#307 Mail-Right Show: Pacaso The modern way to buy and own a second home

How Pacaso Is Changing The Luxury Housing Market

Pacaso is one of the fasting growing companies in the USA in 2021 and you are also one of its most controversial companies in the USA. Started by two former Zillow executives they have managed to unite whole communities into action against them like nothing else seen.

In this show, we discuss Pacaso and their business model and what you as a real estate agent need to know and be able to advise your client on what are the positive and negative elements connected to doing business with Pacaso.

https://www.pacaso.com/

https://www.geekwire.com/2020/ex-zillow-leaders-including-spencer-rascoff-launch-startup-change-people-buy-second-homes/

https://www.npr.org/sections/money/2021/08/24/1030151330/

Robert Newman: Welcome back ladies and gentlemen, Today’s episode is 307, and I’m super excited to be sharing just the airwaves with my co-host. It’s just going to be the two of us. And we’ve decided to talk about a couple of things. Now we’re going to save the second topic as a surprise, but the first topic my fearless co-leader here, my co entertainer, my co real estate digital marketing geek has asked that we discuss Picasso. I’m going to let him introduce what Picasso is and talk about that a little bit, but I’m excited to have the conversation. I already knew who they were. I’m excited to get into it with him and talk about this idea. And I have a spin on this whole concept. I want to talk about how these guys got buzzed around their idea. Alright so without any further do this is Jonathan Denwood. For those of you who do not know him, and you should, he is the founder of Mail-Right. He is actually a mini-time entrepreneur. This is not his first go-round. He’s in the process of seeking for and achieving a really cool product aimed at a part of the marketplace that people don’t usually aim at. And I’m really, really excited for the direction that it’s going. So, John, with no further ado, go ahead and introduce yourself.

Jonathan Denwood: Oh, thanks Robert Thanks for that Great intro I’m the founder and CEO of mail, right? We build websites for agents, that agents own they don’t lease. Plus we offer a suite of digital marketing tools and services that get you in front of your possible quality leads. Like Rob said we’re looking at Picasso. They have become the fastest-growing company in America over the past year. They were founded by two executives, former executives of Zillow. And it’s a really interesting product, an extremely controversial product. And I’m sure we are going to have a great chat back over to you, Robert.

Robert Newman: My name is Robert Newman. For those of you who do not know who I am, and I’d be surprised if you didn’t, but if you don’t, I am, a long-term veteran of the real estate marketing industry. I’ve been around so long I’ve been our own since the last market slowdown and always focused on SEO search engine optimization, inbound marketing. Which is not, I’ve been a lone voice in the, for the entirety of my career. There really aren’t that many people that are credible that will talk to real estate agents about long-term strategies. Everybody always wants to talk to you about short, but that’s not what we’re going to talk about today. What we’re going to talk about is Picasso, we’re going to talk about this idea of taking second market homes, high-value homes, breaking them into pieces, and letting people as a group invest in these homes. If I’m not mistaken, John, that’s the core concept around Picasso, is that correct?

Jonathan Denwood: Yea it’s called fractional ownership. That is the term that they utilize. Like I said the two founders were executives at Zillow superb marketers as well. It’s Spencer Rascoff he’s the CEO and joint founder and the name of the other individual that found it escapes me. But like I say, it’s an extremely controversial company and idea which has stirred and to say stirred the opposition of a lot of people in the areas where they’ve been buying properties would be a slight understatement, Robert.

Robert Newman: So I think you’ve done a little bit more research than I have on what’s happening in the environments, in which they’re buying properties. I actually knew about Picasso before you said, hey, take a look at Picasso. I’ve been, I actually looked at Picasso as an investor strangely.

Jonathan Denwood: Did you?

Robert Newman: Yes. And they’re now not alone. Some people are copying their idea, but what I haven’t been tracking is the feelings of these people that might be owning homes in the same area. So why don’t you talk to us a little bit about that term?

