Despite the Dubai property market going through a rough patch over the past few years, SmartCrowd has managed to outperform the market and offer our clients some of the most desirable and high yielding properties available with net returns above 7%. How?
At SmartCrowd, we believe that if you act with sincerity and transparency, success will follow. That’s why we provide our analysis – along with third-party due diligence reports – to our clients when an investment opportunity goes live, so that they can make informed investment decisions, knowing that their hard earned wealth is safe and will grow with us. More importantly, we make sure the process is the easiest you’d ever come across.
Fueled by objectivity and data, not opinions.
We’ve developed a sophisticated 100-point data model, built by industry veterans with decades of experience, that holistically evaluates a number of factors for each potential investment opportunity that comes our way. Factors that we look out for include price, size, service charges, floor, furnishing, amenities and remaining length of the tenancy contract, among many other things.
The Dubai property market has plenty of opportunities and given the excess market supply, it’s not surprising, but obviously not all of them are worthwhile. For example, in 2019, our team looked at over 232 properties valued at approximately AED 300 million, but only 10 properties were listed on our platform.
Sure, we could have listed more, but we believe in quality rather than quantity and that’s why all of the listed properties had net yields between 6-9% and expected five year returns between 55-75%.
Figure 1: October 2019 – July 2020 (past performance is not indicative of future returns). Cyan: SmartCrowd Achieved Annualized Returns, Dark Blue: Market Average.
Once we finish a deep dive, we dive even further.
So, the property has scored well and gotten an A+ from our data model. Great! For some, that may be enough to get it listed on their platform, but for us at SmartCrowd, that’s not enough. That’s why after a property has been shortlisted by our model, we scrutinize it even further by doing a deep dive analysis.
There’s a lot that goes into our deep dive analysis, far too many to list in a single blog post, so here are some of the things SmartCrowd embraces:
- SmartCrowd conducts a thorough supply and demand analysis for the property’s area by looking at real estate data in terms of activity in that particular area. Moreover, we study similar recent transactions and gauge what the price and rental trends of the particular area will look like today and in the future. We also get a sense of demand and supply by analyzing auxiliary data such as real-time traffic data as well as DEWA (water and electricity) activation and deactivation requests in the building and surrounding area.
- SmartCrowd visits the unit in person to conduct a physical inspection of the property and take note of anything of interest such as furnishing, view or wear and tear, if any. We also want to know who the property’s current tenant is, where they work, what industry they are in and how long they have been a tenant at the property.
- As a first choice at SmartCrowd, we prefer units that have at least 6 months remaining on their tenancy contracts. However, when pricing these properties, we use current rental rates and in some cases, discount to factor in for further anticipated reductions. Why do we do this? It’s because want to provide some downside protection for our investors. For example, If the lease were to renew at a lower rental rate or if a tenant vacated, we would most likely have to accept a lower rental rate the following year. However, by being proactive in our approach and mindful from day one, we can come close to making sure that the net return will still be at the market or above market even after renewal.
As many of our clients know, we show a conservative yield and on many occasions, we have gotten back to them to inform them that they can expect higher yields when a property is funded. Our client’s trust is paramount, so in specific situations, we’d rather under promise and over deliver, rather than over promise and under deliver. For this reason, smartcrowd vs. dubai property market’s difference in returns is always evident.
Risk vs Reward Dynamics
When you use SmartCrowd, we want you to walk away with two things:
- A healthy return on your investment (which is usually higher than the market’s rate).
- Confidence and comfort in knowing that your capital value is protected because of the quality of the properties we analyze and list on our platform.
Obviously, there are still no guarantees as each investment carries risk. However, as an investor, it’s critical to understand risk vs reward dynamics. When we list two different properties – with different profiles and returns – on our platform, we conduct thorough due diligence on both of them. While one property may offer a net return of 8% and another may offer 6%, the higher returning property isn’t necessarily a better investment option – it’s another investment option. Return is a function of risk – the higher the risk, the higher the return; the lower the risk, the lower the return. Some may have a higher risk tolerance and go for higher returning opportunities, others may not. It’s all up to your preference and risk tolerance.
The beauty of SmartCrowd’s platform is that it allows you to diversify and invest in different types of properties, whether they are income generating or prime properties, high risk or low risk. We take the necessary steps to scout exciting investment opportunities in as many risk profiles as possible so that our clients can build a diversified and optimal portfolio based on their risk appetite, so that regardless if a property under performs, your portfolio will always deliver.
Disclaimer: This is not investment advice. Investments in property and unlisted shares carry a risk. Your capital may be at risk and you may not receive the anticipated returns.