There’s a new twist on the old timeshare. It’s a start-up called Pacaso that takes the timeshare model and expands it to something closer to owning your own single-family vacation home. Instead of owning a second home and all the costs that go along with it, Pacaso finds co-owners to share the expense. Scheduling for use of the home is flexible, and allows for much greater access than a timeshare. And, Pacaso takes care of all the management.
Pacaso is the brainchild of former Zillow co-founder and CEO Spencer Rascoff and former Zillow executive and dotloop founder Austin Allison, who will serve as Pacaso CEO. He told Inman News, “The concept of families buying houses together has been around for years, but it’s never been done at scale.” (1)
Luxury Second Home Without the Expense
The basic concept of Pacaso is to provide fractional ownership within a limited liability company. Shares can range in size from one-eighth to one-half. Pacaso sets up all the operating agreements, finds and/or manages the co-owners, handles tricky financing deals, and provides property management. There’s also a design standard for the home to eliminate conflicts over interior decor and furniture, and private storage areas for co-owners to store their personal items.
The cost? Buyers pay a 10% fee up front, and a 1% annual management fee. They will also be responsible for their share of a mortgage, property taxes, utilities, insurance and repairs.
What Kind of Homes are Pacaso Homes?
Homes that Pacaso wants in its portfolio are not ordinary homes. The website describes them as “spectacular” homes. (2) According to Pacaso’s criteria, they are higher-end properties that cost about two to three times the median price for the area. They also want homes in well-groomed and vibrant neighborhoods that are about three hours from a major metro. High-end amenities are also desirable, such as hot tubs or pools. They should also be move-in ready with some sort of a “wow” factor like a great view or beach access.
Pacaso plans to expand across the country but is launching its operation in 25 hot markets across 10 states. These first markets also have their own “wow” factor. They include Scottsdale and Sedona in Arizona; Napa, Tahoe, Monterey and Mammoth in California along with Santa Barbara, San Diego, Palm Springs, Big Bear and Lake Arrowhead. In Colorado, there’s Vail and Aspen. You can check out Florida co-ownership in Sarasota, Orlando, and Miami. If you want Idaho, there’s Sun Valley. In Massachusetts, buyers can head to Cape Cod, Martha’s Vineyard, and Nantucket. There are also markets in Michigan, Oregon, South Carolina, and Utah.
What Is a Selldown Owner?
The website also invites people who already own spectacular second homes to consider a Pacaso co-ownership. If the home meets with Pacaso’s approval, Pacaso would buy 50% or more of the home from what it calls a “selldown owner.” It would then resell the open shares to new co-owners. If the furniture meets with the approval of Pacaso’s interior designers, Pacaso would purchase it from the selldown owner.
Buyers who want to find a Pacaso home can register on the website. Pacaso may have a suitable listing, or a buyer can suggest a home to see if it meets with Pacaso’s approval. The process basically begins with the buyers deciding where they’d like a second home, how much they want to spend, and how much time they want to spend at the home. Pacaso can take it from there.
On the realtor side of things, Pacaso works with real estate agents in each market who can make a commission on the sale of each share. Realtor Elizabeth Oldcott in Napa Valley told Inman News that she’s been working with Pacaso for three months during a soft launch and has already grossed $175,000 in commissions.
Buyers apparently feel that Pacaso makes sense. Second homes often sit empty for most of the year, and with the tight inventory, buyers are saving money and increasing their likelihood of finding a home that they want. There’s also a demand for easy getaway destinations because of the pandemic and a surge in workforce mobility because of remote work. At first glance, it might seem wrong-headed to launch a new venture right now, but for Pacaso, the pandemic might give it a boost.
As for scheduling when co-owners can occupy the home, Pacaso uses something called the SmartStay system. The system allows for two types of stays. There’s a general stay and a short-notice stay. General stays can be scheduled 8 days to 24 months ahead of time. Short stays are scheduled 2 to 7 days in advance.
For co-owners with a one-eighth share, they get 6 general stays per year along with one special date like a birthday or anniversary and a 14-nIght maximum for each stay. Total number of nights is 44. For co-owners with a half share, they get 12 general stays, 2 special dates, a 42-night maximum and a total of 176 or more nights total. Co-owners with a one-quarter share get something in between those two.
There are algorithms that prevent conflicts. For example, if two co-owners try to book a short stay for the same period of time, the one who has “not” recently done so would get priority. Holidays are divvied up according to ownership. Co-owners who don’t get their first choice in one year can reserve it for a future year.
Democratizing Second-Home Ownership
In a press release about the official launch of Pacaso on October 1st, Rascoff says, “The mission of Pacaso is to democratize second home ownership.” He says it’s a luxury many Americans would like but is financially out of reach, and right now is “more important than ever as people seek safety, security and serenity amid Covid-19.” (3)
He feels confident that Pacaso has the talent needed to rocket this idea to success. He says, “From Hotwire to Zillow to dotloop, our team has taken entirely new concepts and created innovation and processes to make them a reality.” Pacaso just raised 17 million in new funds for a grand total of $267 million in funding and debt. A few of the individual investors include former Starbucks CEO Howard Schultz, real estate coach Tom Ferry, and Amazon executive Jeff Wilke.
We watched Airbnb grow into a short-term rental giant. This could be the next great home-sharing idea. And for people who already own second homes that sit empty for a good portion of the year, it could be a way to pull cash out of that home and buy rental property. You could cut down on the expense of the second home, and access cash that will create an income stream. At RealWealth, we can help you with that. It’s free to join and free to access all our information. Just go to newsforinvestors.com
(1) Inman Article
(2) Pacaso Website