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When it comes to business, some people are born with a natural acumen for certain industries, and for Austin Allison, that industry is real estate. And what started as a job to make ends meet through college has blossomed into a career as the founder of not one but two businesses that have genuinely changed the landscape of real estate in the US – and now further afield.
Through his company Pacaso, Allison is trying to change the way people think about owning second homes, with the service boasting some beautiful properties throughout the US, the UK and Europe, and a market valuation that's rising by the month. We chat to him about what he's achieved, and his plans for the future.
What's your background?
My dad was a carpenter, so I grew up around real estate through him. And when I was 18 years old, I started selling real estate to pay my way through college and became a licensed agent. And then I sold real estate all through college and I went to law school after my undergrad. And while I was selling real estate, I discovered a lot of inefficiencies in the real estate transaction because the transactions were very much paper based at the time. So that inspired the idea for my first real estate tech company, which was called Dotloop, and we became one of the largest softwares in the residential real estate industry in the US. We had about a million real estate agents that were customers and subscribers of the platform.
We sold to Zillow in 2015, and along the way that journey basically led my wife and I to home ownership. So my wife Angela and I, like many people dreamed of owning a second home someday, but previously we couldn't afford it. And in 2013, thanks to the entrepreneurial journey of my first company, we were finally able to afford a second home in Lake Tahoe. And that home just totally changed our lives for the better. It turns out when you buy a second home, you're not just buying a piece of property. You're buying a second group of friends, a second community, a second life in many ways. And that's really what inspired the idea for Pacaso.
How did Pacaso come about?
I wanted to find a way to make that dream possible for more people. And the other thing that really attracted me to this idea – following my real estate background – was, as a second homeowner, I experienced just how underutilised these second homes are. I mentioned that most second homes sit vacant 10 months a year before I was a second homeowner, that stat was hard to believe. People would tell me, 'You're only going to use this thing six weeks a year?' And I would think to myself 'There's no way. How in the world could I buy this house and only use it six weeks a year?'
I would think to myself 'How in the world could I buy this house and only use it six weeks a year?'
And it turns out that it's true, it's just life is all-consuming and it's hard to get away from your primary life to spend much more than five or six weeks in a secondary home. So these empty second homes that are sitting all around the world are a massive problem. There's £40 billion of vacant homes in central London alone, to put it into perspective. So this is empty homes are a big problem because it drives up home prices. It starves these local communities because the owners aren't in the home year-round. So our whole idea is about making better use of these underutilised homes on the supply side and on the demand side, empowering more people to realise their dreams.
Why and how have people have historically bought holiday homes?
A lot of people around the world aspire to own holiday homes. It's a very widespread aspiration, once people have kind of a primary home and have some discretionary spending, many people start thinking about it. And the reason why is because second homes tend to be a really life-enriching benefit. When you own a second home, you end up becoming part of the community. You meet new friends, you develop these rituals that become really important to your life. And real estate also happens to be a pretty good place to park money. If you look historically, many, many people have done well by owning real estate. So I think the combination of living a better life and making smart use of your money is what attracts people to second home ownership.
Traditionally, the way that people have bought is quite inefficient. In fact, that inefficiency has a lot to do with why we started the company. Most second homes sit vacant about ten months per year, in some cases even more, which means that there's a lot of under utilisation and the cost to own one of these homes is quite expensive. Even if you can afford to buy the second home of your dreams, it's oftentimes hard for people to justify owning a 100% of something they're only going to use 10% of the time. So many people, to answer your question, have really been priced out of second home ownership in the past, meaning they can't really afford the second home that they want. And if they can't afford it, it's really hard to justify owning something that you're not going to use most of the time.
What are some of the problems associated with home ownership?
The biggest one is the utilisation. As an example, a lot of our buyers in London are expats that now live in the US or Dubai, and they want to get back to the UK often, but they don't get back often enough to justify owning a whole second home. And that's a huge flaw in the traditional model. The second big challenge is that it's really hard to operate homes. If you live in Dubai and you have a home in London, anytime something needs to happen on the home, it's a lot of work. And even if you hire a property manager, as an owner you're generally still involved in a lot of the decisions and details so it can be a really heavy lift.
How does Pacaso approach things?
It's most analogous to imagine if you and a couple of your friends or family members wanted to own a home together. You could do this on your own, you could form your own entity, buy the property, and self-manage, self-organise. Pacaso is just like that, except we manage the whole experience so that it's easy and hassle-free. So, we handle everything from design and furnishing to bill pay and maintenance so that from an owner's perspective, you just get to own amazing real estate and enjoy that amazing real estate for a much lower cost and with none of the hassles that are customary of traditional home ownership.
Our approach really empowers more people to own a second home because you can right-size your ownership. You can buy an eighth or a quarter or as much as a half, depending on how much you want to use the property, and that makes it accessible for a lot more people. But the other big benefit is the seamlessness of our experience because when you buy a second home through the traditional model, you take on a lot of work and hassle and headache. You have to do the design, you have to do the furnishing, you have to repair things when they break. In Pacaso's model, we do all that. So as an owner, you just get to buy a home, buy the home of your dreams and show up and use that home, but with none of the headaches or hassles that are customary of second home ownership. And that's really been quite revolutionary when it comes to making this asset class accessible to a larger audience.
What are some of the solutions Pacaso brings to the table?
