How to Get Equity Freedom with Matthew Sullivan

November 10, 2022

Expert CRE Secrets Podcast

Matthew Sullivan is the founder and chief executive officer of the QuantmRE platform. He is also the co-founder of the Secured Real Estate Income Strategies Fund, and president and founder of Crowdventure.com, a real estate crowdfunding company. A serial entrepreneur, author, and host of the Hooked On Startups podcast, he worked with Richard Branson's Corporate Finance Team in the Virgin Group.

Matthew went to Westminster School in London, UK, and studied Law at Birmingham University before pursuing a career in finance and stockbroking, specializing in the South East Asian markets. Since then he has founded and led companies in the United Kingdom, India, Australia, and the United States in the finance, telecommunications, technology, and real estate sectors.

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How to Get Equity Freedom with Matthew Sullivan

Brett:

I'm excited about our next guest. He is the founder and CEO of QuantumRE, which is making home equity accessible investable, and tradable. In fact, he's on a mission to help others have freedom with their equity through a groundbreaking patent-pending real estate investment and finance platform that has been designed to give homeowners and investors unprecedented access to equity in single-family homes. He wants to help you solve problems which as a homeowner if you have a lot of equity, and you're looking to access the equity to create and preserve more wealth. Matthew Sullivan is your guy. Matthew, welcome to show how you are doing?

Matthew:

Doing very well, Brett Thank you for having me on.

Brett:

Absolutely. For our listeners getting to know you for the first time because you give us a little bit more about your focus, a little bit more about your story.

Matthew:

Say in reverse order. I'm an entrepreneur, I think one is not sure if you're born an entrepreneur or if it's circumstances that make it but I've been really building and running my own businesses for almost 30 years now. I moved to the US, about eight years ago landed in Southern California moved to just north of Salt Lake City a couple of years ago. One of the first things I did when I moved here was to set up a crowdfunding company that focused on real estate, really just hot on the tails of the Jobs Act, which was the first time that you could raise capital, on online platforms, to people that you didn't have a previous relationship with, and really, and quantum theory today is a company that we set up four years ago. As you were saying, what we focus on is really helping homeowners access the equity that is in their home, without having to take on more debt. We have a financial tool that is equity-based, today enabling homeowners to unlock up to half a million dollars of the equity in their homes, without having to borrow money without having to take out another mortgage. What that means is there's no debt, there are no monthly payments, and they can use the capital for any purpose.

Brett:

I'm so excited to jump into this, this is so so timely in so many ways. But before we get into that, Matthew, I want to I want, I want myself and for myself, and also for our listeners to get to know you a little bit more. See, I believe we've all been given certain gifts in this life, these gifts have been given to us to be a blessing and help to others. Some people call strengths, some people call them superpowers. I'm curious, what are those one or two gifts that you believe you were given? And how does that help how you help and bless people today?

Matthew:

Well, I suppose really, that's one of those questions, which is always very difficult to answer because no one always feels this sort of thing that other people should be answering for you. But I suppose the thing that I'm probably best at is, creating solutions or integrating or synthesizing solutions.in other words, my background is, finance-based technology-based, really, what I wouldn't say is I'm good at it. But what seems to be most successful for me over the years, is really combining this concept of, financial platforms, availability, systems, processes, and creating, the machinery to enable people to do things for themselves that otherwise, they wouldn't have been able to do. I'm not sure if that answers your question, but it's always a very difficult question to answer. One last thing, I do cook a mean Indian curry, and I'm actually quite excited about the moment I've got one sort of bubbling away in the slow cooker right now. It is something that's deceiving should be quite good to know.

Brett:

I love that’s a great gift to have for the family and for and for everyone else, too. I've heard the same that we don't rise to the level of their aspirations of our goals. We actually fall to the levels of our systems right and our processes and our procedures, I love the way you put that creating solution, integrating solutions, and then combining financial platforms to be able to solve problems in a systematic way. I think that's wonderful. That's perfect for our next part of this, how to get equity freedom in your home. Matt, can you take us kind of step by step through this process? What's the number one secret of the first step to unlocking this equity freedom in your home?

