Key Takeaways:
- Matthew on raising Private Money and what he uses them for.
- What it means to be ‘House Rich and Cash Poor.’
- What are Home Equity Contracts, how do they work, and why haven’t we heard of them before?
- The differences between a Home Equity Contract and a mortgage.
- Home Equity Contract: reasons, risks, and returns
- Could Home Equity Contracts be the next biggest real estate asset class?
“Cash From Your Home Equity Is The New Financing Instrument” – Matthew Sullivan
Matthew Sullivan wants to convert your equity into cash!
Jay Conner’s special guest today, Matthew is the CEO and Founder of QuantmRE, a company that solves real problems for homeowners by helping them access a portion of their home equity without taking on more debt.
He is here to tell us all about this new financing tool is not a HELOC, it’s not a loan and it’s not a reverse mortgage.
That means homeowners can get cash from their equity with no interest and no monthly payments.
Matthew and his team have helped over a hundred homeowners use their home equity to pay off expensive credit cards, remodel their homes, pay college tuition fees, or diversify into other investments, all without taking on extra debt.
He has a proven track record in real estate innovation through his experiences as Co-Founder of the Secured Real Estate Income Strategies Fund, and as President and Founder of Crowdventure.com, a real estate crowdfunding company.
Originally from London, Matthew worked with Richard Branson’s corporate finance team and was a director of the Virgin-sponsored London Air Ambulance.
A helicopter pilot himself, he is also the host of his own podcast, “Hooked On Startups.”
Timestamps:
0:01 – Raising Private Money
0:59 – Today’s guest: Matthew Sullivan
3:53 – The Move From the UK To North Carolina
6:04 – Why Did Matthew Start Using Private Money?
9:10 – Jay’s Free Private Money Guide: https://www.JayConner.com/MoneyGuide
10:17 – Are You House Rich But Cash Poor?
12:23 – How To Convert Equity Into Cash?
14:55 – Find Out How Much Cash From Your Home Equity Is Available: https://www.QuantmRE.com
16:45 – No Risks??? Tax-free Cash???
18:47 – What https://www.QuantmRE.com
Can Do For You.
20:22 – Types Of Returns For Investors
23:06 – What Is Home Equity Agreement?
25:23 – Home Equity Agreement vs. Traditional Mortgage
26:47 – More Money Now vs. Less Money Now
30:00 – Connect with Matthew Sullivan: https://www.QuantmRE.com
31:12 – Matthew’s Parting Comment: “Cash From Your Home Equity Is The New Financing Instrument”
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Are You House Rich But Cash Poor? | Raising Private Money With Jay Conner
Jay Conner
00:00:02
How would you like to turn your equity into your home or from your home into cash without getting a home equity loan without getting a reverse mortgage with no interest and no monthly payments? Don’t go anywhere I’m getting ready to plug you into the money.
Jay Conner
00:00:35
Welcome to another amazing show and episode. My name is Jay Conner, the private money authority. Also, the host of the show is here with you today. And today I have got an amazing guest that is gonna come on here with me in just a moment and not only talk about private money, but in addition to that also how to convert your equity from your house into cash. Now, my guest has been helping people, homeowners access a portion of their home equity without taking on any more debt. So this new financing that my guess is gonna talk about, it’s not a HELOC, it’s not a loan. No, it’s not even a reverse mortgage. So what does that mean? Well, that means that homeowners, like you, can get cash from their equity with no interest and no monthly payments. I mean, how in the world do you do that? Well, my guess in this team has helped hundreds of homeowners. Like you use their home equity to pay off expensive credit cards, remodel their homes, pay college, and tuition and diversify into other investments. If they want to all without taking on extra debt. The question is how in the world do you do that? Well, guess what? We’re now ready to reveal the secrets to you by inviting my special guest to enjoy me right now, Mr. Matthew Sullivan, Matthew, welcome to the show.
Matthew Sullivan
00:02:11
Thank you for having me on Jay. What a great introduction.
