173. Making Home Equity Accessible with Matthew Sullivan

Average Joe Finances: 0:00

Hey, Welcome back to the Average Joe Finances podcast. I'm your host, Mike Cavaggioni, and today's guest is Matthew Sullivan. So Matthew, super excited to talk to you today. Thanks for joining me.

Matthew Sullivan: 0:10

Thank you for having me on, Mike.

Average Joe Finances: 0:12

Yeah, absolutely. Hey, I wanna start this off the same way I start every podcast episode off, and we wanna know more about you. So could you share a little bit about yourself? Share your story. You can go as far into it as you want or as little detail as you want we're all ears, but we want to know who is Matthew Sullivan.

Matthew Sullivan: 0:28

I think we've got to be very conscious of your audience and you, and the fact that you don't want to suddenly lose huge numbers of people from your podcast. So I will keep it short. But my background really is what one would describe as entrepreneurial. So I've been, building businesses for I think probably almost 30 years now. And my focus has been on telecoms, finance, and technology. I moved to the US about 10 years ago. And one of the things that I really wanted to get involved with, which I hadn't really done in the UK was to get deeply involved with real estate. And real estate over here is a very different proposition to what it is in England. And really the company that I started building about four years ago, QuantmRE, which is the company that I run now, really is one of those Fantastic sort of opportunities where you get to do everything that you've learned over the last 30 years in, platforms and technology and finance and so it's really a combination of all of those things. Thankfully I'm building a business that allows me to build on some of my past experiences. Fun bits. I'm a helicopter pilot, have all that I've flown for quite a while. I used to be one of the directors and trustees of the Royal London Hospital's Air Ambulance in London, which was run by Richard Branson's Virgin group. I spent a few years working alongside Richard with his team. Looking back, it's been a very sort of wide set of experiences building businesses in India, Australia, the UK and, laterally the last decade in the US. So hopefully there's still one or two people left listening after that sort of long, soliloquy.

Average Joe Finances: 2:04

No, Matthew that's fantastic. It seems like you're just a well-rounded entrepreneur and, talking about, what you were doing before you came to the US and how attractive real estate was to you when you came to the US is really awesome, right? Because I feel like a lot of people that are in any type of business, Always wind up looking at real estate as a haven for their wealth or a way to build it better or protect it. There's so many different uses for real estate. And I wanna talk to you a little bit about that today too, about why you wanted to get into real estate, especially with everything else that you've had going on. You built businesses in India, Australia, the UK and now here in the US. Why have you decided to call the US home at this point?

Matthew Sullivan: 2:52

I think you need to ask my wife that question actually. That's the clue.

Average Joe Finances: 2:55

Ok.

Matthew Sullivan: 2:55

A wife plus four children.

Average Joe Finances: 2:57

Yeah. Okay.

Matthew Sullivan: 2:57

Normally, I think it's the dumb thing to stay in the country where actually I haven't said that. Yeah. No, but so it is really personal reasons that I came over here. And it's been really exciting and fun and joyous all the way through. I still have that same excitement that, you know, that a school boy does when he goes on his first trip. You know what I mean? His first road trip or his first school trip. That fact that your, when you drive places, your eyes are still going. Cool, look at that. Originally I moved when I moved to the us we landed in, or I landed in Orange County, California, which is where my wife's from. And we, over the last, few years, we've moved a couple of times, spent a couple of years in Utah during the pandemic just to escape the craziness in California. And then I'm calling you now from our new home in North Carolina, so we're now on the East Coast, so we've done a lot of moving. But yeah, it's been a really exciting time for me and I still have that that sort of fun fact.

Average Joe Finances: 3:51

That's great. So Matthew, I have to ask you then, so since you lived on the West Coast when you first got here, now living on the East Coast, which is better, West Coast or East Coast?

Matthew Sullivan: 3:59

That's right. Yeah. Yes.

Average Joe Finances: 4:01

Didn't expect that.

Matthew Sullivan: 4:02

How can you, I think I would answer that by saying they're very different. So what's really good about and a lot of it really depends on who you are as an individual. So I really love the vibrancy of Los Angeles and Orange County and that sort of, the ability, the fact that you are in the center of everything now. Coming from the UK I came from Kent, which was, beautiful rolling green countryside. That was a part of me that just didn't feel settled despite the fact that there was this fantastic business environment. And, having built the business I feel much more at home here on the East Coast because it feels much closer to where I spent the first, the first few decades of my life. And I think they're all fantastic places. So we live quite close to Raleigh. And there is a huge sort of vibrant, business and educational community there. Both sides have their own huge benefits and I feel like I'm constantly moving forward as opposed to sitting there going I think I probably should go back to California for this. I don't feel I've lost anything. Moving to the East Coast.

Average Joe Finances: 5:05

Yeah. It's funny cause like each area, the United States is so unique, right? When you look at it from just the different areas you can live in.

