Proptech Growth Strategy Brief Newsletter

Pacaso Growth Strategy

Pacaso allows residential real estate investors to team up with others to buy high end homes through an LLC.

https://www.pacaso.com

"Grain of Salt" Warning: I write this newsletter with an outsider's understanding of the business in question. I am likely to make mistakes, leaps of judgement, and assumptions - that's what makes it fun.

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Buying second homes or investment properties has never been easy.

Traditionally, there have only been two real options - buying a timeshare or buying a whole property yourself.

Timeshares are much cheaper than buying, but famously inflexible - if you can't visit during your designated week, you'll have to wait until next year.

Meanwhile, buying is cost prohibitive for most. Even if you are able to buy a second home, you're forced to rely on the rental market to recoup cost while you're not using your property, opening yourself up to revenue and investment risk.

Pacaso is positioning itself as a middle ground to these far-flung options. They allow home buyers to partner with other vetted co-owners and buy fractions of high-end properties from within a property LLC that they set up for you.

This arrangement carries several advantages. It allows people to access properties in markets that may have been well above their budget, and arranges partners who are aligned in the interest of maintaining and building the property's value over time. To top it all off, flexibility is built in - collective use of the property is arranged by all the property's co-owners.

At its core, Pacaso's value comes in arranging an investment cooperative to help people invest in residential real estate. Here's how I think they could unlock new levels of growth.

Acquisition

Pacaso is a marketplace, with selling agents on one side and property buyers on the other. To that end, building both ends of the marketplace is paramount. Given that this is real estate, rolling out in particular geo areas one at a time is the ideal way to get the awareness and listing density necessary to kickstart the marketplace.

For brokers, the value prop is clear - list the home on Pacaso, and wait to get paid - no showings required. To build this side, go to Fiverr and spend a thousand dollars to get email lists for all agents in a given city, and use this list to set up a cold email campaign to get agents to sign up on Pacaso's agent page.

Once those agents list some properties, I'd start a geo-targeted paid social campaign targeting affluent homeowners in the same area, complemented by their existing paid search campaign. The goal here will be to build an email list of in-market users in your target geo areas, with a focus on lead nurturing by email post sign up.

Pacaso's existing paid search campaign - very low search volume for these kinds of keywords.

For channels, social takes priority here over search. It's unlikely that users will use different search terms when searching for a second home compared with their first, making paid search difficult to scale.

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Activation

Now that Pacaso has a list of agents in a particular geo area, we hope they'll list directly with Pacaso. If that doesn't happen as fast as desired, then we can take matters into our own hands. Periodically comb through the listings of our agent signups in search of stale properties, and send messages to the agent about that particular home. If possible, manually list it ourselves before sending to the agent to increase conversion.

For buyers, Pacaso needs to work on their story. Building a story system would go a long way toward helping convey their value to their target market, and lead to more sales. In essence, go deep into customer research to build strong customer personas, and build core value propositions around how the product works for each of those personas. I'd also go deeper explaining what Pacaso does, and push into case study content around happy customers.

The biggest issue Pacaso will face in selling themselves is building trust, and a tight story and social proof are paramount to producing it.

Retention/Referral

For Pacaso, retention isn't much of a core metric, but referral could be high leverage.

Unfortunately, referral amongst buyers is unlikely because of the low density of second home buyers, but there's an alternative - relying on agents.

Use agent signups as a node to access their network. Incentivize them to refer both potential buyers and other agents with commission on new customer transactions. This will also help make our paid advertising and cold email campaigns compound in value once the referral engine gets up and running.

That's it for today.  Thanks for reading!

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See you in two weeks,

Colin

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