Jay Conner
00:02:15
Well, I’m excited to have you on Matthew, my lens as of six weeks ago, you are now a fellow north Carolinian about two hours from where I live. I just learned that prior to the show. So welcome to North Carolina, Matt, you all,
Matthew Sullivan
00:02:31
May I say what fantastic thunderstorms you guys have there? You know, we sit on the porch thinking this is like a, you know, a phenomenal light show. So it is worth moving here just for that.
Jay Conner
00:02:44
Well, I gotta ask first. I mean, we’re gonna talk about, as I just said, how in the world to access, you know, you, how can, how someone can use home equity and get cash without taking on debt. I mean, what a phenomenal, intriguing topic that you bring to the show! Of course, we gotta talk about private money. I mean, I am the private money authority, but before that, why and how in the world do you get from London, England, all the way to North Carolina,
Matthew Sullivan
00:03:13
It’s a long story, but I moved here about nine years ago and started off in Southern California, and spent about almost seven years there. And then we, you know, we have a young family, we moved to Utah for a couple of years, I think really just to California during the top, you know, the COVID CRE you know, the peak of COVID and we are sort of gradually moving east. So, but I can tell you moving a house, you know, four kids, a dog, and a Guinea pig, two and a half thousand miles is probably the greatest logistical challenge. I think I face in a, you know, quite a long time.
Jay Conner
00:04:05
I can imagine. I can imagine. Well, I’m glad to hear you are here in the state. I mean, you’re only a couple of hours on the road, perhaps we can meet for a spot of tea. What do you
Matthew Sullivan
00:04:14
Say? Oh, that’d be fantastic. Of course
Jay Conner
00:04:18
We don’t have spots of tea in North Carolina, but I thought
Matthew Sullivan
00:04:20
I’d well, I mean, we can only start. I mean, we could maybe, you know, start a trend.
Jay Conner
00:04:27
I love it. So first of all, private money, I love to talk about private money. It’s had more of an impact on my business and I love to have experts so on such as yourself that have raised private money. But in addition to that, Matthew, my word you’ve, you know, you’ve just got, you know, our cur curiosity up about being what’s it mean to be ha you know, house rich and cash poor and getting cash without, without, you know, getting a, a HeLOCK and all that kind of stuff. First of all, tell me about your experience and raising private money. How did you get into private money and why did you,
Matthew Sullivan
00:05:01
Well, I think, it started when I moved here, as I said, about nine years ago, one of the first things that I did was set up a real estate crowdfunding platform. This is one of the very early real estate platforms. And, you know, my background is, you know, technology finance. It, it, it’s not real estate. And what I was very lucky to do initially, was to find a couple of, you know, fabulous partners who were still working with today, and really what the crowdfunding platform was all about was taking deals that otherwise would normally only be accessible to high net worth individuals and, you know, large investors and make them more accessible to, you know, smaller investors. So really that was in a way that was taking deals that would normally be presented to institutions and making them available to smaller private investors. So I’ve got a, you know, fair amount of experience we’ve built over the years in terms of dealing with smaller investors, we launched a couple of real estates debt funds. And so we now with my partners, we run a couple of, you know, debt funds that invest in, you know, loans secured primarily by development projects. So, you know, we’ve got some good experience in terms of dealing with people online, offline, and really raising private money a, in a regulated environment. So there’s a, a, a number of different experiences there.
Jay Conner
00:06:43
Have you raised private, what type of projects or projects have you raised private money for?
Matthew Sullivan
00:06:49
Well, I think really the projects are if we look, this is not something that I’m actively involved in right now, cuz I mean for the last four years, my focus really has been, you know, Qari but the projects were residential properties, small multi-family developments. So not a huge sort of ticket. So typically, you know, four units and upwards or you know, small developments. So you’ve got maybe sort of 15, 20 units on a small development where we would raise equity capital from private investors that would enable us to secure the debt funding to complete the project.