Matthew Sullivan: 5:13

It's huge.

Average Joe Finances: 5:14

And how different,

Matthew Sullivan: 5:16

you have no idea how big it is. That's the thing, that's the thing. Sorry.

Average Joe Finances: 5:18

Yeah. It's just like how different areas are. I grew up in New York, I was I served 20 years in the Navy. I spent 15 years stationed in Virginia. And going from the north down south to Virginia was a huge eye opening experience for me. I've been to San Diego and Coronado a couple times, for work trips. But now I, I wind up out in Hawaii. This is where I retired from the military at, and it's again, a whole different world, right? So it's just amazing all these different areas. And I just wanna get your perspective on that, especially being from the UK and then moving here, and then being on the west coast and being on the East coast and see like what your thoughts were on that. And it's unique, right? It's a unique experience that you get to that you get to have right?

Matthew Sullivan: 6:01

One of the things, they are very different, so Los Angeles and New York are very different places. Culturally, I think I'm more at home in New York than I would be in Los Angeles. I prefer,

Average Joe Finances: 6:12

that's a good answer.

Matthew Sullivan: 6:13

The directness, only because you said you came from New York.

Average Joe Finances: 6:16

Yeah.

Matthew Sullivan: 6:16

If you said, now I do honestly cause the thing

Average Joe Finances: 6:19

they have the best pizza.

Matthew Sullivan: 6:20

You always. Yeah, of course. And that goes without saying, but you feel in Los Angeles that someone says something to you and you're not absolutely certain if they're actually gonna deliver it. And that seems to be quite common. Across many people. There's a lot of promises that aren't always backed up with delivery. But and my experience is I think really because I've spent more time in New York over the years but I like it. I just love the fact that New York, you can, as I say, culturally and geographically, it's much more aligned to what I'm used to, which, which means nothing for someone else, so everyone has their own individual views and reasons why. Some people dream and love about, love California. It's a very extended brand. Let me put it like that. And when you get there, you think, yeah, it's not all, it's cracked up to be.

Average Joe Finances: 7:03

Yeah.

Matthew Sullivan: 7:03

Ocean's fantastic and there's some fantastic bits, but there are other bits that are not quite as didn't remember reading about this in the brochure.

Average Joe Finances: 7:10

Yeah, well the Pacific is definitely nicer than the Atlantic Ocean. I can a hundred percent support that.

Matthew Sullivan: 7:16

But the Atlantic is significantly warmer.

Average Joe Finances: 7:21

Yeah, it is. It is. that's, you also have the what's it called? The see I used to go fish it. Why? I'm having a brain fart right now.

Matthew Sullivan: 7:29

A great white shark?

Average Joe Finances: 7:30

No. We used to go shark fishing off on Long Island, but there's What's, why am I having such a brain fart? The, the Gulf Stream. You have the Gulf Stream that goes right up there. Course. Yeah. Yeah. So that helps out as well.

Matthew Sullivan: 7:40

That brings all more though. Yes.

Average Joe Finances: 7:42

Yeah. , I don't know why it took so long to pull that out, but

Matthew Sullivan: 7:45

you have the power of the edit.

Average Joe Finances: 7:47

Yeah. . I want, I wanna, I'm probably gonna leave all that in because that's important, for the episode here.

Matthew Sullivan: 7:51

Yes.

Average Joe Finances: 7:52

But I wanna pull something out that you had mentioned earlier about, some of the differences you experienced. and that was with people fulfilling their promises. Now have you found that a lot in the real estate side since, getting started in investing in real estate since you've come to the United States?

Matthew Sullivan: 8:09

No more than any other business. And I think people labor under the misapprehension that because they live in a house which is real estate, they understand what real estate is. So you get many people don't really approach real estate as a business, and because of that, they suffer the same consequences as anybody that doesn't approach their business as a business. So it's not really specifically related to real estate as such, but you tend to get more people that are, self-appointed experts in real estate because, people understand the concept of what a house is. You get fewer people that are self-appointed neurological experts because, brain surgery is harder. And so because of that, you come across more people that have their views about real estate. And it's, you have to sift through those people that feel that it's an easy choice because it's something that conceptually is more understandable than some of the other business opportunities.

Average Joe Finances: 9:09

All right, so let's, Matthew, let's talk about some of the things people should understand about real estate, specifically with what you do with QuantmRE. And that is, being able to make home equity accessible, right? Because I feel like a lot of people sit on their homes literally and figuratively and they have this equity that's just sitting there doing nothing and they, they find themselves being like, house rich and cash poor. So what is, what does that mean to you when you see somebody in a situation like that?

