The next Hawaii vacation rental disruptor?

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Bezos already disrupted the vacation rental industry as the first investor in Airbnb more than a decade ago before anyone had ever heard of it. Now he plans to do the same with Arrived Homes. The Maui estate owner has brought his Midas touch to fractional vacation rental homes, including Hawaii. This is a new version of Pacaso, with some major differences between the two that we will discuss.

The Amazon founder is not new to Hawaii. He had the foresight to move here and position himself in arguably one of Maui’s most beautiful locations. Bezos shut down the La Perouse Bay location, not far from Wailea, to make Maui his island home last year.

Bezos invests in Arrived Homes – Fractional vacation rental homes from $100 to $10,000 in initial investment.

A new way to be part of Hawaii is condominium ownership in single-family rental properties. We did a first report on this subject last year with Pacaso. The company in which Bezos invests is Homes arrived. Bezos was an early participant in its funding round last year, which invested $37 million in seed money, and then in another recent round of $25 million. Arrived Homes says investment opportunities for those of us who don’t fall into this billionaire category range from $100 to $10,000 in property. In Hawaii?

Arrived Homes enters the short-term vacation rental market. It’s so new that it’s not yet reflected on their website. Arrived Homes is accumulating properties that they will rent through Airbnb in the next 90 days. There’s a lot we don’t know yet and it remains to be seen if your investment could include overnight stays or discounts on these, whereas with Pacaso you have that option. Also, who will manage and maintain these new vacation rental listings?

Arrived Homes is so popular that it is difficult to participate in their rental home investments.

This comes as Airbnb has just hit its highest ever profits. Quarterly bookings of over 100 million overnight stays, up 25% from 2021.

When Arrived Homes added a batch of 12 long-term rentals to its website, they reportedly sold out in 8 minutes. To our knowledge, no vacation rental properties in Hawaii have yet reached Arrived Homes. But they are coming.

Maui’s Bezos is betting against high-end fractional Pacaso.

We first heard about competitor Pacaso from Arrived Homes earlier this year. It was a name that was previously unknown to us. Pacaso, launched in 2020, buys homes and then sells them through LLC membership to those interested in a new type of condominium in Hawaii. They have had a series of listings in Hawaii, although only one is currently listed in Maui (see below).

Pacaso’s website says it’s “Simplified Condominium”.

They run the house and you own part of it. It’s the modern way to buy and own a second home. The innovative startup was launched last fall by former Zillow real estate executives. Pacaso buys properties and then resells the shares to second home buyers. This is not a traditional condominium, where you could buy one, two or more weeks per year. Instead, Pacaso properties are divided among eight or fewer owners, depending on the situation.

While forming an LLC to own property between already connected individuals is nothing new here in Hawaii and elsewhere, what’s different this time is that the owners don’t know each other. Pacaso operates in 30 regions around the world, where it owns and manages homes.

The disruptor Pacaso arrives in Hawaii.

Honolua Maui Bay
Honolua Maui Bay

This spring, Pacaso announced that he was selling shares of his first second home in Hawaii, a Kapalua, Maui condominium with spacious bedrooms and stunning views of the Pacific Ocean, complete with spectacular sunsets. The cost of owning this beautiful unit near championship golf courses not far from historic Lahaina and Kaanapali Beach was $1.45 million per share, based on a maximum of four participating owners.

Pacaso said he would not disrupt Hawaii’s mid-priced real estate market since he would only acquire Maui homes worth more than $4 million. This was the case with the house near Montage Residences Kapalua Bay. Pacaso currently has an ad available on its Hawaii property page: a house of 7.5 million dollars. It is sold in 25% shares at $1,886,000. It appears that the remaining previous listings have been sold.

Pacaso and Arrived Homes are not alone in this new luxury home split membership.

Another company we heard about worked at the lower end of the market. Cohana Houses previously listed three Maui homes that were $958,000 to $3.3M fractional homes, which appear to be priced similarly to Pacaso. The apparent difference is that Cohana operates at a much lower end of the Maui real estate market than Pacaso.

When we went back to check their Hawaii listings today, however, we found there were none.

Hawaiians are worried as home prices continue to soar.

The question compels residents and the government to look into the matter. A Maui council member said he had received complaints and was reviewing the legality of it all.

The cost of homes, primary or secondary, has skyrocketed in Hawaii. We just learned that another multimillion-dollar luxury home in Kauai was sold well above asking price, blindfolded, by mainland buyers, without any repairs or contingencies related to the inspection. What has happened is that mainland investors often overvalue Hawaii residents.

Hawaii is learning by example as Pacaso hits headwinds across the country.

Other vacation destinations, including Long Island, Santa Barbara and Palm Springs, among others, are struggling to control Pacaso, calling it another form of timeshare. Then, in northern California, the tourist town of St. Helena banned Pacaso after the company and the town went to court over the past year to determine whether the town’s ban on the timeshare applies to Pacaso.

There, outspoken neighbors who oppose Pacsco wanted to preserve their communities and prevent other undesirable aspects of what they see as short-term stays. Neighbors said in planning commission testimony that they suffered “from the intrusions that living next to a hotel brings.”

Pacaso says his homes are not a form of timeshare. A Pacaso representative also said of their co-owners, “these are people who want to invest in our community. It also doesn’t take away the housing stock. They further say that having the vacation home occupied year-round brings more ancillary income to the community.

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