Bezos already disrupted the vacation rental industry as an early investor in Airbnb more than a decade ago before anyone had ever heard of it. Now he’s looking at doing the same with Arrived Homes. The Maui estate owner has turned his Midas touch to fractional vacation rental homes, including Hawaii. This is a new take on Pacaso, with some major differences between the two that we’ll talk about.
The Amazon founder is not new to Hawaii. He had the foresight to move here and get positioned at arguably one of the most beautiful spots on Maui. Bezos closed on 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 $10k in initial investment.
A new way to be part of Hawaii is fractional ownership in single-family rental properties. We first reported on this topic last year with Pacaso. The company Bezos is investing in is Arrived Homes. Bezos was an early participant in its funding round last year, which invested $37 million in seed money and then in another $25 million recent round. Arrived Homes says investment opportunities for those of us not in that billionaire category range from $100 to $10,000 in ownership. In Hawaii?
Arrived Homes is entering the short-term vacation rental marketplace. This is so new that it’s not yet reflected on their website. Arrived Homes is amassing properties that they will rent out via Airbnb in the next 90 days. There’s a lot we don’t yet know and it remains to be seen if your investment might include any nightly stays, or discounts thereon, whereas, with Pacaso, you do have that ability. Also, who will be managing and maintaining these new vacation rental listings?
Arrived Homes is so popular that it is hard to get in on their rental home investments.
It comes as Airbnb just hit its highest profits ever. Bookings in the quarter of over 100 million nights, which was up 25% compared with 2021.
When Arrived Homes added a batch of 12 long-term rentals to their website, they reportedly sold out in 8 minutes. To our knowledge, no Hawaii vacation rental properties have made it to Arrived Homes yet. But they’re coming.
Maui’s Bezos bets against higher-end fractional Pacaso.
We first learned of Arrived Homes competitor Pacaso earlier this year. It was a name previously unknown to us. Pacaso, launched in 2020, buys homes, then sells them via membership in an LLC to those interested in a new kind of Hawaii fractional ownership. They have had a series of Hawaii listings, although only one is currently listed on Maui (see below).
Pacaso’s website says it is “Co-ownership, simplified.”
They manage the home, 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 prior executives from real estate Zillow. Pacaso buys properties and then sells second-home buyers’ shares in them. This isn’t traditional fractional ownership, where you might buy one, two, or more weeks annually. Instead, Pacaso properties are being split between 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 do not know each other. Pacaso operates in 30 regions worldwide, where it owns and manages homes.
Disruptor Pacaso comes to Hawaii.
This spring, Pacaso announced that it was selling shares of its first Hawaii second-home, a Kapalua, Maui condominium with spacious bedrooms and breathtaking views of the Pacific Ocean, featuring spectacular sunsets. The cost of ownership of this beautiful unit near championship golf courses not far from the historic town of Lahaina and Kaanapali Beach was $1.45M per share, based on a maximum of four owners participating.
Pacaso has said it will not disrupt the mid-priced Hawaii real estate market since it will only acquire Maui homes with a value above $4 million. Such was the case with the home near Montage Residences Kapalua Bay. Pacaso currently has one available listing on its Hawaii property page: a $7.5 million home. It is being sold in 25% shares at $1,886,000. It looks as though the remaining prior listings were sold.
Pacaso and Arrived Homes aren’t alone in this new luxury home fractional membership.
Another company we learned of had been working in the lower end of the market. Cohana Homes previously listed three Maui homes that were fractional residences from $958K to $3.3M, which appear to be sold in a similar fashion to Pacaso. The apparent difference is that Cohana operates at a much lower end of the Maui real estate market than Pacaso.
When we returned to check their Hawaii listings today, however, we found that there were none.
Hawaii residents are worried as home prices continue to skyrocket.
The issue has residents and the government taking a second look. A Maui council member indicated they have received complaints and are looking into the legality of it all.
The cost of homes, primary or secondary, has been soaring in Hawaii. We just heard of another multi-million dollar Kauai luxury home being sold at well above the asking price, sight unseen, by mainland buyers, without any inspection-related repairs or contingencies. What’s happened is that investors from the mainland often outprice Hawaii residents.
Hawaii is learning by example as Pacaso hits headwinds across the country.
Others vacation destinations, including Long Island, Santa Barbara, and Palm Springs, among others, are struggling to control Pacaso, calling it another form of a timeshare. Then in Northern California, the tourist town of St. Helena banned Pacaso after the company and city had been in court for the past year to determine whether the city’s ban on timeshares applies to Pacaso.
There, outspoken neighbors who oppose Pacsco wanted to preserve their communities and prevent other unwanted aspects of what they deem short-term stays. Neighbors said in planning commission testimony that they suffer from “the intrusions that living adjacent to a hotel bring.”
