188 – Unlocking Your Home Equity With No Debt! with Matthew Sullivan

Synopsis

Imagine being able to use the equity of your home without going into debt. That’s what we learn more about with Matthew Sullivan, Founder, and CEO of QuantmRE. His company enables homeowners to receive a cash lump sum without taking loans, mortgages, or debt. Homeowners can spend the money how you want and have up to 30 years to settle the agreement.

Key points

Equity-Based Financing

Typical commercial transactions have all layers of financing available for investors. But for the homeowner, their only options are to get a loan, mortgage, or home equity line of credit (HELOC). Matthew works with investors interested in participating in the equity portion of your homes.

It starts with the homeowner getting cash for a piece of their equity. When the home is sold, investors get paid with an increase in appreciation of the home.

The perks of this kind of financing include not needing to make monthly payments, it doesn’t go into your credit report, and they require only a minimum credit score of 600 to apply.

Targeting An Untapped Market

There are 15 million homeowners with 50% or more equity in their homes. Matthew is unlocking a previously untapped $18 trillion marketplace where only 5 companies are operating in.

Pros And Cons

Since the company invests in your home, they make money if there is an appreciation in the value of the home. If the sale of the home later is lower than its initial appraised value, they make less and share in the loss.

For the company, the biggest challenge they’re facing is educating people about what equity really is. It is dead money to the average homeowner unless they borrow money. But by unlocking money through a mortgage, the homeowner is saddled with the additional burden of monthly payments.

This is why the evolution of home-based financing is something worth looking at.

Typical Clients

Most of their clients fall under 3 buckets. The first one are those who cannot borrow money because they either do not have the right credit score or do not have the income.

The second bucket are the people who don’t want to borrow money because they’ve spent their lives paying down a mortgage, so there is a sensible fear and reaction towards taking in debt.

The last bucket includes the people who see equity as an asset and want to move their money from equity into something that is cash flowing. For them, equity is another real estate asset.

There are lots of ways the cash can get used by homeowners to get financing. They can use it to pay off high-interest credit card debt, build accessory dwelling units (ADUs), or even put in solar panels.

Primary Requirements

Matthew looks at investing in homes worth $250,000 up to a maximum of $5 million. Anything above that is too difficult to price.

Most of the homes they invested in fall into the range of $500,000-$1.5 million. The structure is that the homeowner keeps 30% equity. By taking an existing mortgage and adding what they will invest, they require that the total be 70% or less of the current value of the home. So the most they will invest is 20% of the current value of the home.

The Application Process

Their application is done through their website. After the initial qualification, they will ask for the credit report. They only do a credit check once the homeowner wants to proceed.

Then an appraiser will do an appraisal of the home. Homeowners also need to provide information about their income only because Matthew wants to make sure they have enough to pay their mortgage.

The process usually takes 4-6 weeks. But it doesn’t mean that QuantmRE becomes a co-owner or tenant-in-common. The homeowner maintains all rights and privileges as a homeowner and has up to 30 years to either sell the home or buy back the investment agreement.

One other benefit is that it is tax-deferred until the home is sold.

How Do They Make A Profit

Take the example of a home worth $500,000. If the homeowner wants to unlock $50,000 of the equity, that’s 10% of the current home’s value. The homeowner gets that minus the 3% once-off fee.

QuantmRE then will take a share of the appreciation of the home, which can mean taking 25-40% of the increase in value. If a home significantly loses value, they will take a share in the loss too.

In the future, Matthew hopes to build a secondary market exchange – a marketplace where investors can sell their interests in homes. Now, most of his investors are hedge funds, pensions, or endowment funds, those involved in long-term capital. Hopefully, someday, he will be able to move to get a wider range of investors.

The Challenge Of Starting A New Business

No business survives the first contact with the first customer. Matthew realized that he had to get really good at originating the types of transactions they offered so that once they’ve made a lot, they’ll be able to create a vibrant secondary exchange.

When starting a business, something new will always face resistance. Most people, when they think of equity, they look at it as debt.

For those who want to start their own business, Matthew shares that it’s better to get your shovel dirty then work backward. Do the basic understanding and find out if there is a demand for what you are offering.

Once you’re happy that there is demand, then get stuck in it. Avoid analysis paralysis and just throw yourself headfirst then just figure things out along the way. The right answer is always there. You only need to make sure not to run out of money.

Finally, the test of a startup that is successful is the frequency of its iteration.

Hook on Startups Podcast

Matthew started his podcast a couple of years ago and had fun doing it. He had met a lot of interesting people. While the podcast is currently put on hold, he plans to come out with a second series soon.

Working With Richard Branson

As a 30-year-old in the 1990s, Matthew got the opportunity to work with Richard Branson, who invested in a hot air balloon company. Branson had always been keen to fly around the world in a hot air balloon.

Matthew was able to become good friends with him and became a part of Branson’s inner circle. He got involved in many ventures including Virgin Cosmetics, Virgin Clothing, V2 music, and a lot more.

Nothing To Regret

If Matthew could turn back time, he would have bought shares in Google and a whole list of other companies including Apple. But as far as how his life turned out, while he had made mistakes, he doesn’t think he would have done anything differently with his company.

Last Tips

Say yes more. There are so many situations where most are afraid to do something. Learn to get out of your own way and take the leap.

References

More from our guest

• Interested in becoming a shareholder at QuantmRE? Join their crowdfunding raise at Republic.co
• You can connect with Matthew at QuantmRE