Here's how Pacaso CEO Austin Allison made his first million

Allison, 38, is the cofounder and CEO of Pacaso, a property brokerage firm that buys single-family homes in ideal destinations and sells them to a handful of different buyers who each own shares. The firm’s vision is to give people at different income levels the opportunity to own a second home, an experience that its cofounder only had after a huge windfall.

The son of a carpenter, Allison has been working as long as he can remember, starting from his teenage years in rural Ohio. He quickly gravitated towards real estate, eventually launching dotloop, a tech start-up geared at automating the entire homebuying transaction process, including e-signatures. The product worked: He ended up selling his firm to the Zillow Group for $120 million, making Allison a millionaire in his own right. 

With the financial cushioning, Allison and his wife bought a second home in Lake Tahoe, a formative experience that he realized people at all income levels would be grateful for. That led him and his coworker Spencer Rascoff to launch Pacaso, which aims to make second homes a possibility for more people at more income points. The project draws on each of Allison’s values: Real estate investments are the best investments, location is key, and hard work should pay off. 

Fortune spoke with Allison about his financial upbringing, his entrepreneurial pursuits, how he built Pacaso from the ground up, and where today’s hottest second-home destinations are. The following conversation has been condensed and lightly edited for clarity.

What’s your background?

I grew up in a small town north of Cincinnati, Ohio. My dad was a carpenter, so I grew up swinging a hammer starting at age three or four. And as the son of a carpenter, I lived paycheck to paycheck. We were fortunate enough to have a home and food on the table, but we didn’t have discretionary income. 

Money was always a point of stress and tension for my parents. But my father, being a carpenter, had to show up every day, and figure out how to survive and find his next job and put food on the table. Watching that growing up and experiencing that firsthand really inspired my aspiration to become an entrepreneur. 

I ended up getting into the real-estate business, and homeownership was always a dream for me, not a foregone conclusion. By the time I was 18 years old, I needed to find a way to pay for college, so I decided to start selling real estate. 

I sold real estate all through undergrad, and I ended up going on to law school after undergrad, which is where I started my first real estate tech company called dotloop. We built that company over a period of seven or eight years, and eventually we were fortunate enough to sell to Zillow Group, where I stayed on as an executive for about four years before leaving to start Pacaso.

I grew up in a rural part of Ohio, where, as a teenager, it’s easy to get into trouble. I found myself, like many teenagers, a bit lost and confused, hanging out with some of the wrong people, doing some of the wrong things. 

One thing led to the next, and I got to a point where I wasn’t a super productive contributor to society. I was not getting good grades in school. I was skipping class, getting in fights from time to time. I just wasn’t someone that I’d admire today. But fortunately, I was surrounded by a bunch of really great people at the time, starting with my family, who was always there for me and always loved me, and my girlfriend at the time, who’s now my wife. 

We’ve been together for over 20 years, and married for most of that time. We met when I was 16 years old, and I’m 38 now. She, along with my family, really believed in me, even when I was a troubled teenager. By the time I turned 18, I recognized that it was up to me to make the most out of my life. And it was up to me to make good choices, and to take responsibility for my actions. And that’s what I did. 

After high school, I went to the University of Cincinnati. I studied architectural engineering and construction management. And then after undergrad I ended up going to law school, also at the University of Cincinnati. While most other students were out having fun and partying, I was working. 

I drove an hour each way to college for five years; I did a dual-degree program, so it was five years instead of four. I showed up at 7:00 or 7:30am, and I wore a three-piece suit to college every single day. I was selling real estate to survive, and ultimately, real estate became my channel to direct my energy and have a positive impact on the world. It ultimately created a career that would lead to other opportunities down the road.

Did you have a first job before real estate?

I’ve been working since before I can remember. I was at the job site with my dad when I was three or four years old. I was working in construction and landscaping at 12 or 13 years old. By the time I was 16, landscaping was the primary job. I would drive trucks and lawnmowers, and that ultimately led to real estate, because I met some real estate people and I was intrigued by the industry. But I was also interested in this idea of helping people find their dream home, and it presented a lot of opportunities to grow as an entrepreneur. 

