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What does SmartCrowd Do?
SmartCrowd is a regulated real estate crowdfunding platform that enables people to grow their wealth by collectively investing in income-generating properties. Through SmartCrowd, users can reap all the benefits of direct real estate investments (i.e., by owning the properties) and reduce their risk by allocating their capital across a number of properties all through an award-winning digital platform. SmartCrowd makes real estate investing, easy, hassle-free, and less risky for people by allowing people to invest for as low as AED 5,000 (approximately $1400).
SmartCrowd is registered in the Dubai International Financial Centre (“DIFC”) and regulated by the Dubai Financial Services Authority (“DFSA”). The DFSA is the financial services regulator of the DIFC.
Starting Your SmartCrowd Journey: Becoming an Investor
It’s simple and free! Register on the SmartCrowd platform and complete the entire process in 5 minutes.
Once you’re registered, browse live properties and invest in those that align with your goals. Top up your digital wallet via a bank transfer and complete your investment. Once the property you invest in gets 100% funded, sit back, relax and watch your wealth grow.
Great question! As the only regulated real estate investment platform in Middle East & North Africa, we are legally required by the regulator to ask for this information. Think of it as no different than opening up a bank account. You’d be worried if your bank wasn’t asking customers the right questions before opening up their account, right? It’s the same concept.
SmartCrowd is regulated by the Dubai Financial Services Authority (DFSA) and is required to comply with Know-Your-Customer (KYC) and Anti-Money Laundering (AML) controls. For this reason, all investors must submit proof of identity (passport and/or national ID) and proof of residence (e.g., utility bills, bank statements, tenancy contract, etc.) along with their employment information, source of wealth, and current annual income.
In each investment opportunity, Smart Crowd limits maximum ownership to 24.99% to ensure no individual owns a majority interest.
However, the total amount that a user can invest in the platform, depends on the type of investor you are. There are two types of investors, retail investors and professional investors.
Professional Investor: If you are classified as a “professional client,” then you will have no limitation on how much you can invest using our platform. A professional client is one who has prior experience and understanding of relevant financial markets, and a decent net-worth from their previous investments.
Retail Investor: If you are classified as a “retail client,” then you will be restricted to $50,000 over a year. According to the DFSA, an individual is classified as a Retail Client if they cannot meet the Professional Client criteria or if they opt to be classified as a Retail Client. These clients are also offered more protection because they are deemed to have less net worth, experience and understanding of relevant financial markets than a Professional Client. We are required to provide Retail Clients with certain disclosures and risk warnings that we may not necessarily provide a Professional Client. Furthermore, we will handle Retail Client complaints in accordance with specific requirements as defined by the DFSA.
Smart Crowd classifies all users as Retail Client unless the user requests to be classified as a Professional Client.
According to the DFSA Rule Book, COB Section 2.3.7, an individual is a professional client if:
- The individual has net assets of at least USD 1 million, excluding the value of primary residence. Assets that are indirectly owned can be included in the calculation and either
- Within the previous two years, the individual is, or
- Has been, an employee in a relevant professional position of an Authorized Firm or a Regulated Financial Institution or
- The individual appears, on reasonable grounds, to have sufficient experience and understanding of relevant financial markets, products or transactions and any associated risks.
Smart Crowd will need to verify the above information in order to classify you as a professional client.
Investment Structure and SPVs
Smart Crowd will establish an investment vehicle, called a Special Purpose Vehicle (SPV) for the purpose of purchasing the investment property.
Each property on SmartCrowd has its own corresponding SPV. And each SPV is broken into 1,000,000 shares. For ease of calculation, if a property is worth AED 1 million, each share in that property is worth AED 1. If an investor invests AED 5,000 – he/she owns 5,000 shares in that investment or 0.5% of the property. As per the Dubai Land Department’s requirement, this vehicle will be incorporated and registered in the DIFC (Dubai International Financial Centre).
The shares are always the property of the investors and they are the ultimate beneficial owners. SmartCrowd does not own any shares. SmartCrowd facilitates the entire process to make this method of investing possible for you.
A Special Purpose Vehicle (SPV) is just a fancy way of saying “a separate new entity” – it’s no different than setting up a new business.
Currently, RERA (Real Estate Regulatory Agency) cannot accommodate more than five to ten people on a property’s title deed.
In order to accommodate multiple investors on a property title deed, SmartCrowd establishes one one SPV for every investment property so that there isn’t a limit on the number of shareholders that can collectively invest in a property.
As an investor, you do! You are the ultimate owner and beneficiary of the property proportionate to your investment amount. For example, if you invest AED 5,000 in a AED 1M property, you own 0.5% of that property. The remaining 99.5% is held by other property investors like you! Collectively, you all earn dividends through the property. Through this mechanism, not only can you invest in an affordable manner, but you can also reduce your risk because you can spread your capital across dozens of properties as opposed to one (i.e., as the adage goes: don’t put all your eggs in one basket!).
Since it is not possible to list out dozens of names on a single title deed, the name issued on the title deed (ownership document) is that of the SPV corresponding to your property. Do not be worried. Ultimately, you own direct shares in the SPV, which in turn is only responsible for holding the asset that is your investment property and paying out dividends to you. To see your name as a shareholder, simply go on to the DIFC public register and type the name of the SPV that corresponds to your property. Typically the name of the SPV starts with the initials “SC” followed by a hyphen and a number.
We have structured a 3-stage approach to evaluate each investment opportunity in the most efficient way. The properties go through a rigorous selection process and as a result, only a small amount of them actually end up on the platform.
We work with financial institutions, property brokers and consult with independent consultants who provide their expertise. Alongside this, we use real-time market data provided by REIDIN, a reputable leader in real estate market data to ensure that our platform offers only quality properties that will provide healthy returns.
You can review the extensive details of our screening criteria here.
Profiting From Your Investments
You own a share of an individual property via a DIFC Special Purpose Vehicle (SPV). The returns are issued from the SPV and you receive a share of returns proportionate to your investment as a shareholder.
The returns available to property owners are calculated as the rent collected from tenants, minus the property-related costs, which include but are not limited to, service charges, repairs & maintenance, and management fees.
Estimates of future returns are provided with the property listing on the platform. Our estimates are available for review as part of the investment process. However, it is important to note that this information is based on past performance, which cannot be regarded as an accurate indicator of future results. Smart Crowd does not provide investment advice. We only provide you with the tools and transparent market information to help make your investment decision.
At the end of the investment term, all investors have the opportunity to vote to sell their holdings at market value. The property will be evaluated by an independent Real Estate Regulation Authority (RERA) approved valuator. We are also diligently working on creating a secondary market for shares which will allow you to sell your shares to the platform community but this is not currently active. If you would like to sell your shares currently, please get in touch with our team here.
Maintainance and Management
Each property will have an assigned facility manager. All facility managers are RERA-approved and reviewed by Smart Crowd.
The investment vehicle will enter into a management agreement via SmartCrowd in its capacity as the administrator of the investment vehicle, which will assign property management to the selected facility manager.
Facility management fees are typically 3-5% of the gross rent deducted from the rental income. These charges include advertising, managing the property, collecting rents, managing tenants and works with RERA for any issues. This charge excludes VAT, legal expenses and certain costs, such as standard maintenance charges and any repair and maintenance expenses.
We don’t expect investors to make further capital contributions. Gross rents funds all costs including bills and fees. Property insurance mitigates the risk of catastrophic damage, such as flood or fire.