Robert Newman: Well, I think before that, I think I need to explain and see if you agree what the basic business model is and why I felt it would be interesting for our audience, which are mostly real estate agents, some brokers, and some other people that are linked to the real estate industry, which are our audience, Robert. Fundamentally Picasso like I said they look for a group of investors to buy a property. There’s absolutely nothing new about what they are doing. It’s just the integration and the, the web app and doing this all in their kind of integrated process, but the fundamentals are this. They find a group of investors 12 of them. They should be you find the other investors so they can be friends, family, whatever, and you buy one 12th of a house of a property. They tend to their marketing spin and the way they position themselves, they are looking to buy luxury properties in highly valued areas like Lake Tao and the wine country or Samoa and other high class areas where there’s a dominance of secondary home ownership. So you buy 1/12th of this property. the property is bought by a limited liability company, which you own 1/12th of Picasso get a 12% fee on the price when the house is sold to the limited liability company, they get 12%, I think I’m boring Robert always, he’s already nodding off..

Robert Newman: No I’m just tired. I had to wake up early. I had to wake up at an inhumane time and wake up at eight o’clock in the morning.

Jonathan Denwood: I don’t know how he’s coping. So you buy 1/12th through a limited liability company, they get 12% of the cost of buying the home. And then they manage the property for you. They make sure it’s cleaned. The maintenance is done on the property. That’s on an ongoing monthly fee or a yearly fee. I think they give choices. Basically, you own the house. You can be, you can utilize that property for 42 days of the year with a 14 day period, one period, but it’s up to, 42 days in total for the year. You can also decide to sell the property or the 12 individuals that own the limited liability company can choose to sell the property at any time through agreement. I don’t know the specifics if it needs all 12 investors or it just needs a majority to make that decision. I do not know that, but that is the fundamental crux of the business and its business plan. Robert.

Robert Newman: So what do you think? So, oh, you know, what’s funny, John, is that I already said, I can’t remember if we’re on air or off-air, but I already told you, Hey, I was looking into this as an investor. And then you said oh, really, but I can tell you already that in whatever research that you did, you know, more about it than I know as a guy that was thinking of doing it. I don’t remember all the details. I think I remember.

Jonathan Denwood: I’m a quick learner you probably think you observe that I’m a quick learner.

Robert Newman: Yea I looked at the thing and I think I decided to add whatever the calendar division was like, this sounds complicated f**k it.

Jonathan Denwood: It isn’t actually when it gets to the nitty-gritty of it, just 12 people owned a house through a limited liability company.

Robert Newman: Right. But you got to share calendars, right? You got to get in there. Yeah.

Jonathan Denwood: They supply all that by the supplier. They supply all that functionality through their website and through their app.

Robert Newman: Okay. Well, I dated more than one woman at once before, and I can tell you for sure, that sharing calendars sounds like a nightmare. So it sounds simple, like so many other things about business do, but I, I feel like in, like, let’s say like Tahoe, have you been.

Jonathan Denwood: Well, I live 40 minutes away from it.

Robert Newman: So yes. Yes. You’ve been. When do you go through? You just said you live 14 minutes away from it, 40. When do you visit?

Jonathan Denwood: I visit in the summer and the winter because I’m a big skier. Why do you think I live here, Robert?

Robert Newman: So you’re a big skier. And I think they’re in is the problem with these factories. Each person gets 42 days over sped over 42 months on what is absolutely positively going to be a second market home. So you have to hope that those people that are getting those 42 days don’t all want the same 42 days, which of course they will.

Jonathan Denwood: I don’t see it as quite the problem because you get some people that are not skiers. Some people, you know, somewhere like Lake Tahoe is actually busier during the summer. I do go up there, but I actually wouldn’t want to stay there obviously Christmas, New Year, the upcoming Labor Day weekend that they are. But is that not the same if you are booking a hotel room or it’s certainly a better solution than a timeshare, which is to say is a scammy industry with a terrible reputation would be a slight understatement. Would it not?

I do take your point of view, but I think what can I say about, yeah, I don’t actually see it as quite such a problem. I think some of the problems have been the response of people in communities, in the wine area where Picasso, that was the first area where they started because the two founders are Silicon Valley, San Francisco digerati they live in their area. They mix with those people of the VC and they are totally VC backed. And they are true. The two founders are true digerati as I call it. So they actually knew the wine area and that’s where they started. And this is where they started is where they have got the most pushback to say that they have put their fist into the center of a hornet’s nest and then just rumbled around. Would it be a slight understatement, Robert?

Robert Newman: So I don’t know what this buzz is. What are you talking about? Like, so, okay, I hear you there causing problems in communities. What the big deal they’re buying, they’re buying homes who care.

