Starting up in Dubai Effort offers retail investors from all over the world the opportunity to buy some of the rental properties in the major city of the UAE and earn regular income. Found in 2020, the startup claims that due to Dubai’s real estate regulations, it has managed to attract investing users on the platform from more than 80 countries in the world.
The company, founded by Manar Mahmassani, Rami Tabbara and Ricardo Brizido in 2020, has raised $8 million in a pre-Series A round from investors such as BY Ventures, MEVP and Vivium Holdings to expand its portfolio and launch in Saudi Arabia and Egypt. The company raised a $4 million seed round for the first time last year.
“This round is a testament to what we are building at Stake and our mission to bring access and liquidity to the world’s oldest, largest and most sought-after asset class. The proceeds will allow us to expand into Saudi Arabia and Egypt, continue to attract the best talent to the team and strengthen Stake’s position as a category leader in the MENA region,” Mahmassani said in a written statement.
Tabbara told londonbusinessblog.com during a phone call that after working in the real estate industry for more than 15 years, he realized that many people want to invest in the MENA region, but they cannot afford to stake large amounts of money without huge commissions to pay to brokers and developers. That is why he wanted to speed up the process of investing in real estate with Stake.
The company says it lists premium properties on its platform that are already available for rent. To acquire a property, Stake looks at factors such as location, build quality, views and whether it has tenants. Tabbara said if the property is not rented out, the company will use its data to list properties that can be rented out quickly. Stake has paid more than AED 1 million ($272,249) in rental income to investors, credited each month.
Stake currently manages over 44 properties with a combined value of AED 56 million ($17.9 million). The company claims it has achieved an average monthly growth of 17% in both investors and assets under management (AUM).
“Our platform currently has 42,000 registered users and more than 2,100 active investors on the platform. While we have users from many countries on the site, people from the UAE, Saudi Arabia, Kuwait, the UK and India are our top five investors,” said Tabbara.
Users can quickly register with the platform and invest as low as AED 500 ($136). Because Dubai’s investment rules individual investors can invest up to AED 183,500 ($50,000) per year. The proptech company also limits a single investor’s maximum ownership in a property to 33% in order to spread the profits evenly.
The company does not rely on financing to acquire homes. All the money to buy a property comes from the investors. While Dubai’s property rule allows partial deeds, there is a maximum of four investors, so Stake creates a dedicated vehicle for each property to facilitate deed registration. All properties usually have an investment term of five periods, but the value of a house increases by 30% in the market, and the investors can vote to sell it.
Stake’s business model is based on various fees. When investors buy a property, the company charges them 1.5% with an additional 0.5% charged annually for maintenance. In addition, there are 0.2% Know Your Customer (KYC) and anti-money laundering costs in advance and 0.1% annually from the second year of the term. The company also charges investors 2.5% as an exit fee when they sell their stake. What’s more, if the property is sold at a higher rate than the purchase, Stake takes a 15% discount on the profit. The company is not yet profitable, but has achieved 470% year-over-year revenue growth.
In the next 12 months, in addition to launching its platform in Egypt and Saudi Arabia, the company also plans to build a second-day trading platform, where investors can sell their stake in a property to other investors. Stake focuses on launching a way to get people to invest in vacation properties going on platforms like Airbnb – something platforms like Komoco and Here are trying in the US
In the local market, Stake’s closest competitor is SmartCrowd, which increased a $3 million bridging round in June. Tabbara claims that his company has already surpassed SmartCrowd when it comes to AUM.
“We rely on our team, our technology and our experience in handling a variety of properties to become the most prominent real estate investment platform in the Middle East and North Africa (MENA),” he said.