Matthew Sullivan: 9:36

It's an opportunity and it's an opportunity to solve a very large problem because I think it is actually a problem. And the problem is that there is over 25 trillion worth of equity in people's homes now, which is the highest level it has ever been in the history of man. And there are a number of reasons. I think we've all, we all understand that house prices have rocketed up over the last, couple of years in particular, but it's a problem because most people's wealth is tied up in their home. And there are all sorts of statistics around this, but the issue is you can't get your hands on it. So it's an illiquid asset. It's not tradeable, you can't spend your home equity at the supermarket and in order to get your hands on it, You have to borrow money and secure that loan against your real estate. So you have to go deeper into debt to be able to get access to something that's yours. And there's a whole process, as we all know that is involved in borrowing money. And it's harder than ever to borrow money now. And if in fact, you, people who were the statistics, the amount of mortgage lending is now at its lowest level in decades. So the problem is for homeowner. Significant wealth that's trapped in their home. The opportunity really is to find a solution or to provide a solution to homeowners to give them access to their home equity. And that also creates opportunities for investors. So that's really, what we do at Quantm is we blend those two together, we enable homeowners to get liquidity, and we enable investors who provide that liquidity to be able to benefit from some of the potential upside that comes from investing in the equity in people's homes.

Average Joe Finances: 11:20

I like that. So I'd like to know, like, how do you do that? Because I personally have taken out a HELOC right, to pull equity outta my home, and I've used it to buy more real estate, right? So I didn't, I, I didn't want my equity just sitting there. So that was a strategy that I used to purchase more real estate by using my equity. Now, from what I understand QuantmRE does a little bit different. It's you guys do home equity agreements right now. How does that work?

Matthew Sullivan: 11:44

It's very similar in terms of the outcome of a HELOC. In other words, what it does is it enables you to get liquidity from your home equity. Now, a HELOC is a loan in by any other name, but it's slightly different to most other loans because it's a line of credit, which means that when you get your home equity line of credit or your HELOC to start with, you are just paying the interest on what you've drawn down. But then after a period of time, which is normally 10 years, it then changes over to being a fully amortizing loan so you don't have to start paying the principle down. But in any case it's a loan. So you've got to meet those monthly payments and your case. If you are borrowing money against your home, you've got to find that extra few hundred or whatever it is, dollars a month to service that loan. Now, if you don't find that, let's say the investment that you put your money in didn't go as according to plan, you are then at risk because you've got that additional lending on your home. So you've got all the risks that go with any loan. Our programs are very different because we invest money. We don't lend money. What we say to the homeowner is in exchange for a pre-agreed share of the future value of your property, we'll give you cash today representing a share of the current value. So what we do is we build in a discount between those two figures and we agree that those figures were the homeowner. But what we do effectively is have an agreement that says at some point in the future, which is normally 10 years, by then you will owe us and agree percentage of the value of your property, whatever the value of your property is at that point, it may go up, it may go down, and in the meantime, we'll buy that right from you in exchange for a cash lump sum that represents a percentage of the current value of your property. So you are selling us some of the future value at a discount. Now, because it's a sale as opposed to a loan, you don't have any servicing costs. So if your business opportunity or your stock or your investments don't perform as you hoped, you haven't got that additional burden. And in addition to that, there's no impact on your credit report, it's a very tax efficient way of, raising capital. There are a number of different benefits. And the most important point though is that this program is accessible to people that otherwise would not qualify for a loan. All those people that would like to get a heat lock but just get turned down by the banks home equity agreements in many of those cases would be an ideal solution.

Average Joe Finances: 14:15

Okay. Yeah that, that's fair. Now, what happens if somebody was to sell their house before that 10 year period? Let's say they do a home equity agreement and they sell their home four or five years later, what does that look like? Would they make their payment back right up front?

Matthew Sullivan: 14:31

No, just at the point that they sell their home so it runs for a maximum of 10 years.

Average Joe Finances: 14:36

Ok

Matthew Sullivan: 14:36

but you can pay that off at any time. So it's a bit like a mortgage, it runs from, for 25 or 30 years. But at any time you can refinance, you can sell the property, you can buy us back without prepayment penalties. There's no early payment penalties. And you're free to do that at any point over the duration of the agreement.

Average Joe Finances: 14:58

Okay, awesome. Now also with the agreement, are they making a monthly payment or is it, can I pay one lump sum 10 years from now?

Matthew Sullivan: 15:05

No, you don't make monthly payments. You actually can't because that makes it feel a little bit like a loan, which is what we really don't want.

Average Joe Finances: 15:12

Okay.

Matthew Sullivan: 15:12

So you have to the payment has to be made in a lump sum, and it's normally when something happens, so a trigger event, which could be when you sell the property or when the last person on the agreement dies. Or if you decide to refinance, you might, take out a very low interest rate mortgage and decide to buy us back at that point.