Jay Conner
00:07:33
Absolutely. Well, that makes sense. Well, since we talked so much about private money here on the show, I want to go ahead and give a free gift away right now, and then we’re gonna move into your topic. That just sounds so fascinating. So here’s my free gift to you. Private money for your deals, residential deals, apartments, whatever it is when I tell you what private money’s had, the biggest impact on my business. And I’m so excited about this brand new money guide, a private money guide that I just finished writing. It’s called seven reasons why private money will skyrocket your real estate business and help you build incredible wealth. It’s absolutely free. If you never wanna miss out on a deal and get funding for your real estate deals, it’s got nothing to do with your credit. You always bring him a big check. When you buy, you can download this for free at www.JayConner.com/MoneyGuide. That’s www.JayConner.com/MoneyGuide. Download it. It will get you on the fast track to getting private money. So Matthew, this area of expertise that you’re in QuantumRe which by the way is spelled Q U A N T M R E dot com. That’s www.QuantmRE.com. I wanna hear all about it. First of all, the first question you talk about houses rich cash, poor. What in the world does that mean?
Matthew Sullivan
00:09:11
Well, I think a lot of us have seen the value of our properties. Appreciate significantly over the last two years, you know, far faster than anyone, any of us could have predicted yet at the same time the economy has tightened. So even though I may be sitting on potentially hundreds of thousands of dollars of equity in my home, I can’t access that equity without going deeper into debt. So what we mean by saying someone’s house rich and cash poor is I’ve got all of this wealth trapped in my home equity, but the irony is I’m finding it difficult month on month to meet my expenses. So I could be worth hundreds of thousands of dollars on paper, but I don’t see the benefit of that. I can’t tap into that wealth because either I don’t want to borrow more money or maybe I can’t borrow more money. Maybe I don’t qualify for a loan or a HeLOCK. Maybe I’m just put off by the fact that if I refinance my existing mortgage, it’s gonna be at a much higher rate. Maybe I don’t have the credit score. Maybe I don’t have the debt to income ratio. So there are many, many reasons why I do not qualify for a loan or maybe I just don’t want to borrow money. So that equity, that wealth remains trapped in my home. And, and so that’s why we talk about people being house rich, but cash poor.
Jay Conner
01:10:47
So how in the world can someone, a homeowner get access, convert equity into cash without getting a Helo without getting a loan without getting reverse mortgage? How in the world do they do it?
Matthew Sullivan
01:11:08
We work with homeowners as investors. We are not lenders. We are investors. So that means that we participate with you as a homeowner in the potential appreciation in your home. So the way our programs work and these programs have been around for a number of years, and they’re gaining increasing traction amongst homeowners and institutions who are funding them. We invest a lump sum with you, the homeowner in exchange for a share of the future value of your home when you sell it. Or if you decide to refinance our agreement because we are investors, we’re not lenders. So it’s not a loan. There’s no interest to pay. There are no monthly payments and the agreements can run for between 10 and 30 years. But what happens is at the end of that term, let’s say at the end of 10 years, we agree that you will settle or pay off our agreement.
Matthew Sullivan
01:12:17
That’s when it becomes due. At this point, you agree to give us a share of the value of your home at that time. And you can buy us out at any time. And typically what happens is people sell their homes. During that period, most people stay in their homes for an average of seven years. So during that 10-year period, many people will sell their homes. And at the point that you sell your home, you would pay us a pre-agreed share of the value of your home at that point. So effectively what we’re doing is we are giving you cash today in exchange for a share of the future value of your home. And that’s an investment. And because of that, it doesn’t appear on your credit report’s debt. We can be much more flexible with you when it comes to underwriting these types of investments, we can accept much lower FICO scores and we can be, we don’t need to look at income in many cases. So we have a very different approach when it comes to underwriting these types of agreements.
Jay Conner
01:13:22
So if I were interested in you being my investor and investing in my property to where I could get cash, now, how would I find out how much cash you could give me?