Jonathan Denwood: The people in those communities don’t feel that way. They feel that these people are going to price, any normal people out of their communities totally. They feel that they are gonna cause these areas to become empty zones, where for the bulk of the time nobody’s actually gonna be living there. They have a host of complaints. In the show notes, I am going to apply a link to one of their websites. I’m just going to put it into chat for Robert to have a quick look at. So you can get a gauge on the kind of things and resentments that have been generated by this company. So is quite fascinating. I think we need to go for a break Robert. I think we’re going to take up the whole episode on this particular subject. Cause it’s amazing how almost 15 minutes can go isn’t it?

Robert Newman: Very much so. All right so ladies and gentlemen, thank you so much for tuning in to John. I, we really appreciate it. Today we’re talking about Picasso and I guess we’re talking about really like some bigger concepts that relate to second-home markets. So for those of you who are just really engaged with the concept, what’s going on in second-home markets, I think that maybe we’ve got some interesting things to get your wheels turning. We’ll be right back after no messages. Thank you.

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Robert Newman: Welcome back, ladies and gentlemen to the Mail-Right podcast today’s episode number is 307. I’m sitting with my co-host and we’re discussing Picasso. What we had discussed is that John is very intimately aware of, well, John has educated himself quickly on this company and they’re offering much more so than I have. I had heard some interesting things about them starting the company. And now he’s just shared with me a link that is connecting to a website where there is actually some big signs and apparently some protests for what is effectively people protesting Picasso, literally. And that they’re saying that it’s affecting negatively in fact just based on the signs that I’m looking at. I don’t, I don’t know

Jonathan Denwood: Their main beef with Picasso has leaned on local authorities. Is that in many areas, they are stirring up a festering soul that was already there Robert. Because these communities had a problem with BNB anyway, with people renting now on temporary lets cause of parties, nuisance, other things that had annoyed the community. then Picasso so they had already approached their local authorities and that had put in place local restrictions on people’s ability to temporary rent out their house into BNB and then Picasso comes on the scene and Picasso argues that the restrictions that have been put in place in areas like the wine country and even Lake Tahoe don’t apply to them because they are not in the temporary let arena. These locals and other people in these areas strongly disagree with that position Robert.

Robert Newman: I have very, very fast read this while you were, while you were talking. And so there’s a site that John links and, it says stop Picasso now. And it’s an advocacy site. It’s got links to places that people can go to stop Picasso. And here’s what its basic points are. So let’s, just cover them saying that Picasso is bullying because it’s been litigious and St. Karena decided that Picasso was a timeshare, told them that they have stopped buying homes and Picasso sued them. Picasso is bad for neighborhoods because it’s depriving cities of occupancy tax. And essentially, and I think this is probably the heart of the complaint. It would be the heart of the complaint from me, even if I get the strong, if I interpret this wrong, I want everybody listening to the show to understand that my position quote, more closely aligns with this than these previous two points, which is, this is a big startup founded by people that are deeply immersed in the venture capital world, of like Zillow.

So they have a lot of money. That’s what it comes down to, to throw at this idea. I think that the idea, the concept, the core of it solid, I think that with most ideas, they’re probably going to take it too far because you know, here, do you know what my point is, John, when you get great amounts of capital and I mean something more than you and I could ever dream of for our little agencies, you have to have a way to spend that. If I hand you $50 million, your job is to take that 50 million and turn it into 50 or 500 million. These are numbers that are impossibly big for your average business. So what do they have to do? In my opinion, I don’t know, Picasso, all that well, I know the guys that founded it, I’ve done some research on them. I know who they are.

I think that they now have to [Inaudible19:28 ] getting sued by St. Molina and they fire back while, you know what St. Molina is a small community may, maybe only has 10 or 12,000 residents total in it, which probably means it has 2 to 3000 homes. Theoretically, you look at that inventory and maybe they can only get a hundred or 200 homes and for them and where they’re at, they’re like, oh, these 1 or 200 homes in Santa Molina are not occupied. That’s a big problem. I don’t disagree with them. But if you look nationwide at every single luxury community that there is and say, how many of these homes are unintended as they claim in their actual foundational papers. That’s what Picasso is based on. How many of these homes are really unoccupied for long periods of time. I’m going to say the percentage has got to be 10 or 20%.