Average Joe Finances: 15:31

Okay, great. Yeah that's what I wanted to make sure I understood, because that's actually a pretty lucrative thing. Then if someone's gonna look. Doing a home equity agreement, because you, you're not adding to your DTI at that very point, right? You're not, creating a monthly payment that you have to make. Which is really cool. Now does this, obviously it's an agreement, right? So there's gonna be a lean on the home with it?

Matthew Sullivan: 15:54

Exactly. That's right. Yeah. So it is, it's a real estate agreement. It's protected by a lean, it's very similar to a deed of trust. The language is almost identical to a deed of trust.

Average Joe Finances: 16:04

Okay. Yeah. Okay, good. So that, that, I'm just trying to make sure it makes sense for everybody that's listening. I like to explain things I'm a fifth grader. Because if I can understand it that way, I know my listeners can understand it. Okay. This is fantastic. Okay. Great. So I haven't heard of these before. So if how long have these been around? Because this is, again, like I, I know about doing HELOCs and I do velocity banking myself with my HELOC, but I haven't heard of this in the past. Is QuantmRE the only people doing this? Or like how long has this been going?

Matthew Sullivan: 16:32

They've been around for over 10 years. The home equity agreement structure has been around for funny enough, it was set up by a company called Equity Key who were based out of San Diego, and that was probably about 12 plus years ago they were the first. And since then about another half a dozen or so companies have started doing the same thing. And we estimate about a billion and a half dollars a year is now being invested into home equity agreements or home equity investments. And that figure's growing because there's a huge demand from homeowners who want to try and get hold of home equity, but either don't qualify for a loan or simply just don't want to borrow more money. And so the reason that most people haven't heard is really because they haven't been around that long, but there are a growing number of companies who are building their businesses in this space because it's such a vast space and it's untapped as an investment class. So I mentioned earlier, There's over 25 trillion dollars worth of equity in residential homes. Those are the figures from the from Fred. And that's as of last year and that's growing, right now. So there is, it is an enormous asset class, trillions of dollars of equity that normally as an investor, you cannot get your hands on, so you, it's very difficult, if not impossible to invest in the equity in an owner-occupied home. You can go and buy a home, you can buy a property and rent it out, but to be able to participate in the equity and owner-occupied homes is an entirely new asset class. So it's very interesting for investors, and it's also very important for homeowners because it solves a real problem that many people have who are, as you said earlier, house rich and cash poor.

Average Joe Finances: 18:21

Yeah. Matthew as you brought it up earlier too you had mentioned that right now it's estimated, what about half a billion a year is going into this industry?

Matthew Sullivan: 18:29

No, I'd say about, I'd say about one and a half. About one and a half.

Average Joe Finances: 18:32

Oh, one and a half billion. Okay. One and a half billion. And like you said earlier too, like it's what 25 trillion of untapped equity in homes in the United States right now is that's just the US right? That's not worldwide. That's just the US

Matthew Sullivan: 18:44

Absolutely. , just the US. Yeah,

Average Joe Finances: 18:46

that is an insane number. That's a lot of zeros people. Okay. And if this is only at one and a half billion, you could probably expect some more massive growth as the word gets out about what this program is, cause you know, sure. There's always been people that have invested in real estate, but over the last couple years, especially during the pandemic, there's been a lot of people that were sitting around at home doing some research and stuff and got into real estate investing. And they were like, this is something I'll wanna do on the side. And a lot of people try to figure out like I don't know where I'm gonna get the capital from to invest. I don't know what I'm gonna do, to buy my next property. I own my home, but I don't know what else to do. Now for me, I tapped into my equity by using a HELOC to buy more real estate. This is just like another avenue, another opportunity to collect, on your equity and go purchase more real estate. what I like about this is just that it adds to your liquidity, right? And you had mentioned that word earlier, but that is such an important word. Because when you have illiquid assets it's difficult to use that towards anything that that you can invest further into. You can't just say, okay, I've got 400,000 in equity in my home, so I'm gonna go purchase, oh, I found this really great deal for 200,000 oh, how am I gonna get that? Oh, I gotta do a cash out refinance and this and that. I don't even know if I can get approved for the loan gotta go take out a HELOC. Oh but the bank said my, my credit score's too low because of whatever. and now I can't get the HELOC, oh, what do I do? So this is just another avenue for someone to Yeah, no, I like that.