As soon as I was old enough to get my real estate license—which is 18—that’s what I did, and I transitioned from landscaping and construction to selling real estate.

Why did you go to law school when you were still doing real estate?

I was inspired by a mentor of mine. I’ve always found that surrounding myself with great people leads to positive things. I was interning at Duke Realty, a commercial real estate firm in Cincinnati run by a gentleman named Dan. Dan was an attorney who never practiced law, and I remembered just admiring him, and the way that other people respected him, and the way that he approached various situations and conversations. 

When I learned that Dan was a lawyer, I tracked him down and asked why he decided not to practice. He said that law school, for him, was like an academic bootcamp. He said even if you don’t have any intentions to practice law, if you’re interested in further developing your skills as a student and as a business person, law school is a great place to go. 

I never actually planned to practice law, I only went for the academic bootcamp that Dan described. And it delivered on that promise—and more. But law school is expensive. Fortunately, I was able to get some scholarship money to mitigate the cost. 

I ended up leaving law school in the third year, because my company at the time was consuming so much of my time that it wasn’t possible for me to perform in both law school and in the company. When I raised capital for my first company, I was a first-year law student, and I remember talking to the investors, and one of the biggest objections that investors had was that I was a law student. 

After two years, our company was growing in such a way that made it impossible for me to both be the CEO and a law student. So I ended up taking a leave of absence, and I was hopeful that I would be able to go back to law school at some point in the next five years, but it just never happened. The company ended up lasting longer than that. 

Was the company your first venture outside of college, or did you have any other professional jobs before?

I would say that dotloop was my first company, but it wasn’t my first idea. I had lots of ideas that I had been thinking about and researching while I was in college. The first idea I had before dotloop was about digitizing the homebuilding process. I was working on that idea around 2008, and we all know what happened in 2008. The real estate market went through a big correction. Homebuilding came to a screeching halt. So I pivoted away from that idea and onto this other idea that I had also been thinking about, which is digitizing the real estate transaction. 

How did dotloop come to be?

I conceived the idea while I was selling real estate. I found myself chasing buyers and sellers around to get documents signed on the trunk of my car. That process was inconvenient for both me as the real estate agent, but also for the buyers and sellers. So I had this idea: What if real estate transactions could be fully digitized, so that buying a house could be as easy as buying a book on Amazon? 

That was the original idea, but I didn’t know anything about building a company or about technology. I only knew a little bit about real estate because I was selling real estate at the time. So I bought a book about how to write a business plan. I went through it, wrote a business plan, and started talking to other people I knew or had met throughout the course of my life, just to ask questions and learn about company building. 

One of the people I connected with was my boss at the time, a gentleman named Jerry, who was vice president of sales at Duke Realty. 

Jerry invited me to demo the product to him. He said, ‘Austin, I really appreciate how loyal you are to me and Duke. But we’ll always be here for you, you have to follow this dream. It may be a once in a lifetime opportunity. And by the way, I’d love to be your first investor.’ 

I didn’t know anything about fundraising, and Jerry had never made an investment in a startup company. He just saw the passion in me and believed in me. He ended up writing a six-figure check to be my first angel investor. The next thing that came to mind after Jerry offered to be my investor, is that Jerry must have friends who would also like to invest. 

Jerry ended up scheduling a meeting with me and a handful of his friends, to whom I pitched the idea. Three or four of them ended up investing, and that was the start of dotloop. We raised about half a million dollars from this group of angel investors. From that point forward, we were off to the races.

How long were you at dotloop before you sold it?

We started dotloop in 2009, and we sold in 2015. dotloop is now part of the Zillow Group, operating as one of the many services that Zillow provides to its real estate agent partners. 

How did you make your first million dollars?