Matthew Sullivan
01:13:37
We have a calculator on our website that’s quite easy to use. So you would type in your address. And then what we do is we look up the value of your property, which is just an estimate at this stage. And we then estimate what, your current mortgage is. And that’s all based on publicly available information. And you can correct it if we’re, you know, a little bit off the mark. And that allows us to calculate on the spot, how much we think potentially we could unlock for you. And that’s the beginning, so that will tell you whether or not your property qualifies, and we can give you a good indication without credit checks or without having to fill in any forms and you get that information instantly. And then if you want to go forward and find out more about how it could work for you, then you can add your email address and your phone number. And one of us will contact you.
Jay Conner
01:14:36
So to find out how much you can get as a homeowner from quantum a.com, they’ve got the calculator. You can just go to www.QuantmRE.com, and fill in the calculator. And they can give you an estimate, right on the spot as to how much money you can get in many cases, regardless of your credit scorer, in many cases, regardless of your verification of income and et cetera, you can find out right away. So Matthew, let’s say I’m a homeowner, which I am, and I’m interested in this. How is this a win-win scenario for the long term? How, I mean, what risk do I have in agreeing to this type of agreement as the homeowner, when really none of us know what the value of my house is going to be 10 years from now, or when I sell it and what percentage I would have to give up in equity share?
Matthew Sullivan
01:15:41
Well, the risk really is it’s so much a risk as such because the risk really is something that’s unknown. The thing that none of us know is what the value of your property is going to be at the time that you agree that the contract comes to an end, which could be, let’s say in 10 years’ time. So, that’s the part that none of us know. So that’s where the risk and reward element comes in. What you are giving up as a homeowner is a share of the future value of your home. Now, you know, what that share is from the beginning that share doesn’t change. So there’s no risk that the contract terms will change based on the change in the value of your property. So there’s nothing that’s gonna come out of the left field that you are not expecting. And the only thing, as I said, that you are giving up is some of the future equity, some of the future value.
Matthew Sullivan
01:16:40
Now, if the value of your house goes down, we are gonna get less because the percentage remains the same. If your home goes up in value, we are gonna get a bit more. So we both win. If the value of your house goes up because you as the homeowner get more equity, but we, as the investor will, will get, a bigger, you know, payment because the percentage of the value of the property, you know, yields a large, larger number from an investor’s perspective. What we’re doing is we are betting that your home will continue to appreciate there’s, a bit of upside already built into the contract. And I’ll talk about that in a moment, but from an investor, it’s a fantastic way to get exposure to the equity in owner-occupied homes, without any of the friction or cost associated with home ownership. So in other words, as an investor, in a home equity agreement, you can buy into the equity appreciation of someone else’s home.
Matthew Sullivan
01:17:49
And then, then when they sell it, you can get the benefit of some of that appreciation. So from the homeowner’s perspective, it’s great to deal with because you get tax-free cash. In other words, there’s no immediate tax to pay. And in fact, the cost of our agreement can be used to reduce your capital gains tax rate. So from a homeowner’s perspective, cash today, no monthly payments, and you can get up to half a million dollars. So, you know, there’s, it’s, it’s not an insignificant amount from a ho from an investor’s perspective, you can invest in the equity in single-family homes where, because of the way the agreement is structured, you can still make a positive return, even if the house falls in value significantly. So there’s no other real estate investment I can think of where you still get to make money, even if the value of the property, you know, goes down.
Jay Conner
01:18:47
So, Matthew is www.QuantmRE.com your company, a matchmaker of putting investors and homeowners that have equity together. And you’re like in the middle of making this happen.
Matthew Sullivan
01:19:05
Yeah, the answer is yes and no. It’s yes. In the sense that we have investors and we originate contracts with homeowners, but the investors are already there lined up. So if a homeowner comes to us, we know that we’ve got the money in place to be able to do that transaction. So they don’t have to wait to find out if we can find enough investors after that deal has been finalized. And the homeowners got their money. And that real estate asset has been created. We have a platform that enables us to tokenize using blockchain technology. In other words, we chop that asset up into lots of little pieces, and we make that real estate asset available to smaller investors. And what that means is as a smaller investor, you don’t need to be a pension fund or an institution. You can invest in these home equity agreements, and you can get the benefit of that return from that homeowner’s equity. And the minimum investment can be just a few hundred dollars.
