Investment Risk Warnings
Smart Crowd does not remove any of the risks that you may experience should you acquire a residential property directly and outright (i.e. without a mortgage). Some additional risks are introduced by virtue of shared ownership and timing of your exit.
We encourage you to diversify your Smart Crowd investments across multiple properties to safeguard against excessive exposure to any one property that could incur issues such as tenant default or a problem specific to that property that impacts valuation.
Whilst Smart Crowd provides gross rental income estimates based on information from third parties, these are not guaranteed. It may be that lower rents are secured. Furthermore, rental income could cease completely for certain periods. In the event of a tenant failing to meet its obligations to the owner of the property, investors will experience a fall in the cash receipts and cash available for distribution to them. From time to time, vacancies can be expected to arise in the operation of real estate assets. In some cases, sizable vacancies may mean there is less cash available for distribution to investors.
- Investment in real estate is speculative, the market value of property can fall and rental income is not guaranteed;
- Forecasts and past performance are not a reliable indicator of future performance.
- The real estate market can experience downturn effecting your property valuation
The value of your Smart Crowd investment can go down as well as up and historic performance is not a guide to future performance. Achievement of rental and capital returns will depend on a range of factors including the property asset as well as the wider economy. A fall in the value of your investment may be due to a number of reasons, such as a fall in the underlying value of the property or a problem with the property that will need to be funded from future rental income. Real estate investments can perform in a cyclical way, and values may increase or decrease accordingly. Economic, political and legal issues can affect values as they would other asset classes. In some cases, there may be government restrictions on the sale of a property to foreign owners, which may restrict the range of potential buyers. Any future downturn in the real estate market could materially adversely affect the value and income generated from a property investment. Investors are to individually assess and establish their level of comfort with this risk from the outset.
If for any reason the operator ceases to carry on its business, investors may lose their capital money, incur costs or experience delays in the investment being wound up.
Ownership in non-tradable shares
Investors will not own the property; rather the investor will have an interest in another legal entity that owns the property. As the investor’s interest in that entity is not listed or traded, it is likely to be an ‘illiquid’ investment; that is, it may be difficult to sell the interest because of a lack of investors willing to buy such an interest. So the investor must be prepared to commit to investing for the full investment period.
As real estate is an ‘illiquid asset’; that is, an asset that cannot always be easily sold, it may be difficult to sell the property at the end of the investment period, resulting in a delay in investors receiving their capital or in the property being sold at a loss.
Once the secondary market is operational, you will be able to advertise your investment for sale to other Smart Crowd users at any point. However, there may not be anyone willing to buy your investment at a price that you deem reasonable (or buy it at all). In that event you will be required to wait until the end of the investment term for an exit. Even at this point, the timing and ability to exit will depend on completion of a transaction to sell the underlying property. This transaction could take several months.
Smart Crowd does not provide any investment advice and no assessment is made to determine if an investment is suitable for investors. All information is provided to help you make your own informed decisions. You must rely on your own due diligence before investing, if in doubt, please seek the advice of an independent financial adviser.
As noted above Client Money will be held in the UAE, outside the DIFC and the market practices, insolvency and legal regime applicable in that jurisdiction may differ from the regime applicable in the DIFC.