The market for second homes has been on the rise in the last few years, both in demand and in revenue. The recently launched firm Pacaso is working to help people achieve second-home ownership.
The company is the latest step for CEO and co-founder Austin Allison. He founded the real estate transaction services startup Dotloop and sold it for $108M in 2015. Talking to CSQ from his home in Napa Valley, Allison says the rate of growth of his new firm surprised him, but the economic foundations behind it make sense.
“The pandemic was obviously difficult for many businesses—and I feel bad and say with compassion that it’s been a tailwind for Pacaso, as crazy as it sounds,” Allison says. “We didn’t have a crystal ball, didn’t know what would happen. We did know that long before the pandemic there was a lot of demand in the second-home market.”
In March of this year, the company secured $75M in fundraising, bringing it to a $1B valuation. Despite the economic impact of the COVID-19 pandemic, rising home prices have helped the real estate industry, including the second-home market.
Real estate has been Allison’s world for more than two decades. He was a licensed real estate agent at 18, and already owned a house. He founded Dotloop in Cincinnati, Ohio, in 2008. He eventually sold it to the Zillow Group seven years later, where at the time Spencer Rascoff was CEO. That connection would prove fruitful.
Rascoff, who left Zillow, teamed up with Allison to launch Pacaso, with the plan to build a service that makes owning a second home easier. The company buys property, with users being able to buy percentages of that ownership value. Although based in Napa Valley, Allison says that the Southern California area is one of the hotbeds for the second-home market and Pacaso specifically. A 2020 Redfin report noted that demand for second homes increased 100% over 2019, with sales up 27% in Palm Springs, Calif., for example.
Although it allows multiple people to book stays at a property, customers actually own a stake of each home, unlike a timeshare. The model allows interested users to gain more ownership and buy up larger shares of the properties. A lot of people aspire to own second homes, but the main hurdles are cost and hassle, Allison says. Splitting ownership shares helps reduce those barriers. The model has proven popular, with the company expanding into new markets, which the CEO credits in part to Pacaso’s team, located across the United States. He says that the right people were on the job market at the right time, and the flexible nature of Pacaso proved attractive.
“We thought it would take 10 years to assemble the team, but instead it took a year,” Allison says.
Origin Story
Before founding Pacaso, Allison started his entrepreneurial journey selling birdhouses when he was 5. He became a landscaper as a teenager, started selling real estate at age 18, and went to college wearing a suit and tie. He credits part of that drive to a mentor he had during his landscaping days. The employer told him to find a passion and work in it, not worrying about the money, as that would come later.
“[You have to] surround yourself with the best possible people you can and ask for help,” Allison says. “I was surprised how helpful people are when you ask. There was a point in my journey where I just started asking people for advice. I was meeting with really successful people for 30 minutes to an hour who shared their experiences.”
That helped shape his mindset, both in selling real estate and eventually founding Dotloop. He says that while some of his early drive and choice of attire in school wasn’t conventional for the college experience, it helped him lay the foundation for future success. But Allison isn’t a fan of the idea of counting on a big break or being an “overnight success.” “I worked my tail off for a decade before my ‘first break’ with Dotloop,” he says. Allison stresses that while Pacaso has grown faster than he expected, it’s the result of years of labor and experience from the team. “Not like someone showed up on day one and magic happened. You have to be in it for the long game,” he says.
Launching Remotely
Like nearly every other business, the COVID-19 pandemic upended some of Pacaso’s plans, but it didn’t fully disrupt its momentum. The founders had intended for the company’s staff to be spread out from the start, so the shift to remote work wasn’t as jarring as for some other businesses, Allison says. The pandemic forced the company to rely more on remote work tools and video conferencing than they expected, but it wasn’t a seismic overhaul.
The remote element does have its challenges, he says, particularly in forming a strong company culture early in the business’ existence. Being remote means that the team can’t get together for coffee or drinks, so is trying weekly events to build strong connections. Allison adds that “transparent communication” drives how the staff operates, making sure everyone is checking in with one another, or joining weekly game nights, attending virtual brown-bag lunches featuring special guests, and aiming to safely get the whole team together at least once a year.
During the pandemic, Allison became a father, and is trying to juggle raising a growing baby with growing a rapidly expanding company. That was on top of the new environment created by the pandemic, where work and home life became more blurred than ever. For the Pacaso staff, he says, that meant working harder to create a distinct and strong office culture to help people find balance.
Why the Secondary Market Is So Strong
The real estate market is hot, with prices rising due to a lack of supply and slow construction rates. Prices are rising nationwide, driven in part by low mortgage rates, per the National Association of Realtors. And according to Allison, the second-home market is even hotter. Demand isn’t likely to go down, and supply won’t catch up in the near future, in part due to the high cost of construction materials. Pacaso is betting on that, and points to that likely prolonged trend as room for further growth this year and beyond. The company recently launched in the south Florida market and Allison says that by the end of 2021 it will have a stake in the top U.S. second- home markets, as well as expansions into Mexico and Europe.
Allison argues that activating property as shared second homes helps communities. Instead of empty homes sitting there, he says, properties are in use, with people supporting local businesses. The market is costly, and the second-home world is clearly for a limited group, but people pay what they are willing to pay.
“Second homes enrich lives,” Allison says. “A second home gives you that place to spend time with people you care about, the trail you ride the mountain bike on, all of those things that are really important.”
Top: photo courtesy Pacaso.
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