Jay Conner
02:20:12
What type of returns are your investors seeing?
Matthew Sullivan
02:20:15
Well, we target around 15%, just under 15% at year three. And it really depends. And that’s based on the home appreciating by 3% a year. Now, if the home appreciates more than that, then you’ll get, a greater return. So obviously 15% is more than 3%. So the way these contracts are written, you get a magnified return compared to the underlying house price appreciation. Now, if I bought a house, it’s an, you know, it, it goes up by say 5%. The value of my investment goes up by 5%. But through a home equity agreement, you get built-in leverage structural leverage, and there’s no debt remember, but the contract gives you enhanced returns compared to the appreciation. And what that means from an investor’s perspective is the house may only go up two or 3% a year, but the contract itself has an inbuilt return. And that gives the investors a better return than if they were simply to own the property themselves.
Jay Conner
02:21:30
So how long have these home equity agreements been around and why have most people not heard about ’em
Matthew Sullivan
02:21:38
They’ve been around for over a decade and most people haven’t heard really, because it’s the beginning of this type of asset class. You will hear about them very soon because the amount of momentum that is growing in this asset class is tremendous because they serve a very useful function for homeowners who want to access their home equity without taking on more debt. So this is not another mortgage product. It’s not another HELOC or another reverse mortgage. It’s something completely different. And potentially it could untap a $23 trillion market because that’s the amount of equity that’s in residential homes in us. Now, the only way that you can access that equity right now is through debt. This is a completely different instrument. It does not increase a homeowner’s leverage or, or a homeowner’s debt. It doesn’t increase their borrowings. So from a homeowner’s perspective, and from an investor’s perspective, it’s a much better investment in some respects, because you are not putting additional pressure on the homeowner.
Matthew Sullivan
02:22:50
You’re enabling them to monetize some of their existing assets. And there are an enormous number of institutions that want to get their hands on the ability to participate in the equity upside in residential homes. So, you know, you may not have heard about it now, but you know, it’s, a market or it’s an asset class that is growing at a phenomenal rate. And soon we think it will become a mainstream product that will be offered alongside other mainstream homeowner products, as an alternative. And that’s, that can only be good for the home.
Jay Conner
02:23:30
So these home equity agreements have been around for more than 10 years. Most people haven’t heard about it because it’s still relatively a new asset class out there, but we are gonna start hearing about ’em more and more and more as time goes on, what are to summarize? What are the major differences between a traditional mortgage and these home equity agreements?
Matthew Sullivan
02:24:00
The most important difference is that it’s not a debt obligation. It’s not a loan. A mortgage is a loan that is secured against your asset, which is your home we’re investors. So the way that we get paid is entirely different than the way that a lender will get paid. A lender charges you interest, and they want to make sure they’re gonna get their money back. So that’s why they secure their loan against your property. What we do is we take the same risk that you, as the homeowner take, because we invest alongside you as an equity investor. Now, that means that we get paid in a completely different way. We get paid by taking a share of the value of your home when you sell it. And that means your home could go up or could go down. If the house goes down, we could take less. So we have a completely different risk profile than a lender does because the lender gets their pound of flesh. Irrespective of whether your house goes up or down, you still owe them that money. So there are a number of differences.
Jay Conner
02:25:07
I like, I like the illustration of the power question, the shake spirit
Matthew Sullivan
02:25:09
Reference. Yes.
Jay Conner
02:25:13
So
Jay Conner
02:25:15
Let me ask you this question. I own a house I’m interested in your home equity agreement. I want to get cash today. I’m willing to give a share of the value, the future value of my house. Say, when I sell it down the road question, will you give me more money? Now, if I’m willing to give up a more percentage share of my future equity, will you give me less money? Now, if I’m willing to give up less equity share in the future, or how is that calculated? And are there optional different levels of amount of money I can get from my, or because of my property?