I made my first million dollars by selling dotloop to Zillow Group for $120 million—mostly in cash, and also some stock. As a founder-CEO, you don’t earn a lot along the way. In fact, the first handful of years at dotloop, I didn’t make a salary at all. And when we got to the point where I could take a salary, it was very modest, which is typical of early-stage founder CEOs. But once we became part of Zillow Group, all that changed. It was really a great opportunity.

Was Zillow your first big paycheck?

I would say that what felt like my first big paycheck was from my first real estate commission, which I think was $4,000 or $5,000. That was a ton of money for a kid from rural Ohio who’s the son of a carpenter. The next big paycheck that I got was when I sold a home. I ended up buying my first home when I was 18, for $40,000. 

To be clear, that wasn’t the amount that I put down. That was the entire value of the home. And I ended up fixing that home up with my father and selling it a few years later for about $160,000. That was the first life-changing check that I got. Not my first million, but it was a life-changer for sure. 

What’s the most expensive thing you’ve ever bought for yourself?

Real estate is the most expensive thing I’ve ever bought for myself. Fortunately, real estate tends to be a good investment if you’re buying in the right area. I just love real estate. After we sold to Zillow, one of my mentors advised me that I should not buy anything large or discretionary for one year after the sale.  

I basically didn’t spend any money for one year after the Zillow sale, but once I got through that one-year period, the first big thing I purchased was a second home in Lake Tahoe. And that second home ended up being a big part of the inspiration for my current company, Pacaso, which is about making second homeownership accessible for more people.

How did you come up with the idea for Pacaso?

My wife and I were very fortunate to become second-homeowners about 10 years ago. We were living in San Francisco at the time, and we’d visited Lake Tahoe when we had a spare weekend. When we became second homeowners in Lake Tahoe, it changed our life in a really positive way. I learned that when you buy a second home, you’re not just buying a piece of real estate, you’re buying a second community, a second group of friends, a second life in many ways. And I wanted to find a way to make that dream possible for more people. 

For the last 10 years, I’ve been thinking about how to make second homes possible for more people. One of the lightbulbs that went off for me along the way was the realization that most second homes are only utilized about 10% of the time. That means that we have a lot of empty homes sitting around the world. Pacaso is about connecting those two problems and opportunities. 

Basically, Pacaso is a co-ownership marketplace that empowers people to co-own luxury second homes together. The easiest way to get your mind around the ownership structure is: Imagine if you and three or four of your friends or family members wanted to buy a home together. Pacaso enables you to do that, except you don’t have to know the other people, and we manage all of the details.

Who is the targeted typical Pacaso homeowner?

The typical Pacaso homeowner is a family with children, most often. Usually they live within a couple hours’ commute from their dream second home. Maybe it’s a family in San Francisco that wants to own in Napa or Lake Tahoe. Or maybe it’s a family in New York that wants to jump on a plane and be down in South Florida in a couple of hours. That’s the typical use case. 

One person can own up to four-eighths, or 50%, of the home, or as little as 1/8 or 12.5% of the home. Most people choose ⅛, primarily because most people are only using a second home four to five weeks a year, and 1/8 works out to about six weeks per year. But about 15% of our customer base owns multiple eighths. Some people will buy a quarter of one home, other people will spread their interest over multiple homes so that they can use different properties throughout the year.

How many times a year can an owner stay in the house?

We’ve created a proprietary scheduling tool called Smart Stay, which distributes the calendar fairly amongst the ownership group. So if you own 1/8 of a luxury Pacaso home, Smart Stay will ensure that you get 1/8 of the peak season, 1/8 of the non-peak season, and 1/8 of the holidays. Typically that works out to about five or six weeks, but you’re not capped at that amount of usage, meaning if other owners in the home are not using their full allotment, then you would be able to use more than the one-eigth that you own. The Smart Stay tool is really designed to give owners optimal use of their property in a fair and equitable way. 

How did you and your co-founder fundraise? Did you invest any of your own money into the company? 

I started Pacaso with a friend of mine, Spencer Rascoff, who I worked with at Zillow. Spencer was a co-founder of Zillow, and CEO of Zillow for about 13 years. We always dreamed about working on a company together, and he and I both left Zillow around the same time, in 2019. We immediately connected to start talking about business ideas. 

