Like it or not, Cabo is off the table for the foreseeable future.
For a pair of Zillow alumni, that reality has created an opportunity.
Yesterday Pacaso (pronounced “Picasso”) came out of so-called “stealth mode” (a temporary state of secretive operations popular with Silicon Valley folks) to announce a $17 million seed round.
The Angle: Pacaso hopes to revolutionize the market for timeshares and second homes.
The Game Plan
Not dissimilar to a traditional timeshare, Pacaso will give buyers the right to use a property for a certain number of weeks per year.
Pacaso Process: First, prospective buyers identify a property on the open market they are interested in partially owning. If Pacaso views the property as a worthy investment, it will buy the home, structure it as an LLC, sell between 12.5% and 50% to the new owner, and syndicate the remaining “shares” to other buyers.
Revenue Model: Pacaso makes money by charging a 10% – 15% markup on the individual shares and through an annual maintenance fee of 1% of the purchase price.
The Catch: Unlike traditional timeshares which cluster in hot spots such as beach towns or mountain resorts, Pacaso will specialize in houses within a two-hour drive from an owners’ primary residence. The company is reportedly targeting markets such as Austin, Texas, and Scottsdale, Arizona.
For city-dwellers in particular, there has never been a better time to own a second home.
- Mortgage applications for second-home purchases have doubled since last year, according to the American Enterprise Institute.
According to Pacaso, there are over 30 million second homes across the U.S. and Europe, but they are occupied for only 4-to-6 weeks per year on average.
Pacaso raised $17 million from investors including former Starbucks CEO Howard Schultz and Amazon executive Jeff Wilke. The company also raised $250 million in debt financing to purchase homes.
Pacaso launched yesterday with just four homes, but it hopes to be operating in 25 U.S. markets with hundreds of homes within the next year.