A group home is defined as a small number of unrelated people, in need of support, living together. This may be the long-established definition, but in today’s unprecedented real estate environment it may have taken on an expanded definition.
It would be redundant to say that real estate values on Anna Maria Island have increased to an extraordinary level during the past few years. Second-home buyers who have flocked to Anna Maria for decades are finding they can’t afford or justify the expense of purchasing a home to use for just part of the year. To fill this opening there is a new homeownership concept – or maybe just a jazzed-up version of an old concept.
Co-ownership is a new model conceived by a California company called Pacaso. The idea is to bring together co-buyers in a luxury home they would not ordinarily be able to afford, to use on a rotating basis as a second home. The process, according to them, is straightforward. Pacaso acquires private homes in upscale vacation residential areas and structures them as eight-member LLCs. Buyers then purchase an ownership interest in the home, ranging from one-eighth to one-half of true ownership of the property.
One of the selling points is, of course, a much smaller investment in the property and no responsibility for maintenance, which is managed by the company for an additional fee. They also make the point that second-home owners frequently don’t use their full homeownership up to the level they had anticipated and have tied up millions of dollars in assets that are no longer liquid.
The regions that Pacaso is active in are, not surprisingly, the high-end markets of Miami, West Palm Beach and Fort Lauderdale in Florida and posh areas of Colorado, California and Utah. They are investing in multi-million-dollar homes that offer amenities most second-home buyers could not afford on their own. One of the typical properties on their website in Fort Lauderdale was a $6,000,000 waterfront property with six bedrooms, seven bathrooms and more than 5,000 square feet. The one-eighth ownership was $895,000 and additional fees were not indicated. This would give you part ownership that you could use for a month and a half every year. How you determine the months was also not indicated.
Even though they say that co-ownership is not fractional ownership, which has been around for a long time, some of the elements are the same, like having your name on the deed. This is entirely different from timeshares, which is buying the right to use the property but without ownership rights. And, of course, many buyers and family members do get together and purchase homes jointly and manage it themselves. But for those second-home buyers who do not have relationships that will enable them to do this, co-ownership managed by a corporation fills that gap.
So, does Anna Maria want this type of ownership on the Island? My guess is no, as residents of Napa Valley in California also don’t want it. Homeowners there have organized and made it very uncomfortable for Pacaso to operate. They are confronting potential buyers and have attempted to pass regulations to control co-ownership purchases.
Nevertheless, don’t be surprised if Pacaso or some other co-ownership company starts to buy up our multi-million-dollar properties to sell as co-ownerships. In my opinion, it would be another negative slap in the face for Anna Maria. If it happens it will be very gradual, before anyone knows what’s going on. So stay alert – the concept is really just an extravagant group home.