Matthew:

Let's, first of all, let's talk about the problem that we solve. Let's put the discussion in that context, it's the problems become particularly relevant over the last, 18 months or so as we see huge house price appreciation. The problem is if you are a homeowner, and you have significant equity in your home, the only way that you can access that equity is to borrow money. That means you can only access what is probably your largest source of wealth by going deeper into debt. Now, that's okay, if you have the cash flow to support that additional debt. But it's a problem for you if you cannot borrow money. Now, you may not be able to borrow money, because you may not simply meet the bank's requirements, you may not have the credit score, you may not have the income, or you may not want to borrow more money, you may not want that exposure. If you're sitting on potentially hundreds of 1000s of dollars of equity, and I think more than 18 million homes in the US are equity, rich in the sense that the homeowner owns more than 50% of the equity in the property.if you want to do that your only option other than a Home Equity agreement, which is the agreement that we create, is to borrow money. Now, a home equity agreement really uses commercial funding processes in a residential environment. What I mean by that is that if you are a commercial real estate developer, there are a number of funding tools at your disposal. There are all sorts of different types of debt, you can borrow money at senior debt or as junior debt. There's a mezzanine, excuse me, mezzanine finance, there's also different forms of equity. You can have preferred equity, or you can have equity that's part of a shared appreciation mortgage. As a commercial operator, you have all sorts of funding mechanisms at your disposal. As a residential homeowner, the only financial mechanisms you have really are all debt-based. Different flavors of debt, a mortgage, a reverse mortgage, a home equity line of credit, that's pretty much it. What a Home Equity agreement is, it's a mechanism or it's a financial tool that enables you to access your home equity without borrowing money, the way that works is we have investors who share in the appreciation of your home, so they get paid by taking a percentage of the amount that your home goes up in value, rather than taking interest or having, a payment via interest on the loan. I'll pause there and see if that answers your question.

Brett:

I think it doesn't make sure I gather that too. First of all, the problem is that there's a lot of folks that either want to access the funds, but don't necessarily want to take on more debt and or they don't have the ability to access the funds, because perhaps their credit score or wherever they're at the cash flow needs just aren't there. They're just, they're just not it's just too much for him, there are about 18 million homes. I think you said sitting on 50% or more equity. I think that was a stat. Absolutely. Just staggering as well, then what this home equity agreement kind of solves or bridges, the gaps is it, it kind of gives investors an opportunity to take an equity position in your house, and then in exchange, you can get the are you getting cashed out? You have to pay capital gains tax kind of give me that again.

Matthew:

That's where it becomes quite interesting, I think, because the capital that you get, which is up to half a million dollars of cash, is tax-deferred. What that means is because it's an agreement, that settles at some point in the future, there is no immediate tax implication, again, the caveat is, we're not accountants, we're not lawyers, so do your own research on this. But what it really means is that the capital that you get can be offset or the cost of the capital can be offset against a potential future capital gains tax liability.in other words, if we were to invest say, $200,000 in your home, in exchange for the right to participate in some of the appreciation when you sell it when you sell your home, you would typically give us back the investment together with a share of the appreciation, and that share of the appreciation that cost of capital can be offset against your possible capital gains tax liability.

Brett:

I think I follow that pretty good. I guess let's talk about the deal itself. Let's just do an example. bought my house for $380,000 like five years ago. The one down the street just sold for 750. On a wild deck about we, we owe about, I think, around 300 right now. Let's say that's the scenario. Let's just use those numbers roughly, let's say I wanted or needed 200,000. I'm like, I'm not financial, and I, I don't want to refinance, so I want to do the deal, so and by the way, you can learn more about Matthew Sullivan and the team at QuantmRE.com. That's QuantmRE.com. You guys would come in and say, first of all, let's assess is it 745? I guess (A) who's paying for the appraisal right to figure that out? (B) let's say 200,000 is the number. What percentage of ownership are you taking in for the property.

Matthew:

So first of all, there are no out-of-pocket expenses for you. We would pay for the appraisal, we would take all of the risks of the contract, those costs come out of the amount that we invest, ultimately, so the homeowner pays for that. But we pay for that capital upfront. You as a homeowner won’t have any initial expenses or initial risk. The first step really is to find out if you have enough equity for us to be able to prequalify your home, there are certain numbers that we need to look at. First of all, if you look at your existing debt, and the amount that we want to invest, if you add those two together, then normally that must not be more than 80% of the current value of your home. In your case, you're looking at about $650,000 Off the top of my head would be that figure. If you look at the amount that we're going to invest, add that to your existing mortgage, you're below that figure. That that works for us.

