Pacaso Homes Review [2024]: Better Than a Timeshare?

Vacations are a time to escape the day-to-day grind and relax with your family. But lodging costs can eat up a large part of your vacation budget. As a result, some people have turned to investing money in a second home rather than on vacation homes and timeshares. Although those options work for some, there can be a lot of regret that comes with buying a timeshare, especially as living costs continue to rise.

Pacaso offers a different solution to second home ownership and timeshares by allowing you to buy a share of a property you can use as a vacation home. Here’s what you need to know about Pacaso and whether it’s the right option for you.

Who is Pacaso best for?

Real estate startup Pacaso allows people to buy partial interests in second homes in over 40 second home markets throughout the world. If you’ve ever dreamed of owning a chateau in Paris or a villa in Spain, here is your chance.

Pacaso is a good fit for individuals who want to get started in real estate investing or buying a vacation home without the full commitment. Since you can buy as little as one-eighth of a share in a luxury home, you don’t need to worry about the full mortgage payment or furnishing and upkeep of the place. However, unlike owning a second home entirely, you also won’t be able to rent it out for additional income.

If you are someone who loves to travel far and wide, Pacaso might not be the best fit for you. Yes, you can have the option to trade your stays with other Pacaso owners, but that is not a guarantee. Plus, owning one-eighth of a share gives you 44 nights per year, which might not be enough for your travel needs.

Buying with Pacaso

Pacaso allows you to vacation in a second home without the hassles of owning, paying for, and maintaining the whole home yourself. This fractional ownership model is also different from real estate crowdfunding sites, such as Fundrise, however.

To achieve their goal of providing second home ownership to a wider audience, Pacaso uses a unique business model. It purchases a home using an LLC and sells one-eighth shares of the property to its customers. Customers can buy one to four shares in a home they want to use.

Pacaso handles all the details for homeowners, including finding properties, professionally decorating them, handling maintenance issues, and managing each owner’s time. This can take the headaches of homeownership out of the equation.

Although this model may feel similar to a timeshare, the difference is that you actually own the home, not the right to use it for a specific period ‌each year. You can also sell your ownership interest after owning it for at least 12 months.

Booking your shares

A one-eighth share entitles a shareowner to schedule ‌44 days in the home per year. You get unlimited short-notice stays booked two to 60 days in advance, and all days count toward your 44 days per share.

There are maximum limits to the maximum number of nights per stay based on your ownership percentage:

• One-eighth share: 14 nights
• One-quarter share: 28 nights
• One-half share: 42 nights

You can also book stays up to two years out. Special dates and peak season scheduling limitations also exist. You get one special stay, such as a federal holiday like Thanksgiving or Christmas, per one-eighth share. These require a three-night minimum stay. Peak season bookings are limited to two general stays of up to seven nights per peak season. These limitations may go away as a date nears and is not booked.

How much does investing with Pacaso cost?

Partial second homeownership isn’t generally less expensive than renting a property for a week. The difference, however, is that you own part of the home, which can appreciate in value.

Pacaso requires a minimum 30% down payment on each share you want to buy. You may be able to finance the rest, but you will have to make principal and interest payments. You will also split the monthly operating costs of your property with other owners based on your share percentage. Finally, Pacaso charges a $99 monthly fee per share you own.

As of October 2024, the cost of a one-eighth share of a property on the Pacaso website ranged from $130,000 to $2,638,000. A minimum 30% down payment for the less expensive of the two would be $85,500. With principal, interest, taxes, operating fees, Pacaso fees, and other costs, you could also end up paying an additional $2,115 per month for ownership of that property.

Let’s use a fictional scenario to get a better idea at how much a luxury rental with Pacaso will cost you:

You buy one-eighth of a share of beach-front property in Newport Beach, California for $848,000. Expect to pay:

• Minimum down payment: $254,400
• 1% loan origination fee: $5,936
• Monthly loan repayment for 30-year $593,600 loan at 5% interest: $3,187
• Monthly Pacaso fees: $99
• Possible monthly additional fees (taxes, utilities, operating fees): $1,331

To sum that up, buying one-eighth of this property would cost $260,336 up front and about $4,617 per month, or $55,404 per year. If you stayed for all 44 days, this would come out to just over $1,259 per night based on the yearly cost alone.

Selling your home to Pacaso

Full owners of second homes may be able to sell a portion of their home to Pacaso. You sell the entire property to Pacaso, the company creates an LLC, and allows you to keep up to 50% ownership. If you keep less than 50%, the home sale won’t go through until Pacaso secures owners for at least half of the property. You get the money from the portions you sell and Pacaso finds buyers for the other parts.

Pacaso does have high standards for purchasing property though. It must be in a highly desirable area, move-in ready without repairs needed, and with a luxurious, resort-like feel.

Selling your Pacsaso share

What happens when you no longer want your Pacaso share? As long as you’ve owned the share for at least 12 months, you can sell it to someone else. You choose the price you want for your share. Pacaso can either market the share for you or you can choose local real estate agents to sell it for you.

If your property has appreciated in value, you could make money on the sale. By the same token, if the value of your property has decreased or people aren’t interested in buying a share of a home, you could lose money on the sale. You also have to account for the costs to maintain the home over the time you owned it to determine whether your sale was profitable.

FAQs

Bottom line

Pacaso offers home buyers a flexible alternative to buying a short-term vacation rental, second home, or timeshare. It also creates an opportunity to make a profit by selling your share when you’re done. As a result, it could be a good way to learn how to invest in real estate.

Before committing to Pacaso, research the cost of purchasing a second home in your desired area. For example, buying one-eighth of a Newport Beach, California home with Pacaso can cost $848,000, whereas a slightly smaller home two miles away costs $1,500,000. The price tag is almost doubled, but you own the whole house and have options for rental income and fewer management fees.