frasier then how would a new wholesaler protect themselves and reap tax benefits?

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    4y

    @Alexandra Beard

    Naics codes for this would not provide you any tax benefits

    Naics codes are used for several reasons which primarily are for workers comp insurance and other types of insurance.

    The Internal Revenue Service uses it to make decisions about whether your tax returns look in line with other businesses in your industry

    Some states use them for tax incentives but a note investor or wholesaler will most likely never qualify - ie. Don’t overthink a Naics code it’s not gonna make a difference based on this line of work.

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  • Alexandra Beard
    Member since 2022 · 17 posts · 3 votes
    4y

    @Chris Seveney So then... does it make sense to have an LLC at all? I'm just trying to fully comprehend what all of this means...In order to file for an LLC you MUST have an NAICS code listed as a business purpose. If I started an LLC and used NAICS code 531390, the IRS would keep a closer eye on my company and I have a higher likelihood of being audited VS. me not having an LLC...

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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    4y

    @Alexandra Beard

    If you run your business legitimately the Chances of an audit are most likely very low.

    Whether you need a LLC you should review with your attorney as it will also depend on how you are wholesaling and what processes you are using.

    7e investments53 Reviews
    WebsiteView Page
    1Reply
  • Quang Nguyen
    Real Estate Agent · Mississauga, Ontario · Member since 2016 · 42 posts · 6 votes
    3y
    Quote from @Brian Frasier:

    ***UPDATE*** 5/31/22

    These codes below no longer exist. As far as I can tell there are no longer any codes that are for Real Estate Wholesaling in any way. Probably due to the restrictions that the gov are trying to place against Wholesaling & Assigning Contracts. I have spoken to 3 Real Estate Attorneys, 3 CPA's, Credit Suite and 11 other Wholesalers as well as extensive digging throughout the NAICS website. Also, if you are a new wholesaler or Flipper trying to form an LLC and want to get funding, it is very wise NOT to have anything whether it be "Business Purpose" or an NAICS code that has any relation to Real Estate whatsoever. It will put you in a "High Risk" category with the credit bureaus and lenders and you will most likely be denied.


    SIC 6531054 - Real Estate Buyers Representatives (wholesaler/non-licensed)
    SIC 6531026 - House Buyers (wholesaler/non-licensed)


     What do you suggest to use for an NAICS code where we can easily get funding?

    I'm thinking you can use this code 541613 - Marketing Consulting Services:
    As your business utilizes marketing strategies to find motivated sellers and potential buyers, this code can reflect the marketing efforts you engage in to promote your properties.


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  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Quang Nguyen

    Naics code has nothing to do with funding, it’s used for the government for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy

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  • Chris Boselli
    Investor · Boston, MA · Member since 2018 · 51 posts · 50 votes
    2y
    Quote from @Chris Seveney:

    @Quang Nguyen

    Naics code has nothing to do with funding, it’s used for the government for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy

    My understanding is that when applying for business funding (business CCs in particular with the big Tier 1 banks) they will 100% reference your NAICS code to determine whether you are in a high-risk industry or not. Not entirely sure how heavily this weight into their decision, but wanted to throw this info out there so folks can do their own research, consult with their own advisors/CPAs etc and make the decision for themselves.

    Banks consider NAICS codes to protect themselves, and the ones deemed "high risk" are simply ones that have a higher likelihood of cash transactions which therefore could be more at risk for tempting thieves/fraud. Again this is not my expertise by any means so do your own research, but this is not the first time I have heard of NAICS codes affecting the likelihood of being approved for business funding. 

    That being said it is only one piece of the puzzle with business credit, but sticking on topic hHere is a pretty interesting article about NAICS codes:

    https://www.creditsuite.com/blog/how-to-avoid-high-risk-naic...

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