The next question is, how much do you want us to invest? So we won't invest more than around 30%, again, it depends on underwriting. If you want 200,000, that's less than 30% of the current value of your home. That would work. All of this we can figure out without having to do any credit checks. Or we can do all of this at an early stage based on publicly available information. The next step, there really is to find out whether or not you what program you want to look at. We have 10-year agreements, we also have agreements that run up to 30 years. If I give you an example of a 10-year agreement, that is where we would invest if you want us to invest Mae Mae, I use round numbers 20% of the value of your home, which is $150,000, the same sort of ratio works if you want more. If we wanted to invest 20%, we would write you a check for $150,000, less a 3% initial fee, which is the only fee that you pay and would also take out the direct cost of the appraisal and title fees.

Now, in exchange for that, you would agree that when you sell your property, or if you agree to buy back the agreement, then you would pay us 33% of the value of your property at that time. If your property goes down in value, then we would still only get 33% of the value of your property, then if it goes down to, $350,000, for whatever reason, then then we potentially might be looking at a loss, that's the real difference between a loan and this type of equity-based agreement. You get your 150,200 $1,000, the amount of the sharing amount would be higher. But I don't have the mathematical acumen to be able to do that off the top of my head, I can't find the calculator on my computer right now. Those are, those are round numbers. But over that 10 year period, there are no monthly payments because it's not a loan, we wait until you sell your home or at the end of that 10 year period, you may decide to either extend it to renew the agreement, or you may agree to buy us out by refinancing your property because the way things are going your property will be worth even more than that.

How to Get Equity Freedom: “Most successful for me over the years, is really combining this concept of, financial platforms, availability, systems, processes, and creating the machinery to enable people to do things for themselves that otherwise, they wouldn't have been able to do.” – Matthew Sullivan

Brett:

Can I, thank you for that. That was very detailed and I love how you use those numbers, for our listeners, you can rewind back to get some of those numbers. But I think the the the macro view is you're taking an equity position in, let's say my house or anyone's house, as long as the LTV matching the equities there and, and such and there's an on my side of things, it's when I sell a pay it back plus, in the end, you could participate in the upside.

Matthew:

I mean, essentially, what happens is there's, the agreement is deferred for 10 years, so there are no monthly payments, what happens is, when you sell your property, a percentage of that sales value settles our agreement in total. You don't pay it back, you don't pay 33%, on top of the 150,000, that 33% settles everything that you owe us, one other important point is, we do not go on title as owners. There's no transfer of ownership, I think it's really important for a number of reasons, I think most people know why that's important, so we're not going to come knocking on your door, hoping to, sleep in your spare room, we don't have any rights over your property. There's no transparent transfer of ownership. It doesn't trigger any capital gains tax, it doesn't trigger any do on sale clauses on a mortgage. But the agreement itself is protected by what is very similar to a trustee. There is a lien on the title, we sit in a junior position to the existing lenders. That just means that our position is protected when you go through the sales process.

Brett:

Who is this not for? So if someone comes to you, they're like, would you could you just say like, it's not for if you got this and this, it's not for you. Then quickly, I think we kind of clarified who it is for both to make sure we clarify who it's not for.

Matthew:

First of all, do you qualify for it? There's a very simple guide, there are some numbers, if you've got too much debt, it's not going to work because there's not enough equity. The other thing is really, these are programs that can work in conjunction with loans. A loan or a mortgage, and home equity agreement can both coexist, and in most cases they do so they're not mutually exclusive. Where we have most people most objections, as it were, is really if people don't want to share in some of the potential future value. People are wedded to this concept of equity being something that you must not touch, I think that's something that is changing, as the equity begins to grow, and people are scratching their heads, why can't they get their hands if they're worth a million dollars on paper, how come they can't pay the grocery bills. But it's, it's really if you don't want to share in the potential appreciation, or you really don't like the idea of tapping into your equity, then, these types of programs are not suited to you, we do have people that compare the prices, it is more expensive, or can be more expensive than the loan. If you can borrow money, and you don't mind the monthly payments and the risks associated with that, then that may be a better solution. As you rightly say, this is not a panacea, it's not a solution for all customers, but it is really helpful if you want to unlock a big lump sum of capital, but without all of the issues associated with debt and borrowing and monthly payments.

