As home prices surge, a real estate start-up launched in October by two former Zillow executives sees opportunity.
Cincinnati-based Pacaso purchases luxury single-family vacation homes and then sells them to groups of buyers through a fractional ownership model as part of an LLC, co-founder and CEO Austin Allison told CNBC on Friday.
“Most second homes sit vacant for 11 months per year,” Allison said on “The Exchange.” “We’re simply making better use of the housing stock by modernizing this old practice that’s been around for years, which we call co-ownership.”
Allison said the company operates differently from a timeshare, which sells the right to use a fixed amount of time in a property.
The company also offers integrated financing, interior design, property management and proprietary scheduling technology services.
“Imagine if you and a small group of friends decided that you wanted to own a home together,” Allison explained. “That’s what Pacaso does, except for we handle all the details — everything from bill pay and maintenance to design — so that you can enjoy your second home and not have to worry about the headaches.”
Up to eight buyers can purchase shares of a single property, Allison previously told the Napa Valley Register, but most of the company’s homes are split between five and six buyers. Pacaso owners can sell their share after 12 months of homeownership.
“The owners have complete control,” he said, adding, “Pacaso is effectively a property manager once you purchase your one-eighth or one-quarter interest in the home.”
Vacation home prices surged during the Covid pandemic, reaching an average cost of $468,000 in seasonal towns, according to a report from real estate brokerage Redfin. The demand for these second homes was primarily being driven by affluent professionals who were able to work remotely, Redfin CEO Glenn Kelman told CNBC in October 2020.
However, the number of buyers who locked in mortgage rates for vacation homes fell 11.1% year over year in June this year according to Redfin, signaling a potential end to the surge.
Pacaso announced in March it raised $75 million in a Series B funding round, putting the start-up at $90 million. The company now claims “unicorn” status, which means the private firm is valued at more than $1 billion.