All About Pacaso Second Homes and Vacation Rentals
Are you dreaming of an Ibizan villa, coastal living in Corona del Mar, or a Colorado chalet? Any could be yours for a fraction of their multi-million-dollar price tag thanks to companies like Pacaso. Pacaso sells shares of high-end vacation homes through fractional ownership.
Pacaso was founded in October 2020 by Zillow alumni Spencer Rascoff and Austin Allison. The company, valued at more than $1.5 billion, buys high-end real estate in popular vacation markets such as Miami, Aspen, Lake Tahoe, Napa Valley, Lake Tahoe, and Ibiza. They’re currently in 35 of the top vacation markets around the world. Pacaso typically targets luxury homes worth two to five times the median cost of housing in an area, and the average purchase price of a Pacaso home is $2.4 million.
Pacaso purchases and renovates the homes as needed. They then work with interior designers to decorate and furnish the home to suit their style and location. Once the upfront work is complete, Pacaso turns them into property-specific limited liability companies (LLCs). The LLCs serve as the financial vehicles for the Pacaso transaction. The company then partners with local real estate agents to market the properties to potential investors.
The vacation homes are sold in one-eighth increments or shares. One person may only own up to half of a property, and no more than two people can chip in to purchase a one-eighth share of a Pacaso second home.
To determine the value of the shares, Pacaso adds the home preparation expenses (at cost) to the original price of the home and divides it by eight. Pacaso adds a 12% service fee to each of those shares, which is how they make money upfront on the initial transaction.
Once all shares are sold in a home, the co-owners get 100% ownership of the house. Pacaso does not retain any shares. Meanwhile, Pacaso transitions to a property management role. They handle various logistics such as maintenance, financing, legal and more. Pacaso’s app, which uses proprietary software, also helps owners with scheduling and booking use of the home.
Owners can access the homes for an allotment of days per year – 44 days for a one-eighth share. Since there are no specific week assignments, each owner receives one “special date” per year, including high-demand periods like holidays. Pacaso charges a $100-per-share monthly management fee.
Owners cannot rent out their properties on platforms like Airbnb or VRBO, so this is truly meant to be a vacation home—not passive income.
Pacaso owners can sell their share(s) after 12 months of ownership.
Why Pacaso began
Pacaso was founded with the mission of making second homeownership more achievable for more people through co-ownership. Buying a share of a home rather than an entire home outright makes owning a vacation home achievable at a more accessible price. Rascoff and Allison also wanted to reduce the risk and complexity of owning a second home.
Additionally, the company says its model is a more sustainable and less wasteful way to own vacation homes, since multiple owners can share a single multimillion-dollar house instead of individually buying units that are likely to sit vacant for much of the year. Many vacation homes sit empty throughout the year – sometimes up to 80% of any given year.
Want a second home without the high price of Pacaso?
Before the pandemic, there was already an increase in demand for second homes. With the permanent shifts in the way people live and work, demand for co-ownership has only accelerated.
If you’ve ever wanted to own a vacation home but are not necessarily ready to pay the high price that can come with it, now it’s more affordable through co-ownership. A beachfront or cliffside house may no longer be out of reach.
Nestment, Inc. does not guarantee and is in no way responsible for the accuracy of information provided in this blog post. All information is provided “AS IS” and with all faults. Data presented here may not reflect all real estate activity in the market. While the information on this site is about legal and tax issues, it is not intended as legal or tax advice or as a substitute for the particularized advice of your own attorney and tax professional.