Brett:

The interest rates are so low but banks make right now it's like doing a triple backflip. So, I pictured the person who's doing they're doing the gymnastics in a running, like you're running and you got to like, jump in, you gotta do all these flips, you got like land perfect, and it just takes so it's gonna take a long time to get loans, and just going through the whole loan process and, and I have great credit and you know, it's just it's daunting. So I especially if you want to access capital to get into investments, how quickly can your team Matthew execute? And by the way, you can learn more about this at QuantmRE.com, It's QuantmRE.com. How quickly does it take? Give me, give us a timeline on a deal.

Matthew:

The average duration, beginning to end is four weeks, that's it, everything runs smoothly. Occasionally, it'll be longer than that. Sometimes if we have to send an appraiser out, then it takes a little bit of time to get the documentation back from the appraisal company particularly right now because, very busy also, sometimes it takes longer than normal to get information back from cities. Again, that's like a post COVID effect. But normally, I'd say if it's a straightforward operation, it's much lighter underwriting than I've done a bank typically four weeks which you know tends to go pretty quickly.

Brett:

Let's transition to the capital gains tax portion of the show. A lot of our client’s friends and family you know before they meet us they struggle with Capital Gains Tax on the sale of cryptocurrency businesses, real estate primary homes, partly because a 1031 Exchange doesn't qualify for the majority of those assets. I'm curious what's been the biggest frustration with that you've experienced maybe for your clients, yourself or friends or family when it comes to capital gains tax deferral, and or the 1031 Exchange?

Matthew:

Well, I think it's really just understanding, where the 1031 exchange begins and ends. In other words, if you look at a real estate investment that you might have, through indirect ownership in a property, it might be through shares in an LLC that owns the property. It's just the complexity of the 1031 exchange regulations, really just understanding what can and cannot be used, because most real estate structures, use entities that may not qualify. I think the biggest, it's like a gift. That sounds incredibly that is incredibly useful and incredibly tax efficient. But it's just finding that single source of knowledge or understanding that can guide people through what you know what they need to do, particularly when they're structuring their deals in the first place to avoid potential, banana skins when they come to try and liquidate their investments.

Brett:

That's part of why we started Capital Gains Tax Solutions to give clarity on the options, opportunity zones, CRTs 1031, Exchange, the Delaware Statutory Trust, and of course, our favorite, the Deferred Sales Trust, and also to give people time and energy to be able to invest at optimal timing. Part of what you're doing is freedom for people in their home equity. Part of what we want to do is to give freedom to people when they go to sell that high-end primary home that luxury real estate, that cryptocurrency deal, unlock the capital, through the tax deferral through the deferred sales trust to go start their next venture or buy their next investment property can't go into a primary home. But it can help. We just did a Bitcoin case for 5 million, she had purchased Bitcoin for 50,000 and went to 50 million, she never sold and she wasn't going to sell until she met us and also had a good outcome for being able to invest into a business. She transferred the 5 million to a deferred sales trust, then they went to cash, now she's funding her next business venture all tax-deferred, and people can learn more about that at CapitalGainsTaxSolutions.com. But I'm curious how you heard Deferred Sales Trust before, what are your thoughts on it again.

Matthew:

That's something that heard of it, but it's like many of these entities, I think, our platform, funnily enough, has been designed to enable investors to buy fractions of these home equity agreements. He talks about cryptocurrency, our platform, which we should be launching sometime early next year from an investor's perspective, allows you to buy or will allow you to buy tokenized fractions of these home equity agreements. Looking, we are now looking at different structures that we can introduce our clients to our investors. Deferred Sales Trust is one of those things that we've heard of but really haven't done any great. Any great research on it.it's definitely something that, However, having said that, the moment this interview ends, I can tell you exactly what I'm going to be getting, that is to find out more about how they work because it's, it sounds like a really useful structure.

Brett:

I appreciate that, by the way, people can also go to CapitalGainsTaxSolutions.com to learn about that, but I can also join our mastermind, we have a free no cost mastermind called the DST Cryptocurrency Mastermind every Friday at 10 am Pacific Time. 1 pm Eastern Time, that's 10 am Pacific, 1 pm Eastern Time. We bring on clients for being on people learning for the first time financial advisors, cryptocurrency influencers, commercial real estate experts, and we're just trying to make everything simple when it comes to the Deferred Sales Trust so that you can unlock that capital sells that deal. And do what things that you want to be doing with your wealth, whether it be starting a business or investing at optimal timing. You can go to CapitalGainsTaxSolutions.com. That being said, Matthew, are you ready for the lightning round?

