A passionate real estate investor, along being with a riveting worker who partners with us to create operational excellence, Abu Obeida shares his personal journey of growing with SmartCrowd.
What was the most satisfying part of running our Airbnb business for the last two years?
Well, between work meetings, sitting on a couch, and watching TV with my wife, an SMS alert would pop up with a deposit notification. All were ranging from 300 AED to 10,000 AED and seeing those deposit messages, popping at irregular hours, felt very different than the usual payday notification. The additional revenue stream, exceeding 100K AED in two years, was an excellent addition to our basic salary. Being conditioned to having a steady outflow of money, the cash inflow was a welcome change.
Running AirBnB has been an exciting experience, a wholesome journey. First and foremost, as a real estate investor, it was a question of strategy. What returns we wanted, and what cost we were willing to pay upfront. After much deliberation, we collectively came to a decision! We would invest our savings into a studio in Dubai Sports City, and convinced family members to invest in another two studios, as well.
Initially, we made a 9% net return, which we were ecstatic about looking at other investment options in the market. Then in Feb 2018, our tenant left, and with rental yields plummeting, we decided we wouldn’t settle for lower returns.
THERE HAD TO BE A BETTER WAY.
Back to the drawing board- the resources we had were distance (physical proximity to the area) and time (flexible work hours). But wait, we do live in one of the premier travel destinations in the world, the hub of the middle east. All these visitors would need somewhere to stay, and for some, the cold, industrial feel of a hotel just didn’t cut it. They wanted something more subtle, homier.
Short term rentals – furnished self-contained apartments that are rented for short periods of time, usually by the month as opposed to annual rentals in the unfurnished apartment rental market. They are seen as an alternative to hotels.
In the first unit, we spent roughly two months of rent fixing it up, topped off by investing in an advanced smart thermostat to regulate temperature and save on cooling costs ( those small expenses add up). We all have our strengths, and this project bought to light that interior design was not one of mine. As such, I relied heavily on my wife’s artistic sense to decorate and arrange the place.
We had the goal of becoming the #1 Airbnb studio in Sports City. As frequent travelers, we realized that the customer service standards in Dubai had much room for improvement. A key focus for us was to ensure that the pictures, copy, communication, and each customer interaction were simply exemplary.
It took us less than seven months to achieve that #1 position in sports city, beating 100’s of other units!
Unfortunately, the myth of money growing on trees proved to be correct; hence our capital was limited, so to build our empire into more units, we decided to package our personal experiences into becoming a holiday home operation service. Taking returns we made in those first seven months, along with the strong customer ratings, we offered our family and friends the chance to turn their long term units into short term rentals where my wife and I would earn 20% of revenue in exchange for our services. First, we assisted a studio owner in JVC by decorated his unit resulting in average rent of 6K AED monthly. Next, we took a two-bedroom in Sports City that was behind in maintenance and service charges. After consulting with us, the unit averaged 10K in monthly revenue. Two more studios followed!
The strategy was paramount. We didn’t want the commit that much capital, and, more importantly, we wanted the option to walk away if our family time priorities change. Our services expanded to offering financing to owners to help with their setup costs, at zero interest loan off course. In return, they would allow us to manage their units.
The next major decision was whether we would focus on specific areas within Dubai, and which area’s those should be. Should we expand to the premium tourist areas? No, they required too much overhead in the form of managing daily and weekly check-ins from tourists who had a million questions. The sweet spot was young professionals, singles, and couples in the Dubai labor market. These guests already knew the city and had long terms needs.
Ultimately, the business grew organically, earning us a net of 10K AED a month. Our unit saw a substantial increase of 40% net return due to Airbnb, and the owners we worked earned an additional 10% net return compared to what they could have received via rent.
The end of a journey is the fresh start to a new one
Although our strategy was successful, the net income was a fraction of the salary, and our focus shifted when we welcomed a new baby into our family a few months ago. We were lucky that a family friend who has been observing our success got encouraged to try this on his own. With mentoring and followup, he also grew to five units, and we felt confident that we could refer our friends and family to him to continue the business.
Our lessons were basically that for people that do have time and flexibility, it makes sense to do Airbnb, but for others who are at a different stage of their life, this becomes hard to manage. We did, however, want to stay in the real estate game, so we went searching for an option that would fit our new lifestyle. Something hassle-free that provided us adequate returns and didn’t require high startup costs. This led us to SmartCrowd and our next journey.