Matthew Sullivan: 20:15

And the important point again, that you mentioned about not appearing on your credit report is that credit report is very important because for people that are, That have, there's a lot of people that have run up significant credit card and other types of debt, because, the economy is changing and it's very easy to find yourself in a position where, know, the credit cards suddenly become difficult to pay back. We've all done it, but the problem is you're paying 30% a year in many cases for that. So if you get to a point which isn't very high, you can find yourself in a position where you are. Able to afford the payments to keep yourself, from going backwards. You don't pay anything towards the principle that stays the same. You're just servicing the credit cards because they're so expensive. So a lot of people that we work with are in that position. And so for them, we're actually, they're making 30% a year on their, on, on their. So just by being able to pay their credit cards off, that's effectively the same as making a 30% return. Then you have the people that are looking to invest. Now, if you don't have. More debt on your personal balance sheet as it were. That means that you can probably borrow more money to buy the home because you've got a lower servicing cost and banks looking at small property owners and small portfolio owners are looking at you as an individual as well as you as a business. So if you have a lower debt income ratio and more cash, which is exactly what these instruments provide you, then that may give you a wider range of properties that you can invested.

Average Joe Finances: 21:53

Yeah, absolutely. Because now you have that key word we talked about earlier, liquidity. What are your thoughts on this, Matthew, about, home equity agreements? Do you think this can be one, like the next biggest thing in the real estate industry? Because I'm getting excited just having this conversation with you about it. I think it's, I think it's pretty cool.

Matthew Sullivan: 22:12

I think the answer is yes, and I, and that is based on. A number of key factors in, in terms of the proof behind that answer. The critical things that make this happen is it solving a real problem? And I think the answer is category yes. Is there a ready market for it? And there are. Mil, tens of millions of homes where the homeowners are equity rich. And what that means is that they have 50% or more home equity. Liquidity is a major challenge. So I think we're all agreed on that. And this solves. That problem for a wide range of people. It's not for everyone. It is less expensive to borrow money through a HELOC or a cashout refinance, but for those people who simply don't want more debt, there are many people like that or. All those millions of people that don't qualify here is a way to unlock some of your wealth. So the first point is it solves a major problem. Now, from an investor's perspective, it's a compelling investment opportunity to provide that liquidity to homeowners because the way the agreements are structured, you are buying property at a significant discount to the fair market value, and that's really what these agreements are. They're agreements that enable investors to buy some of the future value at a discount to the current value, and that's very attractive to investors who want real estate exposure because these agreements have inbuilt downside protection, and what that means is that the property can fall by 30 or 40% in value, and the investor can still make money. So it solves a problem for homeowners, provides liquidity and gives real estate investors. Access to a previously untapped real estate asset class with an instrument that gives them some pretty solid downside protection, which I, I would challenge anyone to to come up with a real estate investment that has the same level of downside protection that these types of agreements have.

Average Joe Finances: 24:13

Yeah. So Matthew, I was actually gonna, that was gonna be the next thing I wanted to ask you about was like, what does this look like for an investor that wants to purchase these future? The future value of these homes, right? And now you break it down by shares, right? So do you break the home up into like shares and you say, okay, you have this much equity so a share would be worth, this much, and then 10 years from now we estimate it would be worth this much. So this is the amount you have to pay back. This is what we'll give you today, right? So the investor that's buying into that they're essentially paying that amount right up front. Yes. And then it's, a 10 year hold period. So if you've got the money to be able to put into something and let it sit for 10 years, what type of returns are some of these investors seeing at that point?