We handle literally every detail all the way down to bill pay. As an owner, you don't even have to pay your utility bill because it's all automated through the Pacaso management experience. And something that's front of mind for many of our international buyers and a lot of our UK buyers are international, London in particular tends to be a very international city in terms of where people come from, but buying internationally is very difficult. If you live outside of the country that you're buying, it could take months and months and months just to figure it out, or to connect with the right people.
Real estate transactions tend to be different in the laws, tend to be different from market to market so navigating that is a foreigner is very, very difficult. And this pain point is more pronounced in certain markets. The UK tends to be a pretty efficient real estate market, but when you go to other parts of Europe, for example, they're not quite as efficient. It could take a year to buy a property in Italy or Spain from the time you find the property and go through the closing process. With Pacaso, it takes one day. You could find a dream home on our website in the morning, connect with somebody on our sales team, and we could have you as an owner in that property by the end of the day. That's how seamless we've made the transaction process.
And we basically have a team of people who are professional real estate people. We onboard and identify homes for a living, lots and lots of real estate, and our team has bought tens of thousands of homes in their career. So we're professional real estate people, we have the people on the ground and the local partners that enables us to do all the legwork so that as a buyer you don't have to deal with that. Pacaso is handling all those details for you.
To what extent does a second home offer an investment opportunity?
Well, we're not an investment company, and we don't tell people to buy Pacaso for investment reason. The main reason why people buy is because they want to own and enjoy a second home, and this is the smartest and most responsible way to do it. That being said, if you look at the data, history would tell you that real estate tends to be a pretty good investment, including during turbulent times. The macro environment that we're in right now, all the way back to 1980 if you look back at the data in almost every downturn, all except for the global financial crisis in the US, in every other downturn, real estate proved to be one of the most stable and safest places to park money. So while the main motivator of buying a Pacaso is to own a second home, there's definitely a peace of mind that comes with knowing that you're buying great real estate, and that great real estate tends to go up and value over time.
Pacaso enables people to access real estate that they would've otherwise not been able to access
Frankly, if you buy a whole home, obviously you're buying the home because you need a place to sleep. That's the primary motivator that people buy their primary home. But a secondary benefit is that home ownership is proven to be a really good way to build wealth over time because real estate tends to go up and value and in our model, you're only paying one eighth of what you would have to pay to operate the whole home. So it enables people to access real estate that they would've otherwise not been able to access. Take London for example – the first penthouse that we did on Queen Street, I think it was roughly an £8 million property. Not just anybody can afford an £8 million penthouse in Mayfair, but that is some of the best and most iconic real estate in the world. Owning real estate in Mayfair is a big deal if you're a real estate person. So Pacaso gives people access to that in ways that has never been possible before. And one of the other cool things about our model is that real estate, one of the drawbacks of real estate through the traditional model is that it can be clunky and antiquated to transact.
So I think one other thing that we're hearing right now is just given the environment that we're in, there's a lot of inflation, a lot of volatility, and many people think about real estate almost like a hedge against inflation because it's limited supply. They're only so many penthouses in Mayfair, they can't just print more of them. It tends to be a limited supply kind of thing with a lot of demand. All the markets where we're operating are markets where people from many, many destinations aspire to own there. Marbella as a market where people from all over Europe look to buy, When you look at the profile of people who buy in Marbella, not just coming from London or Barcelona – they're coming from everywhere. We have people from all over the world that buy in London. So I think anytime you have a dynamic where there's very limited supply and lots of demand, that's a good ingredient for strong market appreciation or value appreciation over time.
Pacaso's Villa Vida property in Marbella, Spain
Pacaso's Villa Vida property in Marbella, Spain
How do you choose which countries to move into?
The easiest way to think about this is it's all driven by demand, meaning buyers or aspiring buyers come to our website. We have millions of people that visit our website and thousands of people who are talking to our sales team on a regular basis. And all of those buyers are telling us what they're looking for. They're saying, 'I want to be in Mayfair and I have a budget of X.' And we use all those data points to basically of narrow it down to the markets, and the property types, and the price points that are of interest to our buyers. And there's a lot of those markets, we're in about 40 destinations now around in four countries, the US, Mexico, the UK, and Spain. But we're just getting started, so as we look into the future five, 10 years from now, Pacaso should be in many hundreds of destinations around the world with a wide range of homes and price points available to our buyers.
But the markets that you see today that we're in are really a byproduct of that's where we saw the most demand within our buyer base, and that's really what influenced us to go there. But it's growing super fast. If you look at our growth, and if you look at the first half of this year, we grew by more than 300% compared to the first six months of last year. We're now approaching almost a billion in cumulative revenue that we've generated as a company in the last two years since launching. So there's a lot of growth here to be had in the future. And for us, what's really exciting about that is it means we're going to be able to support a lot of people across a lot of markets at a range of price points into the future.
How far can Pacaso go?
We're entering a world where I think we as a society really value sustainability. We value utilisation. So if you just think holistically about this model and the impact that it can have on real estate and the benefit that it can bring to communities by better utilising existing supply, to me it just seems kind of inevitable that this is going to be available in all markets at some point in the future. And for us it's really just a function of time, because it's a lot of work to grow a business at the pace that we're growing. We're already almost 300 employees and we just started the company two years ago. So it's growing super fast and we want to make sure that we don't grow too fast, because most importantly, we focus on our customers and we really like where we're at right now and we like the rate of our growth. But when the time is right, we'll definitely add a lot more markets.
Find out more at pacaso.com/uk
