Communities across the U.S. are experiencing troubling housing inventory shortages, and this problem has only intensified over the past year — particularly in second home communities. Buyer demand for second homes increased 100% in 2020 as more people sought to own a home where they can work remotely and enjoy everyday life. In communities that were once thought of only as special retreats, this surge in demand has dramatically increased prices and intensified competition for homes (among local and out-of-town buyers alike). This supply and demand imbalance is understandably frustrating for local residents in search of affordable, moderately priced homes. It also creates a challenge for aspiring second home buyers hoping to unlock the dream of second home ownership and secure a higher-end home in these desirable communities. Enter Pacaso. Pacaso launched in October 2020 with a mission to make second home ownership possible for more people. Our fully managed co-ownership model is helping a broader pool of aspiring second home buyers purchase real estate in a second home community for ⅛ the price and enjoy the home throughout the year. Because a fully managed co-ownership model is new to many people, we often encounter questions and misconceptions from neighbors and local community members about the potential impacts to their community. To shed light on these misperceptions, here are common myths about Pacaso — and the reality behind our model and owners.
Myth: Pacaso is a timeshare
Reality: Pacaso is real estate co-ownership, not a timeshare. Timeshares are commercial properties with hundreds of resort or condo units that typically sell purchasers a right to use a unit for a week or two each year. In comparison, Pacaso brings together just a few owners (two to eight) to co-own a single-family home in a fully managed LLC. Pacaso owners collectively own 100% of the home, and they employ Pacaso as a service provider to care for the home and simplify their ownership experience. While Pacaso’s fully managed co-ownership service is new, “DIY” co-ownership is not. It’s common for groups of friends or family members to buy a second home together. While feasible, self-organized co-ownership can be a hassle to set up and manage on an ongoing basis.
Myth: Pacaso will drive up home prices and take away homes needed by the local workforce
Reality: Market dynamics, including record-low housing inventory, have driven up prices of both primary and second homes. Second home demand in particular has surged since the onset of the pandemic, and many of these whole home buyers are competing for homes at middle-tier price points. Commonly, this is the same inventory sought by the local workforce. This supply and demand imbalance often results in homes receiving multiple offers, from a mix of primary and secondary buyers, and selling above list price. These bidding wars make real estate more expensive for all types of buyers.Pacaso helps preserve affordable and middle-tier inventory by enabling eight aspiring buyers to instead co-own a single second home. Now, instead of applying their original budget to a lower priced whole home, Pacaso buyers can co-own a home at a higher price point. This redirects buyers toward luxury, above-median homes and consolidates buyer demand. Said another way, each Pacaso home removes eight second home buyers from the market as active shoppers. This reduces overall competition in the market, creating opportunities for local buyers shopping in for moderately priced homes. Austin Allison, Pacaso co-founder and CEO, explains Pacaso's positive impact on local housing markets.
Myth: Pacaso’s math doesn’t make sense — cumulative shares add up to more than the whole home price
Reality: The real estate value of the property is the whole home divided by eight. Our fee (12%) is then rolled into the price of each share and accounts for our administrative costs and furnishings. This enables us to provide owners with a fully managed experience and move-in ready home. The fee, similar to a real estate agent’s commission, is not part of the home’s market value.
Myth: Pacaso owners will negatively impact my local community
Reality: Most second homes sit vacant for 10-11 months out of the year. This underutilization can hurt the local economy in markets like Napa Valley or Lake Tahoe where a large portion of the homes are owned by absentee owners. Pacaso owners, in contrast, use their home year-round, which means they are getting their hair cut, enjoying restaurants and shopping in local retail stores throughout all seasons. Moreover, Pacaso employs up to 10 local service providers, including property managers, landscapers and housecleaners, to care for and maintain each home.Pacaso also supports greater diversity in the community by lowering the barriers to second home ownership. We’re proud that 25% of Pacaso’s owners are nonwhite or identify as LGBTQ+, and many owners are families who are now able to enjoy second home ownership for the first time.
Myth: A Pacaso in my neighborhood will be disruptive
Reality: Unlike renters, Pacaso owners make a significant investment in their property and bring an owner mentality, not a vacation-renter mentality, to their use of the home. All Pacaso owners agree to Pacaso’s Code of Conduct, which prohibits large events or parties that would disrupt the neighborhood, among other policies. Pacaso also educates owners about local noise ordinances and maintains an open line of communication with neighbors. If noise becomes an issue, we take action.
Myth: Pacaso homes are the same as short-term rentals
Reality: Pacaso serves owners only, and Pacaso’s policies strictly prohibit any rental of Pacaso homes. Owners return to their home time and time again, just like other families who share and enjoy a second home.
Here’s what local community members are saying about Pacaso’s positive impacts: “As a professional vacation home manager, I’ve primarily served short-term vacation rentals. When I began supporting Pacaso homes, I was amazed by how invested Pacaso owners are. Pacaso owners are conscientious owners, warm neighbors, and engaged in the community."— Justin Vasquez, Poolside Vacation Rentals, Palm Springs“There is no law in the nation that says that multiple owners can’t buy a property together. The Pacaso model is completely different than a timeshare model because Pacaso does not own the property — the eight buyers do.“— Lauren Ackerman, Ackerman Family Vineyards, Napa“Our small businesses community has suffered tremendously over the past few years due to fires and the pandemic. The recent surge in second home buyers — of which approximately 70% reside in the Bay Area — means more homes will actually be occupied by a diverse group of Northern California families/part-time residents. Pacaso’s approach will result in more sustainable support for our local businesses. Local business recovery and growth is no longer possible if solely reliant upon seasonal tourism. I also welcome the fact that one of the fastest growing companies in the U.S. has determined Napa to be a key market in their growth strategy.”— Travis Stanley, President and CEO of the Napa Chamber of Commerce“The competition for homes in Lake Tahoe is relentless, and having 6 to 10 bidders on a property is not an exception, it’s the norm. Pacaso’s model is helpful in this regard. Just one Pacaso can lift up to eight buyers from competition.”— Heather Whitney, real estate agent with Sierra Sotheby's, Lake Tahoe
How Pacaso created a new approach to second home ownership