Matthew Sullivan: 24:58

I think it's interesting because even though it's a 10 year term, what we're seeing is most of these agreements pay off much sooner than that, maybe, three to four years. So the whole period is normally gonna be a lot lower on average than the full term. And what we state on our website is that the I R is 12 to 15% over a four year period and that's assuming, a 3% house price appreciation. We're assu assuming a fairly conservative house price appreciation and the way that these agreements are structured. As you can see, if house prices appreciate by 3% a year, how come I'm getting a 15% i r And that's because of the inbuilt return, inbuilt leverage, or the inbuilt acceleration that, that comes from the way that the contract is structured. So investors get a sort of a structurally leveraged. In other words, they get the same sort of returns that they would get if the agreement was a leveraged agreement, but it's not. So they get the same returns without all the risk associated with a leveraged agreement. The other important thing is that our platform that we've recently launched has been designed to enable investors to trade. The paper. So in other words, once an agreement has been funded with a homeowner that happens behind the scenes, we take that home equity investment, which is an asset. We use blockchain technologies to chop it up into tradeable shares and people can then buy fractions. Of home equity investments, or they can buy whole home equity investments or they can buy pools. So from an investor's perspective, our platform is a marketplace that's been designed to enable much more flexibility. In investing into these agreements. So you can pick and choose where you want to invest, but you've also got a tradeability element. You can buy and sell these instruments and that, that creates liquidity for the instrument itself. So the homeowner has liquidity and the investor also has the prospect of liquidity. And we're still at a very early stage in terms of numbers, but. Over time, I think we'll see we're expecting to see some, some significant increase in trading activity on the platform as these become more widely known, understood, and invested in. . Average Joe Finances: Yeah. No I really like that cause it's interesting, you had mentioned that it's, it's on the blockchain, right? And you split it up into fractional shares and, that is like where the future of real estate's going, right? There's already been homes sold. on the blockchain, title, everything done that way. Yes. And there's popular people out there like Ryan Pinedo, who's saying this is the future of real estate. And I don't know for sure. I don't have a crystal ball, but the way things are going and the way technology is, I could definitely see it going that way. So being able to get into to a marketplace like super early, is quite telling of where this is going. So I think that's pretty awesome. And the fact that you're able to fractionalize, these investments that these investors are putting into, and it gives them the opportunity, like you said. for possible liquidity themselves. That's huge, right? Because any investor, no matter what they put into, they want liquidity, right? Everybody wants liquidity. You always wanna be able to cash out if you need to and things like that. And this provides that opportunity. So that's pretty amazing. Great, thank you. And it is, I agree with you because it's not just about the technology the regulatory environment is now it's become more flexible and there's a lot more understanding of what blockchain can actually do. And really what it does is it brings low cost efficiencies to the change of ownership of real estate assets. And in very simple terms, it means that the ownership. Of an asset or the ownership of a fraction of an asset can change hands at a much lower cost and with much higher efficiency than it was done previously. Yeah, instantly, previously you would own shares in a real estate investment through a, an LP or a, you'd be, you'd have a partnership if you wanted to sell your shares in the partnership, you would go through the general partner there would be a very long process, in most cases of finding another investor. And you'd be expensive. But if you. Bring all of that into a technologically driven environment that can happen instantly at a much low cost, and that in itself creates liquidity. That creeps accessibility and tradeability and all of that breathes life into. an enormous asset class. And so that, if it was a, a tiny asset class, then it wouldn't be worth doing. But the fact that you are creating or the one is creating accessibility and tradeability in this enormous untapped asset class that going back to the very beginning of our conversation. Everybody understands, people know what a home is. Then that's why we're very excited about where this whole space is at the moment and where it's going to go.

Average Joe Finances: 30:01

Yeah. Matthew, I wanna point something out too, just so people understand your experience with this, cause I don't think we really talked about this in your background. Now you also have two real estate funds, right?

Matthew Sullivan: 30:10

Yes, I was co-founder of a couple of this funds. Yeah, exactly.

Average Joe Finances: 30:14

Okay. And you also do have a crowdfunding platform called Crowd Venture. Right?

Matthew Sullivan: 30:19

That was one of the very early real estate crowdfunding companies that came out of the Jobs Act. So yeah, so there's lots of learning. That's happened over the years with the online trading and, the challenges and the benefits of bringing these things to life in an online environment and also, running real estate funds. It's where concept meets reality, so there's lots of, Understanding and experience there of, what should happen and what does happen.

Average Joe Finances: 30:46

Oh I just wanted to point out your experience with this, because when we're talking about, cause this is something that's, to me it was new, right? And I, I know a lot of people are listening right now. Probably never heard of these home equity agreements before. So this is a very new thing for a lot of people. But I wanted to point out your experience. In the real estate realm as well with funds and with running real estate funds and everything because you have a very good understanding of how this works and you know how to work with investors. And I think that's important to point out. Yes. Because there's a lot of people that can start things up and it sounds great on paper, but if they don't have experience with investors, they, they find themselves getting stuck and having a hard time. But I find this very fascinating. I feel like I learned so much just from this short conversation. This is really cool, Matthew. Thank you.

Matthew Sullivan: 31:32

Thank you now, and the important thing is, again coming back to what we do is it has a real world application. So there are many technologies that are fascinating because of what they do and how they work. But the nuts and bolts of this really is that it provides a service to millions of people who need the money now more than ever. And. And so doing it provides, a solid return to investors. It's a great place to be. And it's funny, as I was saying earlier, you build on all of your experiences and this was really interesting from the very, very beginning because of the scalability of it. Because all the things that I learned at Crowd Venture which is. Scalability is so important. Every time you take on a new deal, if you have to manage each deal individually, then you grind to a haul very soon. But being able to create something that, that can grow and grow without, the friction associated with having to have almost individual loan offices for each deal. So there's lots of learnings that happened with all the other things I did in this space that, that really, you know help us build it the way it is today.

Average Joe Finances: 32:40

Yeah, absolutely. I, again I just, I wanted to point that out because I just, I feel like, this is something that might be very useful to a lot of investors. One if they need to borrow against their equity. But two, if you're an investor and you're looking for something else to invest in that's relatively very safe and . Some very good downturn protection, like you mentioned earlier. Yes. This is a great thing to look at. That's fantastic. Matthew, I wanna transition this into something that I call the final round. It's where I'm gonna ask you four questions that I ask everybody that comes on this show, and it'll help give us an idea of how you are under pressure or when you're put in tough situation.

Matthew Sullivan: 33:17

Okay. Okay. And as we said earlier, I have not prepared for this. They be prepared for long silences.