Pacaso says its homes are not any form of a timeshare. A Pacaso representative also said of their co-owners, “these are people who want to invest in our community. It’s not taking away housing stock either.” They say further that having the vacation home occupied year-round brings more ancillary income to the community.
Quite right! It seems to me it is very good idea. Completely with you I will agree.
No more thumbs down????
I’m taking a stab in the dark and guessing that whatever is decided in court next year won’t matter to these companies somehow. If 4 people purchase into the ownership, with the company owning at least part of it, there’s no rentals therefore no breach of the laws. That is a very simple way around the problem. Fractional Ownership, I like the idea.
from Outsider theory of Hawaii Affordable Housing…”Leveraging data from the Cato Institute, a nationwide analysis of median home prices and land-use restrictiveness yields results consistent with previous research that there is a statistically significant positive correlation between a state’s land-use restrictiveness and median home price. Moreover, the relationship between state median home prices and land-use restrictiveness is statistically stronger than the relationship between median home prices and the prevalence of out-of-state buyers”…Exactly what happened in California- it is 100% Difficult to build anything there because extreme environmentalists run the entire state & will not allow you to build due to “fill in the blank”…
We don’t want your ancillary income. Go away.
This reminded me of the Hawaii episode I just watched on “United Shades of America with W. Kamau Bell”. Here is an article about it with a clip from the show: cnn.com/2022/08/18/us/hawaii-tourism-impact-united-shades-cec/index.html. I found the Hawaii episode very disheartening, especially because of the idea being floated that maybe the best thing we can do for Hawaii is just not come any more. And then the Bezos thing, which seems inconsistent with keeping the islands fully Hawaiian. It’s discouraging for me as an annual visitor for 3 decades. How can I make things better? Would love to know if our editors have seen this and what they think? And if other readers have seen the show and have comments? Thank you.
Hi Glenna.
No we haven’t seen it but will check it out. Thanks.
Aloha.
I think what’s the difference You own part of a home you get to use or lease out part of the year, no different than a time share, instead of a week in a timeshare you get a longer amount of time to do what you want with. or you can continue to rent a hotel or condo.
This sounds awful. Turning a people’s home into one giant resort/playground for the wealthy. I visit frequently because I have family and friends who live in Hawaii. It’s a struggle. And now they will be competing with the uber rich who come to play for a month or so. I read a lot of complaints lately about the quality of service decreasing in the hotels—who do you think provides this? Where do they live? Schools in Hawaii are among the worst in the nation. Hawaii needs to be lifted up, not trodden down by a much of foreigners/out-of-staters who only see it as their private island(s).
Sorry–“bunch of foreigners/…” (I thought I used to be able to edit my comments.)
I doubt it’s the uber rich buying fractional share of anything, thats why the prices are low. Uber rich don’t need fractional shares of anything. The people that live and work in Hawaii can take advantage of all the programs and lower income homes/apartments that are specifically built and income qualifying for them, that population would never be purchasing luxury places. It is a total shame the State doesn’t invest in their schools, greedy politicians would rather see a rail to no where than invest in the kids, thats shameful
Aloha, are these fancy homes doing anything to lessen our critical housing shortage? Sounds to me like another scheme for those that have to make more and leave those less fortunate in the streets. In the streets where then those that have drive by and say look at those lazy people.
becareful, those people lounging in the streets will get a movement going and want your house, you look rich to them
You folks that think out-of-state buyers are responsible for the housing affordability crisis in Hawaii have it all wrong. You all are just parroting each other because it sounds good and it’s easy to blame others. For the real culprit, look no further than your own government, which you seem intent on continuing to vote into office, even though their policies are completely against your own interests. Legislative policies are the main reason why you can’t afford a house in Hawaii. Read here:
grassrootinstitute.org/wp-content/uploads/2022/08/The-‘outsider-theory-of-Hawaiis-housing-crisis.pdf
P.S. This study has the REAL data and statistics, not anecdotal bellyaching. You can’t argue with the facts.
it is Always all Local Politicians Selling their constituents down the river- It all Begins and Ends Locally…Affordable housing begins and ends with sensible policies that actually have the Best Interest of Local People in Mind and Not the latest Power and Money Grab by these so-called “for the people” liar$$$$….you get what you Vote for! Vote the same and Nothing will Ever Change!
Exactly.. the voters here believe their politicians, whoever has the best rhetoric, wins, and then they do nothing for their citizens.. They know the people that actually look into their backgrounds don’t live in Hawaii, and can’t vote here, so they pander to the week. Go chase all those short-term rental owners, they’re the issue here in Hawaii.. knowing full well the majority of property owners can’t vote here.. sad buying of votes