When it comes to owning a second home, whether it is going solo or co-owning with family, or friends, or investing in an LLC where the co-owners are anonymous, there is no single solution that is best for everyone.
To realize your dream of owning a vacation home, what works best depends on how much money you want to invest, how many weeks per year you have to utilize your vacation home, and how much time and money you want to spend on the maintenance, upkeep, and renters.
With the right solution, you can reach your second home dreams, and both Lifestyle Asset Group and Pacaso have created co-ownership models that are worth considering.
The future of real estate is co-ownership.
Co-ownership is growing in popularity because the concept is based on:
- Personal use rather than speculation
- Being able to purchase only the amount of time that you have to use and discretionary income on which to spend
- Lowering household spending habits and capabilities
- Being hassle-free, i.e., “show up and enjoy”
- The opportunity for flexibility and variety of use due to reciprocity and exchange features to other vacation homes.
To achieve the goal of owning a luxury second home, families have reached out to companies such as Lifestyle Asset Group and Pacaso to combine their money with other owners to co-own a second home.
Of course, both companies have their strength and weaknesses.
In this article, we'll examine the pros and cons of each so you can decide which is the best match for you.
Lifestyle Asset Group vs. Pacaso: A Fair Comparison
Both companies use the same legal structure where an LLC is created to hold title on the property and thereafter, the LLC releases a limited amount of membership shares, typically 5-8 shares. Each 1/5th or 1/8th co-owner signs legal documents that include an operating agreement for the co-ownership, rules for lodging and reservations, and a subscription agreement which is the legal evidence of how much equity you own in the property/LLC and what you paid for that equity share.
The pros of Lifestyle Asset Group
The most significant difference between the two companies is the exit strategy. Beginning with the end in mind, Lifestyle Asset Group offers you a defined exit strategy so you know exactly how and when the co-ownership will end and your investment will be returned.
As background, 15 years ago, the fractional real estate sector used to be a $1b industry. In 2021, sales were $255m (Ragatz https://www.ragatzassociates.com/ragatz-industry-survey). Why the dramatic decrease in sales? Because the fractional industry does not offer an exit strategy.
Nor does Pacaso.
With Lifestyle Asset Group, the term of the co-ownership is defined in the legal documents, and it is between 5-10 years. At term end, the home is sold, either on the market through a realtor or to one of the existing co-owners, and sales proceeds are distributed to the co-owners.
With Pacaso, which is similar to the fractional industry, each co-owner is responsible for reselling their 1/8th share when they want to exit the partnership. Few real estate agents will help a seller with a 1/8th share, and if they do, they charge up to 25% commissions for the time and hassle it takes, so owners find themselves on fractional resell websites selling their shares at a loss.
Additional Pros of Lifestyle Asset Group:
- Defined exit strategy, as described above. However, if you need to exit before the LLC term, Lifestyle Asset Group can resell your share on your behalf.
- Local host and concierge. Each destination has an on-site staff member who will greet you on your first visit and then be available thereafter to assist with property management issues. Owners can also hire a local host to coordinate local activities.
- Reservation Specialist. You will be assigned a dedicated reservation specialist to assist in making reservations each year, assist in cancelations, and facilitate occasional exchanges between properties.
- Reciprocity to other properties Lifestyle Asset Group encourages and facilitates exchanges between property owners to occasionally experience new homes and destinations.
- Membership in an exchange travel club. Lifestyle Asset Group pays for and enrolls each owner into Elite Alliance, the leader in an exchange platform for thousands of fractional owners around the globe. This membership gives access to 100s of vacation homes around the globe.
- Rental Income: You can deposit weeks into their rental program to receive income to offset annual expenses.
- Occupancy: Lifestyle Asset Group’s LLCs have an 80% occupancy, leaving room for maintenance, reciprocity, and exchanges.
- Pets: Some of their homes allow you to bring your dog.
- Direct access to the Senior Management team. When you invest, you work directly with the senior management team, not an inexperienced salesperson.