Average Joe Finances: 33:23

Alright hopefully there's not long silence, but I think we're gonna be okay, but, alright. Matthew, first question is, what's the biggest mistake you've ever made in real estate?

Matthew Sullivan: 33:33

I think you real estate is like any business. and you know that after you've gone through it. And I think the biggest mis mistake is assuming that everything will go according to plan. And I don't think there's one specific investment that went terribly wrong. And I've spoken to loads of people who have one horror story where everything went right and then the one deal that they did went horribly wrong. But I think the way I would answer this is by saying that nothing. Goes according to plan. So you have to have contingencies. You have to have the expectation that if this thing doesn't go entirely according to plan, what's gonna happen next? What is your plan B? How do you prevent all your eggs from being in one metaphorical baskets? And that I think, is. In real estate as it is with any other business. But people are lulled into a full sense of security with real estate because they think they understand it because they can feel it and touch it. But, I think, the learnings are that it is an incredibly dynamic business with many individual factors that can contribute to success or failure. And you have to be as open and. To of as many of those as possible at any given time, and not to assume that everything will go according to your spreadsheets and your plans.

Average Joe Finances: 34:59

Yeah, a hundred percent. It is hard to narrow it down to one, right? Especially if you've been doing this for a little while because, and assuming can be the worst thing you could possibly do, like you had mentioned earlier. And feel like a lot of people find themselves in that area cause real estate can be incredibly easy and incredibly hard at the same exact time. Because you might think, everything you need to know. And if you're not paying attention to what's going on, there's always new laws, there's new regulations coming out. There's so many people that got involved in like short-term rentals just to have that. Just a false flat on their face because the city regulated it and changed the rules. Where that asset class worked as a short-term rental, but it did not work as a long-term rental. And now, these people found themselves like having to sell these homes short, sell them or figure out another way to, to make it work. So yeah definitely appreciate that. Okay. Imagine.

Matthew Sullivan: 35:50

No. I was just gonna say it is exactly that. It is the fact that you just have your blinkers on and you think that everything is gonna be exactly as but you just need to work with smart people who've been through this before and listen to them when they say what happens if interest rates go up from three to 7% and not say things like, oh, that's never gonna happen, so you've gotta be able to, you.

Average Joe Finances: 36:10

Yeah, having a good mentor is important or getting a coach right. I firmly believe in that stuff, okay. Matthew, the next question I have for you is, what is something that you've learned that you wish you knew when you first got started?

Matthew Sullivan: 36:23

I think the answer to that really is that you've got to have faith and trust in yourself. And I don't want this to be a very west coast Californian touchy feely answer, but in many cases, something is the way forward. It endemically, you feel it inside. And that's the path that you should be on and that's what you should be doing. And that's the business that you should be building, and that's, And then someone will come along and say and we'll give, Some negative feedback or something and because of lack of courage or lack of self-belief, you'll you won't do it. And I think really the only way that you should not do something is by doing it. And then completely and utterly failing at it at the end, so see it all the way through. So in a number of cases, I've done something I've half done something because I got distracted or I got scared because of feedback from people. Who really didn't know any better and didn't have any of the same vision, that I had at that time. So I think the advice, not that it is advice, but just see something through to the end. Take advice from people, but if it's gonna crash, then, be the pilot of your own disaster so that at least you can, come out of the wreckage, dust yourself off and start again knowing what went wrong and why it went wrong.

Average Joe Finances: 37:47

Yeah. No that's great. That's a fantastic way to put it. Be the pilot and be able to dust yourself off because, if you can't dust yourself off and get back up and get back into it that's where you're gonna start to see true failure come in. Because, the people that get caught up in their mistakes and give up are the ones that just, that could have made it, that never. So I definitely appreciate that perspective.

Matthew Sullivan: 38:09

I think that, I think that is, I think that is failure. I think failure is not to fail. It sounds ridiculous, but it's, failure is a natural part of the growth and, the business cycle.

Average Joe Finances: 38:20

It's another step towards success.

Matthew Sullivan: 38:23

Exactly, it's like a scientific experiment that, that yields a certain type of results, and what do they say that, fear is a temporary lack of information. Same sort of thing, anyway, I'm not sure if I answered the question we'll, just taking down a completely different route. Sorry.

Average Joe Finances: 38:36

No, it's all good. It's all good. All right, Matthew the next question I have for you is, do you have any tips or tricks that you would recommend to someone that is just getting started out?

Matthew Sullivan: 38:46

In real estate or, yeah.

Average Joe Finances: 38:48

In real estate.