After Spencer and I connected on the idea for Pacaso, the first thing that we had to figure out was how we were going to raise money. Fortunately, both of us had a track record at the time—in his case, Zillow, and Hotwire prior to that. When you have a track record, it’s a lot easier to raise money than the first time around. 

We basically just started making phone calls to investors we had relationships with. We had a lot of opportunities right out of the gate, which was very different from my first experience. We had several options to choose from, and that enabled us to pick a partner we thought would be right for us long-term.

Did either of you invest any of your own money into Pacaso?

Yeah, we both invested some of our own money into Pacaso.

Were you working at Zillow after it acquired dotloop?

After Zillow acquired dotloop, I stayed on as an exec for almost four years. Pacaso launched in late 2020, three-and-a-half years ago. In that time, we’ve sold about a billion dollars of Pacaso units, what we call revenue. We’ve expanded into pretty much every market around the U.S. and we also are in Paris, London, and Cabo. 

In terms of how we grew so quickly, it was a combination of the right idea at the right time, and the right team. When compared to a typical startup or my first startup, I didn’t have a team or a network of people to rely on. It was built through trial and error over an extended period of time. Whereas with Pacaso, we had the dream team right out of the gate. 

And it was a great time in 2021, which was basically the first year after launching. It was a really crazy time for the real estate market in a good way. Interest rates were low, home prices were appreciating quickly, people were experiencing more flexibility with respect to their working schedules, a lot of people were working remote, either part-time or full-time. And there was a lot of interest in second homes. We really benefited from that right out of the gate. 

How many homes are currently in your portfolio?

We have about 1,500 owners now that are part of the Pacaso network.

Why did you expand to lower-priced homes?

The vision for Pacaso is about democratizing access to second homes. But we had to start somewhere. We chose to start at the very high-end: ultra-luxury homes in ultra-luxury markets. But the long-term vision is about serving more people, and the only way to do that is by having more homes across more markets at more price points. But even in markets where the price points are a bit lower, Pacaso is still a very luxury product. So our average home prices are well above the median in every market where we operate. But homes are a lot less expensive in rural Tennessee than they are in Malibu. 

Do you know the most expensive listing in terms of money? 

Yeah, the most expensive listing that’s ever sold on Pacaso was just under two-and-a-half million dollars for ⅛ of the home. But most of our homes are offered at between $200,000 and $500,000 per ⅛ share. But it does go up to about $2.5 million on the very high end again and Aspen. 

On the opposite side of timeshares are Airbnbs. Why do you think Pacaso may be more appealing than Airbnb when choosing vacation spots?

I think Airbnb is an amazing solution for someone who’s only visiting a location once a year. But if you live in San Francisco, for example, and you’re gonna go to Napa, or Lake Tahoe, multiple times throughout the year, Airbnb doesn’t solve that problem really well.

Pacaso solves that problem really well, because you own the home, which means you get to leave your stuff in the home, you’re guaranteed all the right times throughout the year in your home. You get to participate in the capital appreciation as that home goes up in value. So it really just comes down to usage. For very frequent usage, it’s better to buy the whole home. But if you’re using a place two to 10 times per year, that’s where Pacaso is optimal. 

How does leaving your stuff in Pacaso homes work when you’re sharing it with other owners?

We outfit every Pacaso home with eight owners’ closets where owners get to leave their stuff. When you show up at your Pacaso home, you pull your stuff out of the closet and just enjoy the home. You don’t have to worry about any of the headaches or hassle that is customary of homeownership. And it feels like you own 100% of the home while you’re there, but you’re only paying for 1/8 of it.

Can you give us your argument in favor of the co-ownership model? Why should people invest this way?

There are two main reasons why people choose co-ownership over the alternative of whole homeownership. The first is the cost savings. You’re spending one-eighth of what you would spend to buy the whole home, which means you’re either saving money or you’re increasing your buying power to be able to afford more home than you would otherwise be able to afford on your own. 

