It’s no secret that the pandemic has prompted many people to buy a second home in a sought-after vacation spot. It has also led to a decrease in the supply of housing and a surge in prices in many resort areas, especially in the most desirable locations.
Those who have been excluded from the individual ownership market have generally looked into the vacation condominium market, which has traditionally consisted of timeshares, timeshares, private residence clubs, and destination clubs. They have also done very well over the past year.
Now come Pacaso, a Silicon Valley startup that focuses on the high-end vacation condominium market. The Pacaso model is the closest to fractional real estate ownership, offering an ownership interest in one property with others so that the costs can be shared. Each owner has an equal share of the land title and shares maintenance and taxes. The condominium can allow access to the house for several weeks, depending on the number of owners. As a concept, it has been around for twenty years and is being used successfully to sell townhouses and condos in ski resorts and seaside communities.
This is where Pacaso is a little different. The company buys single family homes in desirable luxury communities that are unique properties, not cookie-cutter condos and townhouses. They equip and decorate each home with high-end furniture and state-of-the-art appliances, using professional interior designers. For the most part, these are luxury properties worth $ 1 million and more.
They then sell the subdivided property of each property to a maximum of eight owners, who each buy a share. A single action includes approximately 44 overnight stays per year. As a stock owner, you are also guaranteed a “special date” per year, which includes Independence Day, Christmas and other federal holidays. If a buyer wants more ownership, they can buy up to four shares, which would mean owning half the house.
Unlike a timeshare, this is an actual real estate purchase and the value of the property is tied to the local real estate market. If an owner decides to sell at some point, he or she can benefit from the increased value of a property. It’s 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 enter a rental pool.
In terms of stays, Pacaso allows you to plan from 8 days to 24 months in advance. Short 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, high, reflecting the exclusivity and high real estate values in the markets they have chosen. The prices listed reflect the cost of buying the home. For example, a share in a five bedroom house in Breckenridge, Colorado is $ 593,000 while $ 725,000 will get you a share of ownership in a five bedroom house in the Old Las Palmas neighborhood of Palm Springs, with a pool, tennis court and putting green on its enclosed one acre lot. For ocean lovers, a share in a three-bedroom beach house in La Jolla, California with a rooftop infinity pool is $ 1,151,000. The total value of the La Jolla home, according to Pacaso, is $ 8,250,000.
Naturally, there are real estate transaction fees and Pacaso service fees that cover the aggregation of buyers (finding and verifying qualified owners) and the formation of the LLC, including legal fees. Pacaso offers financing of up to 50% of their purchase through Pacaso’s banking partners, as well as financing costs assessed at closing. There are also running expenses such as property management and repairs associated with the property.
Is Pacaso the wave of the future secondary property? Considering that it started in October 2020 and achieved unicorn status faster than any other company in history, with a valuation north of $ 1 billion, it probably deserves your attention.