Jonathan Denwood: Well my position on this is a bit like yours, but it’s even more, my position is even more confused because there are parts of me that understand some of the complaints from locals because I think their main complaint is that they’ve already got a problem with second home or occupation or ownership affecting areas you see in the Lake Tahoe area where during the week areas are deserted and on weekends, they become just glorified parties zones, right? But there’s part of me that says for God’s sight, this is America. As long as you’re doing something legal, which I think Picasso is a totally legal company. It is controversial, but they’re not engaged in any shape or form in any things that is iffy or morally I think to myself, these people are NIMBYs, not in my back garden people, they, they are just living in a cloud, Picasso’s got every right to buy a house for God’s sake This is America. So I’m totally torn between those two rocks, Robert.

Robert Newman: I think it’s a great idea. And if it was done by some scrappy entrepreneurs that weren’t these two guys, I would be excited about it. But these two guys left their huge corporate jobs at companies that are already doing. I just don’t think that they’re doing the most conscientious business that exists inside real estates, like Zillow, and I could be wrong. You know, there is a statistic that I read recently because we talk oftentimes about the guy that is currently running Zillow and he used to run Trip Advisor or whatever the site was, Eastern Travelocity. That was it. Well, I’ve read a statistic recently that says, wow, in the first three or four years, that he redesigned the travel industry, the numbers dropped by like 50% in terms of independent travel agents. And now apparently that number has bounced back considerably. And there are now almost as many independent travel agents as there ever were.

Jonathan Denwood: Sorry to interrupt Robert, but because they adapted because the kind of independent travel agent you have now is a much more different animal than the ones where, when he entered the market. They are more about designing for kind of customer experiences for their clients. You know, building instead of just selling a package off the shelf, they customize the experience. And there’s much more of a demand for that helping hand that can advise and build a custom experience for the client.

Robert Newman: Which is an advance in travel services. So I’m going to say that that like mini free thinkers, this guy, he’s probably revolutionizing the real estate industry. And I appreciate that. What I have never appreciated and I never will appreciate, and I’m not appreciating about Picasso is that every single time you get enough money involved with somebody or guys that are savvy enough, they do kind of slap everybody around. And so these people kind of come along with their vision. I wasn’t a big fan of Microsoft when it was in the business, in the middle of interrupting and redesigning and creating the software industry. Is this to say that they were bad. No, it just is. It’s just, I look at a really big guy that is a bully. And my personality is such to kick that person in the nuts. That’s just who I am. That’s who I am as a human being.

Jonathan Denwood: I think most of us, but just we’ve got another three to four minutes before we got to wrap this up, Robert. Is the other thing why I wanted to bring this story out. Obviously, it affects specific high-class areas. And I think for a real estate expert, who’s got one of these homes as one of these clients to sell. They gotta be aware of what Picasso is about and that. but the other factor is as we spoke about a couple of weeks ago and with our guests last week we touched on this last week is that Zillow and Redfin, are planning to effectively follow the Picasso model that this is what they are planning Robert I am 95% sure on that, but to the wider market. But this is the model that Zillow and Redfin are going to pursue Robert.

Robert Newman: Yeah. So, and then, and I,

Jonathan Denwood: In a way, the bit that they won’t do is the ownership, the limited liability company, and the fractional ownership, but that is not what they are going to be doing, but what they are going to be doing is the wholesaling, the other parts of the Picasso platform. This is, I’m pretty sure this is what they are planning Robert.

Robert Newman: Here’s what I want to talk about. I’m going to take five minutes. All right. I want to take five minutes because here’s what I think that, that we haven’t talked about. Picasso is being operated by two guys that are brilliant as is Robert Redmond and many other people that are in the digital space that have these rapidly growing companies and you know, where they’re brilliant? They, take a lot of time to be digitally savvy, whereas others don’t right when they start their operation. And what do I mean by that? I mean that they take the time to meet with bloggers and they do press releases that are digitally focused, and they make sure that the spin, the buzz on Facebook and other places where content is getting shared and shared a lot that makes sure the buzz is exciting, Interesting, Awesome.