The second reason why people choose co-ownership is because it is the easy button for homeownership. Owning a home is hard. Owning a second home is really hard. All the little details around maintenance bill pay, things that break—it’s a lot of work. With Pacaso, we handle all those details for you, so you just get to show up at your home and enjoy it with none of the headaches that are customary of homeownership.

Why do you think millennials and Gen Z would benefit from co-ownership specifically?

I think there are two relevant themes causing co-ownership to become increasingly popular with younger generations, not just for second homeownership, but also for primary homeownership. The first theme is around housing affordability. Homes are expensive, and it’s becoming very difficult for people to afford a home on their own in many cities. The second theme is around the sharing economy and nomadic living. 

People, particularly in the younger generation, are becoming more and more nomadic, and more comfortable sharing things with other people. If you’re nomadic and comfortable sharing, co-ownership is an absolute no-brainer, because it’s less money for a better experience. And it gives you more flexibility in the way that you live and work. 

What are your top three tips for homebuyers?

My top three tips for homebuyers would be to think long-term. Real estate is not a short-term investment, and I run into a lot of people who often think short-term about the purchase. It’s very hard to find the perfect time to do anything, but one thing I can tell you about real estate in good markets is that it goes up over time. 

So if you have a long-term time horizon on your real estate purchase, today is the best time to buy if you have a need. That’s the first. The second is location. In the real estate world, we have this phrase: “There are only three things that matter in real estate: location, location, and location.” Location really does matter a lot. You know if you’re investing in a location that has a lot to like, where there’s steady, growing demand, and a secular trend or macro trend that’s causing more and more people to be interested in that market. That probably means it’s going to be a good place to invest. 

The third thing I would say is: Think outside of the box. In a market like this, where affordability is a challenge, solutions like co-ownership are the way to fulfill your vision. It’s just becoming too hard for people to afford homes in many markets. I think now is the time to be creative and look at new and innovative models, such as co-ownership, to make your dreams a reality.

How many ownership shares do you have in Pacaso houses? 

I own three different Pacaso homes today. One is in Scottsdale, one is in Napa, and one is in Cabo.

What are the hottest housing markets for Pacaso right now?

I would say mountain towns probably are at the top of the list. Mountain towns are interesting because they have two very great and diverse seasons, winter and summer, which means that the season is longer. So if you have a four-month winter and a four-month summer, you’re gonna get eight months of peak time throughout the year, which is awesome. 

But they also attract two different types of people. There’s some people who really love the winter, other people who really love the summer, and you get two for one. 

Some of the hottest cities or markets that people are focused on at Pacaso are definitely South Florida. Not just Miami, but there’s lots of hot pockets in South Florida and the Carolinas that are super hot. 

In terms of urban markets, we’ve seen a lot of demand for both Paris and London. Those would be the top ones that come to mind.

Do you have any hot takes on the future of the housing market?

This is a really interesting housing market that’s kind of tough to predict. But we know that supply is limited, and likely will continue to be limited. Anytime there’s less supply than demand, it means that pricing should stay pretty firm, meaning I don’t expect a huge correction in home prices. I think the more likely scenario is that home prices will continue to rise, especially in the markets with the most demand, but at a slower rate than what we’ve experienced over the last couple of years. 

In terms of interest rates, which are a big needle-mover for the housing industry, the Fed is predicting a couple of rate cuts this year, which should translate into lower mortgage rates. And that would help the housing industry quite a bit. I think the biggest thing that we would see as a result of lower interest rates is an increase in transaction volume. 

Transaction volume was low in 2023, but we’re already starting to see transaction volume climb in the first quarter of 2024. I think if rates come down, we can expect continued increases in the overall transaction volume. But again, I don’t expect to see big decreases in price. 

What is one piece of advice that one of your mentors gave you in your young adult years that you carry with you today?

One piece of advice that my mentors gave me was to follow your passion and surround yourself with great people. And I’ve followed that advice in everything that I’ve pursued professionally and personally, and it’s always served me very well.