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Co-ownership platform Pacaso, which offers second-home buyers a more flexible way to buy vacation property, has launched a fund for accredited investors to buy into the company.
The intent is to further back the company’s flexible lending program and offer investors a unique way to invest in real estate.
“The new investment opportunity with Pacaso is a two-year, 10 percent annualized promissory note backed by luxury real estate,” according to an announcement. “Investors receive quarterly interest payments with a return of the principal at the end of the two-year term.”
The company stated that it is off to a solid start in 2023. In an email to Inman, the company stated it experienced a 40 percent increase in funded shares compared to Q4 2022, and that it sold 63 percent of its 2022 year end inventory balance, powered by its incentive payment solution PacasoNow. More than a third of Pacaso sales in March were booked sight unseen, marking the highest level since January 2022, according to the company.
Its founder, Austin Allison, said in the release that the program will allow future Pacaso owners to lock-in “seamless financing.”
“This unique fund is a smart choice for people who want a low risk and low barrier of entry investment opportunity to diversify their portfolio by gaining exposure across high-quality, luxury real estate, which has proven to be one of the safest places to park money during uncertain times,“ he said.
Pacaso has largely formalized the concept of fractional ownership for the modern buyer. The concept is not new, but their application of it is unique. By deploying resources to invest in properties in fast-growing second-home markets, Pacaso quickly spread its footprint and message.
It helps that Pacaso employs local vendors to service properties and pays agents commission rates considered standard for their respective markets. A marketing effort to educate agents on their model has materialized in the form of partnerships with notable brokerages, such as Realm, Engel & Völkers and HomeServices of America, among others.
The company developed a certification program and offers educational opportunities for agents. They’re further incentivized with 500 restricted stock units in Pacaso for each share sold.
Pacaso scored a governance win in the state of Utah recently, as the Beehive State Senate voted unanimously in February in favor of a bill to protect co-ownership companies like Pacaso and local competitor Ember by blocking cities across the state from restricting fractionally owned properties. The bill, passed in March, is set to become on May 3, 2023, according to Utah State Legislature’s website.
The issue came to light largely because people equate co-ownership, a form of fractional ownership, with timeshares and in some cases, short-term rentals. Pacaso sells a single home to up to eight different owners who have occupancy rights of varying periods. In essence, it reduces the number of homes owned by second home investors.
“Pacaso homes have an almost 90 percent occupancy rate compared to 11 percent for traditional second homes,“ the company stated.
Pacaso services second homes in markets from coast-to-coast and abroad, claiming homes in London, Spain and Mexico.