- Access to legal documents. Most clients want to see the legal contracts before forwarding any money. With Lifestyle Asset Group, reviewing contracts with Senior Management is easy and does not require a deposit.
- Lower Pricing options. Choose the investment level that works for you. Lifestyle Asset Group has several options to buy into the property, many under $200,000 per share
- Veteran Management Team: Since 2013, Lifestyle Asset Group is the pioneer in the vacation home co-ownership industry 2013.
The Cons of Lifestyle Asset Group
While Lifestyle Asset Group offers a smart and sensible way to own a second home, it’s not always the right solution. Here are some reasons it might not be the best fit for you.
- Plan in advance. Not everyone can plan their vacations a year in advance. The benefit is that it forces you to plan vacations, but not everyone is a planner.
- Not everyone likes to share. Some people just don’t like to share.
- Control. Depending on how much you like to be involved in interior design and property maintenance decisions, shared ownership may or may not be right for you. Lifestyle Asset Group handles those decisions.
- Slower adoption: Lifestyle Asset Group is a small, boutique, high-touch point group. They handpick their properties; thus, the expansion has been slow compared to Pacaso.
The Pros of Pacaso
The goal for anyone investing with Pacaso or Lifestyle Asset Group is to own a luxury second home for a significantly lower cost and removes the typical hassles of homeownership. When you choose to invest in Pacaso, you also benefit from:
- A big corporation with many offerings. With over 35 destinations and growing, there are plenty of homes to choose from.
- High-profile leadership team. Pacaso is founded by the ex-founders of Zillow so have immense credibility in the space.
- Well-funded: with over $275m in funding and debt, the company is well poised for growth.
- Financing: Pacaso offers a financing solution for those who don’t have the resources to pay all-cash
- Crypto: Pacaso accepts cryptocurrency to buy shares
The Cons of Pacaso
- The pro-tech startup Pacaso has made a few enemies in its efforts to help its customers realize their dreams of second-home ownership. With their well-funded, rapid expansion, many groups in the destinations they acquired homes assert Pacaso is hurting neighborhoods by removing already limited housing stock from tight markets.
- Pacaso is a technology-enabled enterprise: they don’t focus on personalized service, rather they encourage you to use their app for most transactions. If you are at the home and need to call for maintenance, instead of calling someone local, you call a centralized phone number in California and speak with someone who may never have seen the home or knows the local tradesman.
- Occupancy – Pacaso reservation protocols run close to 95% occupancy, not leaving much room for free space available use, flexibility in changing reservations or annual maintenance.
- Exchanges with other properties – Pacaso does not allow for exchanges within the portfolio of properties so all your vacations will be within the property you invested in
- Rental income– Pacaso does not allow you to rent any of your weeks to offset annual expenses
- Must put in a deposit to see contracts: Pacaso does not allow you to review the legal documents unless you put in a 10% deposit. With the average share price north of $600,000, that is a $60,000 deposit just to preview how the co-ownership agreements are written.
- Higher price points – The average buy-in price in Pacaso is $715,000 which is higher than most people can afford for a 1/8th share.
Lifestyle Asset Group vs. Pacaso
Here it is – Lifestyle Asset Group vs. Pacaso. Each company has strengths and could be a great fit for a particular family to realize their dream of owning a vacation home. Here are the recommended things to consider, as both firms have similar fee structures:
- Lifestyle Asset Group is a good fit for those who appreciate partnering with a small, boutique company that offers less expensive ownership options and a personalized approach when working with their customers. They hand-pick destinations and properties at a manageable pace and facilitate exchanges between homes. Also, you get free membership into a leading exchange provider allowing you to further expand your travel options each year.
- Pacaso is a good fit for families who have the resources to make larger investments and don’t mind that most interactions with the company are via an app instead of a personal contact. Their top-notch staff will keep the company growing at a hefty pace, their interior design and marketing are excellent, and will attract many buyers for years to come.