Pacaso: Disrupting Vacation Home Ownership
It’s no secret that the pandemic spurred many people to buy a second home in a desirable vacation spot. That also led to a dwindling supply of homes and skyrocketing prices in many resort areas, especially in the most desirable locations.
Those who have been priced out of the single home ownership market have usually gone on to look at the shared vacation ownership market, which traditionally consists of timeshares, fractional ownership, private residence clubs and destination clubs. They’ve also done pretty well during this past year.
Now along comes Pacaso, a Silicon Valley startup, that’s focused on the high end shared vacation ownership market. The Pacaso model is closest to that of fractional real estate ownership, offering an ownership interest in a property with others so costs can be shared. Each owner holds an equal part of the real estate title and shares maintenance and taxes. Fractional ownership can allow access to the home for multiple weeks, depending on the number of owners. As concept, it’s been around for a couple of decades and successfully used to sell townhomes and condos in ski resorts and beach communities.
This is where Pacaso is a bit different. The company purchases single family homes is desirable luxury communities that are one-off properties, not cookie cutter condos and townhomes. They outfit and decorate each home with high-end furnishings and state-of-the-art appliances, using professional interior designers. For the most part, these are luxury properties that are worth $1 million and up.
They then sell subdivided ownership to each property among a maximum of eight owners, who each purchase a share. A single share includes about 44 stay nights a year. As a share owner, you’re also guaranteed one “special date” per year, which includes Independence Day, Christmas and other federal holidays. If some buyer wanted a larger share of ownership, they can purchase up to four shares, which would mean owning half the home.
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Unlike a timeshare, this is an actual real estate purchase, and the value of the property is tied to the local home market. If an owner decides to sell at some point down the line, they can benefit from a property’s increased value. This is not a VRBO or AirBnB style purchase, the company says. Pacaso promises exclusive use by owners and their guests, and stresses that the property will not go into a rental pool.
In terms of stays, Pacaso allows you to plan anywhere from 8 days to 24 months in advance. Short-notice stays can be booked two days in advance.
Pacaso currently has homes available in more than a dozen markets, with a focus on communities where the cost of entry can be otherwise prohibitive. They include Aspen, Palm Springs, Napa-Sonoma, Telluride and Park City.
The prices are, frankly, steep, reflecting the exclusivity and high real estate values in the markets that they’ve chosen. The listed prices reflect the cost to purchase ⅛ ownership of the home. For example, a share in a five-bedroom home in Breckenridge, Colorado is $593,000 while $725,000 will get you an ownership share in a five-bedroom house in the Old Las Palmas area of Palm Springs, complete with pool, tennis court and putting green on its walled one acre lot. For ocean lovers, a share in a three- bedroom home on the beach in La Jolla, California with a rooftop infinity pool, is $1,151,000. The whole house value of the La Jolla home, according to Pacaso, is $8,250,000.
Naturally, there are real estate transaction costs and a Pacaso service fee that covers buyer aggregation (finding and vetting qualified owners) and LLC formation, including legal fees. Pacaso is offering financing of up to 50% of their purchase through Pacaso’s banking partners, along with a financing fee assessed at closing. There are also ongoing expenses such as property management and repairs associated with ownership.
Is Pacaso the wave of future second-home ownership? Considering that it started up in October 2020 and has achieved unicorn status faster than any other company in history, with a valuation north of $1 billion, it’s probably worth your attention.
Published at Sun, 27 Jun 2021 05:00:00 +0000