They’ve also made sure that their sharable posts are on their own website. Every single one reads like a press release. I’ve read through five since we’ve been in the middle of this conversation and they design them in 300 words, snippets that all read like press releases. So that if anybody’s sharing the content of the Picasso website, which is not heavy on content, it’s not what I do. They’ve just got this thing focused so that you’re not going to get a lot of deep information about the company, but you are going to get great press pieces every time somebody shares anything off any page on the Picasso website. This is by two guys that are really experienced with the way that the digital world works today. Right now, they’re not doing thin content. They’re doing strictly social and promotional content on their site. Understanding that as buzz grows, whether it’s negative or positive that people are going to come to this site and share their pages, they’re very clever about it.

Jonathan Denwood: This is already a 1 BNB valued company this like I said this is the fastest-growing company in North America Robert.

Robert Newman: Doesn’t surprise me I don’t know how they got that rapid evaluation, but it doesn’t surprise me that they did at all. As you say, you say that this is the, you know, this is what happens. It doesn’t surprise me and Picasso the website is already getting the 6,000 people to it. Its domain name is less than a year old it’s got you know, it’s obvious that this is a rapidly growing enterprise. And you know what you and I don’t what we don’t know is I’ve heard rumors that they’ve had 50, 60, $70 million in the direct advertising budget. I can’t prove that, but if that’s what-

Jonathan Denwood: I wouldn’t be surprised.

Robert Newman: So That means that you and I, and every single other person that’s searched for anything related to homes on Facebook, Instagram, any of those certain we’ve all come across Picasso. They probably have a number of major ad agencies handling their budgets. They are number one, with how like they’re number six for how the timeshares work on their blog. So needless to say, even though people are saying, Picasso is interesting because Picasso’s saying they’re not a timeshare yet. They have, a blog post on their website and is aimed at that keyword, which

Jonathan Denwood: Well my response to that is it is and it isn’t. It is timeshare amongst the 12 people, but some of its other practices and some other aspects of the business model are timeshare because traditionally timeshare, you don’t own the underlying asset. You are just buying a section at a time and then open out all the other problems around timeshare. So you are still sharing the property with 12 other people, but you also have ownership to a certain level, but in the mechanics, the way affects communities, yes. Is timeshare. And that’s why a lot of communities are up in arms about it Robert.

Robert Newman: Which makes sense. Well, I think that we’ve discussed this topic with a great deal of thoroughness at a minimum. I don’t know that anybody has as learned too much about this. What I would suggest to all of you is go to Picasso or go to stop Picasso now either one and then see what the pros and cons are.

Jonathan Denwood: All the links and there was a really large piece in the npr.org website. They did a data investigation into it. And they got their opinion, which was a bit negative towards Picasso and I’ll make sure that all the links are in the show notes Robert.

Robert Newman: Lovely. Well, listen, ladies and gentlemen, we really appreciate your patronage. You’ve probably been listening to us on whatever your favorite podcasting tool is. For many of you, that’s going to be iTunes. If you go into iTunes the actual service, you’ll see that there is a place to leave us reviews. We can always use more on iTunes. We had some when we originally started the show many years ago and we haven’t had any more recently. Yeah. And we would love to get a few if any of you can figure out how to leave them because I had a little bit of a hard time. In the meantime, John works really hard on these shows. So you can go to the Mail-Right.com website and drop him a comment. Anything you want about shows about starting your real estate career,

Jonathan Denwood: I think the main thing is to go to the Mail-Right Facebook page and leave us some comments or some suggestions of guests or topics that you want to hear during this show. We love to provide content that our listeners and viewers want us to interview or discuss I think that’s the main thing. And also tell your colleagues about the show. The show’s audience has really grown over the past six or seven months. We’ve become regular top spots in iTunes. If you do real estate agents, the audience is substantially growing and, we think we offer really great insights. And just tell all your other colleagues to come and listen to them and join us.

Robert Newman: So on that note one thing which I’ve never done before, and I probably will never do again, but we managed to get a top content marketer. One that when I say the top, I’m just going to say that top number one, content marketer that has ever existed inside the real estate space that I know about is going to be a guest on our show. We’re pulling them out of retirement. So stay tuned for a lineup in September. I’m not going to tell you which show is going to be on. You’re going to have to listen to all the shows in September to find him. But he is coming and I’m extremely, extremely excited about it and gratifying that I connected with him. And then he agreed to come on the show John is going to take an interesting position.

Jonathan Denwood: [Inaudible] a very polite post Robert

Robert Newman: Awesome. All right, everybody, listen, we think it’s been a great show. I hope, or at least I hope John does. We’ll catch you the next time John takes us off.

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