Matthew Sullivan: 38:48

Generally. Yeah I think you should be very specific about the type of real estate that you want to invest in and do your research. So do not, Leap in just because your capital is burning a hole in your pocket. Conversely, make sure you do something. In other words, don't just sit back and not invest because then nothing will happen. The way forward is to treat it like a business, treat it like a something that needs work in the same way that you would work at any other normal job. Put the hours in, make informed decisions and get as much advice as possible from other people. Preferably free advice from people that you trust or from people that you don't trust, but just get as much information, as much background information, and then make an informed decision. Then if it goes right, congratulations. If it doesn't go right, don't bet the. Make sure that you learn from the mistake and then go back and do it again more intelligently next time.

Average Joe Finances: 39:52

Yeah, learn from that. That's one, one of the biggest things. Just learn from the mistakes. In real estate, every time you make a mistake, it's another piece of education. How expensive it is. Depends on how much you had to learn . Matthew Sullivan: That's right. Yeah. Could be very expensive. Harvard. Great education just then. Yeah, exactly. Exactly. All right. Matthew, so the final question of the final round is, do you have a favorite business investing or real estate related book or podcast, or, both?

Matthew Sullivan: 40:19

Yes, funny enough, my favorite book that that has had the most use to me, and I was just looking up as you were speaking earlier is a book by David Allen called Getting Things Done, and I always forget his name but it's a book that someone recommended me years ago, and it's one of these things that. It just stayed with me because like many of us, I wake up at three o'clock on a Monday morning just going through a list of things I've got to do and and then getting to the end think, oh God, I've this, and you just go through, I've gotta this do that, make sure I've gotta do that. So your mind is just full of all this useless list information. And I stumbled across this book and what he teaches, and I'm paraphrasing very badly, is that your mind is really designed to be creative and absolutely not designed to be a repository of useless information. So write down all the stuff that you've got to do somewhere safe, like a book on your desk where you know where it is, and then you can completely forget about having. Remember what you're gonna do the next day, cause you know that you've written it all down and then suddenly your mind become, Clear to start thinking about solving problems. And you can still wake up at three o'clock in the morning with ideas, but you'll have ideas then about how you've solved problems, how you can bring new light and, new growth to the business or new ideas because your mind is being used as a creative engine rather than being clogged up by all this sort of useless information that is really, strangulating your ability to think creatibly.

Average Joe Finances: 41:56

Yeah, no I appreciate that that book recommendation, Matthew, because that's fantastic. When you first mentioned, you know that you were getting up at three o'clock in the morning, like many other people, I'm like, who are these people for? One, for two. Then I realized you were talking about, okay, you're waking up cause your mind is racing, right? I was like, oh man, if he's getting up at three o'clock in the morning every day, that's crazy. cause I did 20 years in the military and I was getting up at four 30.

Matthew Sullivan: 42:19

No, let me explain one thing. No. I do not Category, do not get up at 3:00 AM In fact, I'm not even sure if that time actually exists. Yeah. So but you'd wake up, bolt up, right?

Average Joe Finances: 42:29

You threw me off for a second, man. I was like, oh my goodness. He's got up at three o'clock in the morning. Good on him, man. Yeah,

Matthew Sullivan: 42:33

I just like Margaret that, so I just need four hours sleep, plus the rest.

Average Joe Finances: 42:38

That's fantastic. All right, awesome. Hey, so great book recommendation. Thank you so much for that. All right, I, that's it for the final round, but I do have one more very important question for you, Matthew, and it's the most important question of all. I learned a lot during this episode. I'm sure my listeners also learned a lot during this episode. And they wanna know more about where they can find more information about you and Quantum, how they can get into a home equity agreement or how they can invest in a home equity agreement. So where can we find that information about, do you have a website any social medias that we can follow, anything like that?

Matthew Sullivan: 43:10

Yes, thank you. And it's all, all really, we try and put everything on the website. It says quantumRE, QUANTUM RE, quantumRE.com and we've got lots of information. There's a calculator where you can find out how much equity potentially you could unlock. You can register an account with us, which is a trading account, so you can go on, see some of our home equity deals. It's for accredited investors at the moment, but we're gonna be opening up next year to smaller investors. So everything is there. There's lots of resources. There's a downloadable guide that talks about what home equity agreements are. Everything's on the website, phone numbers, addresses, and please call us. We'd love to hear from you.

Average Joe Finances: 43:52

All right. Fantastic. Thank you so much. I'm gonna make sure I have the, all the links and everything in the show notes to make it easier for our listeners. You can just copy and paste or click away. Just don't do it while you're driving. Matthew, thank you so much. This was a very informative interview and I really enjoyed myself. Thank you.

Matthew Sullivan: 44:07

Wonderful. Likewise. And it's been a pleasure, Mike. Thanks so much for having me on.

Average Joe Finances: 44:11

Absolutely. And hey, to my listeners, thank you so much for joining me and our special guest, Matthew Sullivan on the average Joe Finances Podcast. Go leave us a five star review and tell us what you like about today's episode with Matthew. Aloha from Hawaii and have a great rest of your day.