Build a real estate portfolio starting with as little as $1000
Investment in real estate has always been a daunting task to consider. Entry-level investments are enough to put one off, let alone the paperwork involved.
Now, however, there is a solution for the budding investor looking to get their feet wet in the ever-expanding UAE real estate sector: Real estate crowdfunding.
Real estate crowdfunding comes to Dubai in the form of Smart Crowd
In the US, investors are utilizing crowdfunding sites like Realty Mogul, CrowdStreet, and Fundrise to start and/or build their portfolios, Investopedia notes.
Smart Crowd, an innovative new digital real estate investment platform that supports crowd-funding endeavors in the real estate sector, is trying to fill in a similar role in the region.
Earlier this week, the Dubai-headquartered company celebrated completing its second investment opportunity in just three days.
Via crowdfunding, the company offers the chance for those without high wealth to buy and share investments in property, as well as catering to wealthier more seasoned investors.
Talking about their latest achievement, Smart Crowd Co-Founder Siddiq Farid said: “We offered the chance to invest in the purchase of a studio in Jumeirah Lake Towers, one of Dubai’s most residentially-dense and popular communities. Within three days, we had achieved the investment level required, which is thrilling, and underlines the need for our visionary company and its new investment philosophy.”
Smart Crowd’s highly experienced team of real estate experts negotiated a purchase price 26% below the market value of a similar property and 10% below the market value per an independent RICS certified valuator, a statement by the company said.
“On behalf of all our existing and potential investors, we negotiate hard, and we negotiate well,” said joint company co-founder, Abdul Kadir Faizal.
How does it exactly work?
In a sense, real estate crowdfunding is not too different from buying shares in a company. Pitching in with crowdfunding campaign nets you a portion of ownership in the property, which then pays back dividends according to your ratio of ownership.
FitSmallBusiness.com notes that there are typically two types of real estate crowdfunding investments:
– Equity crowdfunding – Dividends typically consist of rental income. Equity crowdfunding investors own a proportional share of a property or portfolio and earn income on rental profits as well as if/when a property is sold.
– Debt crowdfunding – Dividends consist of interest income earned off of a property or portfolio’s mortgage payments. There is no additional income if/when a property is sold and investors don’t own a proportional share of any property.
Anyone can become a property investor
What makes the concept of property crowdfunding so tempting is that you often do not have to worry about an unsurmountable minimum threshold for entry. Smart Crowd offers investment opportunities starting from as low as $1,361 (AED 5,000), while similar service DURISE advertises a $1000 (AED 3,673) minimum.
The allure of such a possibility is quite simple to grasp.
“The ticket size to crowdfund a $1-billion airport is not exactly for everyone. However, a three-bedroom apartment in Mumbai, Manchester or Dubai Marina jointly owned by a hundred individuals sounds realistic. It also helps diversify risks for investors,” Gulf News quips.
At its essence, the goal of real estate crowdfunding is to give them middle to lower class individual the chance to become an investor in the property market.
“For far too long the average person has not had an opportunity to access the real estate asset class in a meaningful way,” Farid said last year. “We want to change that by allowing them to access it and sustain the investment through cyclicality of the market.”
Crowdfunding investments pay dividends
For as little as about $1000, you can be on your way to becoming a serial investor.
In their statement from earlier this week, Smart Crowd explained that one of the investors that had successfully invested in their first investment property is already receiving dividends on that purchase. This allowed him to top up his dividends a little bit and buy into Smart Crowd’s second investment property to start building his real estate portfolio.
“The seller is happy, making an immediate sale and a decent return, and the buyers are delighted, coming into the market at such an attractive pricing point. We are seeing an 11% gross yield already, and expect a rent return of 9%. Even if rents reduce, it’s still a healthy return for investors,” Faizal said.