Matthew:

Well, I hope so.

Brett:

Knowing what you know now, if you can go back to your 25-year-old self, what's the one golden nugget make sure to tell yourself to do?

Matthew:

I think when you just find something that you like and focus on it, I think one of the biggest, I wouldn't say regrets but one of the things that people tend to do is just move from one thing to another without any clear strategy or gameplan, I think it's relatively easy to instill that in people and say, Look, if you're doing something, try and figure out what your long term objective is, where do you want to be at a certain point, and that will sort of avoid drifting as it were, or the sort of shiny new objects and scenario. I don't think I've been, terribly guilty of that either. But I think I could have certainly, in many situations with if you become a subject matter expert, if you just find something that you love, and just stick at it and get better and better at it, you then become the de facto source of expertise, that's really valuable.

Brett:

Very well says so much was no thank you for sharing that. Second question. What's the number one book you've recommended or gifted at the most in the past year?

Matthew:

Well, that again, it's an old favorite. It's Getting Things Done by David Allen, it's a book that I read years ago. I read it, you sort of skim through the bits. But it's just so relevant. It's so useful. It's not psychobabble. It's information that allows you to declutter your mind almost instantly, and you read it and you go, for goodness sake, why did I not find this book? 25 years ago, when, every Sunday night at four in the morning, you'd wake up trying to figure out what you're going to do for the following week.it's a really useful book, It's the one that I re-read over and over again, and it's still, still delights me with the usefulness of the information.

Brett:

I want to buy 30 I've never heard of it and revive it. Now. You got me inspired. Question three, what are you most curious about right now?

Matthew:

I'm just trying to figure out how to get my US helicopter license. I've been flying helicopters in the UK for quite a while private pilot, I haven't flown much since I've been over here. I'm now very curious about how all that sort of stuff works, which is actually quite exciting. It's quite daunting to try and figure out how to, navigate one's way through the FAA and all of the licensing regulations here, but it does still fill me with that sort of joy of exploration.

Brett:

Our last question is this, Matthew, after all your success, helping the people you've helped create the companies you've created and helped people unlock capital and their homes and everything else that you're doing? How do you stay centered in your values? How do you stay encouraged to charge forward to reach new heights?

Matthew:

Well, I have far too many children, ranging from two years old to 28 years old. I don't really have a great deal of time to sort of sit back and think about things, because there's too much going on, I think really if I can just avoid being, a completely awful father and possibly leave them with something useful, then, that's all one can really hope for actually.

Brett:

That's a beautiful Matthew, I want to thank you for being on the show. I want to encourage you to keep using the gifts and talents you've been given to create solutions, integrated solutions, and then combine that with financial platforms to unlock freedom for homeowners and the future of the cryptocurrency tokenized equity positions which when you launched that, please come back on the show if you can, and share that and we were really, really focused on serving the cryptocurrency world and helping people get freedom and options with all things cryptocurrency, so with that being said, for our listeners who want to connect with you, would you remind them one last time what's the best place for them to find you?

Matthew:

Everything's on our website. It's QuantmRE.com. We have a calculator there where you can find out how much home equity you could possibly unlock. We've got a free book that you can download a free guide to home equity agreements. We have all sorts of videos and podcasts and other information that should give you a very good background and information about how we can potentially help you, finally, there's a phone number at the bottom that connects to human beings who would be delighted to help you.

Brett:

Matthew Sullivan, thanks, for being on the show. I just want to thank our listeners for listening to the episode of the Capital Gains Tax Solutions Podcast. As always, we believe most high net worth individuals and those who helped them they struggled clarifying their Capital gains Tax Deferral Options. Not having a clear plan is the enemy and using a proven tax deferral strategy such as the Deferred Sales Trust is the best way to exit highly appreciated cryptocurrency businesses real estate sales and 31 Exchange all so you can create and preserve more wealth or help your clients do the same please go to CapitalGainsTaxSolutions.com. We have a Free ebook as well there on how to sell your business or real estate or cryptocurrency smarter. You can Sign Up for the Free Mastermind you can get so many other resources there. We have our YouTube channel, of course, we're streaming this there right now, Facebook, Twitter, all those cool things, we so appreciate everyone out there. Also if you're checking us out on eXpert CRE Secrets. We appreciate you there as well. Please rate review, subscribe, and please share this with someone who could help today and inspire it. We appreciate you and we hope to talk to you soon.