Signs you’ve made it: Three-ply toilet paper, ordering from a menu that doesn’t have prices, and stepping into the foyer of your second home.
Yesterday, startup Pacaso emerged from stealth to help you with pad No. 2. The brainchild of former Zillow CEO Spencer Rascoff and exec Austin Allison, Pacaso is pitching “an entirely new category of second home ownership” by selling partial rights to a property, ranging from 12.5%–50%.
How it works: Imagine that a timeshare, commercial lease, and Airbnb had a baby. Interested buyers browse Pacaso’s listings or find something on the market, then the company sets up the LLC, finds buyers for remaining shares, and handles the other logistics.
- In exchange, Pacaso charges an upfront 10% fee and 1% annual maintenance fee.
Pacaso launched with just four homes, but it’s hoping to spread to 25 markets in the next year with a focus on suburbs and more affordable cities rather than beachfronts and resort towns. It’s got $17 million in venture funding, including the backing of former Starbucks CEO Howard Schultz, and $250 million in debt.
There are still some questions. Like traditional vacation timeshares, Pacaso properties could see slower appreciation compared to a fully owned home, as well as bitter competition over who gets the house for the Fourth of July weekend.
Timing couldn’t be better
Rascoff and Allison wanted to “democratize” second homes before the pandemic, but Covid-19 offered a perfect opportunity as city residents looked to swap subways for suburbs or upgrade their WFH offices.
Home prices are now up 13% annually after four months of growth in new home sales and a supply squeeze that’s limiting inventory. Pacaso thinks it has the solution: Besides defraying the cost of home ownership, it would bring new units on the market by buying portions of existing second homes.
Looking ahead…real estate experts think home buying enthusiasm could continue for years thanks to low interest rates and older millennials settling down with their first mortgage.