Matthew Sullivan
02:26:05
Yes. So there is a range of investments that we will make, and it really is very flexible and it’s entirely dependent on how much your property is worth and how much equity you have, but there are minimums and maximums. So the most that we will invest typically is 25% of the current value of your property. And if we add that to your existing mortgage or mortgages, if you have a Helo, for example, then that combined lean-to-value amount must be no more than 75% of the value of your property. So what that means is at the end of our transaction, we’ve invested in some of the potential future value of your property, but you’ve still got 25% equity. So what we don’t do is we, we make sure that we leave you with a, a, a, you know, a fair chunk of equity, and it’s good for our investors as well, because that means that we are not overexposed to your home, should the value of your property and fall significantly.
Matthew Sullivan
02:27:16
But to answer your other question, the minimum amount that we invest is 30,000, the maximum is half a million. And as long as those figures fall within those two boundaries, if you have a 2 million home, for example, the most will invest is half a million because that’s 25% of 2 million. And if you have a $500,000 home, then the most will invest is 125,000, which is 25% of that. So you can have any amount from 30,000 to 125,000 in that case, and the amount that we invest dictates, the amount that you agree to share with us when you sell. So if you want us to invest 10% of the current value of your property, we will do that in exchange typically for 16 and a half percent of the future value. So if it’s 5%, then that’s gonna be about eight and a quarter, so that the proportion is, is direct.
Jay Conner
02:28:22
It’s just fascinating. Matthew is fascinating. So Matthew, who would benefit by reaching out to you and how should they,
Matthew Sullivan
02:28:31
We have really two, two types of people, really. First of all, homeowners who are looking to access some of the equity in their home without taking on more debt, and can see how much they could get by going on our calculator. And you can then arrange a call. If you want to find out more at that stage. We also want to hear from investors who would like to buy into these home equity agreements, we have a website, the same website, there’s a different part of it, where you can click on the investment side, register as an investor, and then you can participate in some of these fractionalized home equity agreements. So you don’t have to buy the whole thing. You can buy a fraction of it, and you can build a portfolio over time of these home equity agreements, which gives you exposure to the equity in single-family, owner, occupied homes that are not for sale.
Jay Conner
02:29:32
That’s fantastic. Matthew, well, Matthew we’re about out of time. So I’m gonna leave it to you with any final comments, parting comments, final words, and advice. Before we call this episode a wrap.
Matthew Sullivan
02:29:46
Well, first of all, thank you very much for having me on, you know, it’s been fun that I can’t believe how quickly the time has flown, but no other, you know, we are very excited about this. I mean, we’ve been working on this for four years and just to see the marketplace as a whole, with the companies that we work with, the amount of interest that’s coming from banks and institutions to fund this. And I think there’s gonna be an enormous amount of activity in this space, and it will become a truly new financial instrument. So to be there at the very beginning of this is, is very exciting. And I think we’ve got a long, I, you know, to, to quote an expression we’re on page 20 of a 500-page novel. So I think we’re, you know, we’re just at the very beginning. So, you know, we’re, we’re very excited to be part of this and, to see where it leads.
Jay Conner
03:30:37
Fantastic. Matthew, thank you so much for taking the time to join me. And I just can’t wait to go to your website myself and see how much money I can get.
Matthew Sullivan
03:30:47
Thank you, Jay.
Jay Conner
03:30:49
There, you have it, my friend, thank you so much for joining me here on another episode. And I tell you, I need your help. I really appreciate the five-star reviews on iTunes. If you happen to be watching on YouTube, be sure and ring that bell. So you don’t miss that on any future episodes with amazing guests, just like I’ve had today with Matthew Sullivan, be sure to like and share and subscribe. That means a lot to me. So here to you, I’m Jay Conner, the private money authority wishing you all the best here’s to taking your business to the next level. And I’ll see you right here on the next episode.
