This glossary details all the investment costs in a transparent manner so you know exactly what you are paying for. The following fee structure is for our general buy-to-let investment opportunities which include other 3rd party costs typically associated with property transactions.
Please note, we might introduce different types of investment opportunities in the future, and fees for such types of investments will be detailed in the investment paper on the platform.
TRANSACTION COSTS
Know Your Transaction Costs
This is the price of the property
This is the total of 3rd party costs associated with property purchase. The details of this are presented below. (No other property investment portfolio provides this level of transparency and detail!)
This is the Dubai Land Department (DLD) fee. Legally, the fees constitute 2% to the buyer and 2% to the seller, however, the market norm and practice are that the buyer pays the full 4% at the time of property transfer.
This is typically 2% plus VAT totaling 2.1% of the property value. The market norm and practice are for buyers to pay this fee.
In Dubai, all property transactions are registered at DLD-licensed trustee offices rather than being handled by solicitors as in more developed markets. For cash property transactions that don’t involve any type of mortgage financing, there is a trustee fee of AED 2,100 for properties below AED 500,000 and AED 4,200 for properties above AED 500,000. In addition, there is a charge of AED 580 for the issuance of a new title deed. The SPV, which is utilized to purchase the property, has to be registered with the Dubai Land Department, which can also be done at the trustee’s office for a fee of AED 2,100.
The DEWA deposit is not a cost but rather a refundable deposit. Every owner/landlord is required to register their account with DEWA for each property and pay a deposit for it. This is for DEWA to ensure that all utility bills will be paid. Additionally, this is also linked to DLD systems, so an owner who has outstanding bills on the property cannot sell it at the time of property transfer.
Similar to DEWA deposits, some buildings have district cooling and similar owner accounts need to be registered along with deposits.
This is an estimated cost to furnish the particular unit. These costs are estimated for properties where the rental strategy is to offer furnished rental apartments. Any unused funds are refunded to the investors.
These are also estimated costs for maintenance work required to get the property ready for tenancy. Any unused funds are refunded to investors.
As you know, for each property transaction we register a separate SPV in the Dubai International Financial Centre (DIFC). In order for the SPV to purchase the property, a Non-Objection Certificate (NOC) has to be issued by the DIFC addressed to the DLD. Details of the SPV are provided in the NOC, including all the investors who have contributed to the property purchase along with the property details. This is for your protection to ensure the correct information is being provided to another government entity. Each SPV is registered with the DLD as well, so both the DIFC and DLD are fully aware of the ownership structure for each property and you as an investor have legal validity of your fractional ownership in the property via the SPV.
This is the cost associated with registering the SPV in the DIFC. This registration cost is approximately $100 plus $1,000 for an annual license.
These are other miscellaneous transaction costs that can include items like DTCM fees for holiday home licenses or rental and service charge adjustments. Any unused funds are returned to investors.
This is the SmartCrowd entry fee of 1.5%. These fees are VAT applicable.
This is the total funding cost inclusive of the investment amount (property price), the purchase costs, and transaction costs (SmartCrowd 1.5% Fee + VAT).
Each property has one million shares issued. Here we just detail all the costs on a per-share basis. This level of detail is important for the functioning of the share transfer facility where you are able to see your shares to other investors on our platform.
Rental Breakdown
The transaction costs above detail all the fees at the time of the investment, but there are also ongoing operating expenses that are reflected in the rental breakdown.
We detail those costs below along with the full rental breakdown for your benefit.
TRANSACTION COSTS
Know Your Operating Expenses
This is the expected gross rent to be achieved for a particular property. Details are provided on the investment paper available on our platform.
These are annual service charges charged by the building or community management company responsible for the upkeep of the building/community. These are invoiced through the DLD systems and are typically paid quarterly. We hold reserves back from rent to pay for these costs.
This is the gross rent less the service charges.
This is the net rent divided by the property price. This yield is not reflective of the true return on your investment as it doesn’t account for many costs. However, in the market, this yield is commonly used to market investment opportunities. We present this here for easy comparison to other opportunities in the market.
This is the sum of all other annual costs associated with operating the property and includes the Property Management Cost and Property Insurance Cost.
This is the property management fee. For long-term rental properties, this is typically 5% of the gross rent or a minimum fee of AED 1,800-2,000 depending on the property. This is in line with market practices.
For short-term rental properties, this management fee can range between 18%-20%. In the market property management for short-term rentals ranges between 15-25%, inclusive of 3rd party operator costs, such as Airbnb, Booking.com, etc.
All properties are insured and have an annual premium that has to be paid.
This is the final amount left over to investors after paying for all costs. This is the expected amount that is to be distributed to investors. This is typically paid out on a monthly basis on the 12th of every month.
This is the dividend yield. Which the net dividend amount divided by the property price. Please visit our returns page for further details on how the returns are calculated and what they mean.
