Last updated: 27 Aug 2024
Raj Beri, an experienced property investor with over 15 years in the property business. With a unique background in genetics and a former career at AstraZeneca, Raj has transitioned into full-time property investing. He is a co-editor at YPN Magazine and a mentor who has helped over 120 people navigate the property market. Raj is particularly known for his expertise in maximising rental income through buy-to-let (BTL) properties and HMOs, utilising a strategy that has largely been forgotten by many in the industry.
This article delves into the details of Raj Beri's approach to maximising rental income from BTLs, specifically through the Local Housing Allowance (LHA) strategy. Often overshadowed by the more popular HMO and SA models, this strategy offers a viable path to financial freedom with fewer properties in the portfolio. Raj shares his insights on cash flow versus ROI, the nuances of the LHA strategy, and how this method can be implemented effectively.
Raj begins by addressing the critical balance between cash flow and return on investment (ROI). While many investors focus on ROI, Raj emphasises the importance of cash flow as the key to financial freedom. As he puts it, "Capital Growth won't do it. You shouldn’t be spending Capital Growth; you should be reinvesting it. You should be spending rental income." This highlights the need to focus on what truly sustains a property portfolio over time.
The heart of Raj's strategy lies in the LHA approach. LHA, or Local Housing Allowance, is a housing benefit provided to tenants. Unlike the traditional BRRR property investment method that requires substantial capital for refurbishment and refinancing, Raj outlines a formula where: Rental Income minus LHA equals Zero. For private tenants who claim LHA, He outlines two models within this strategy:
Model 1: Renting to two individual LHA claimants
Model 2: Renting to a family where two members claim LHA
"This LHA strategy is not social housing. The properties are not being handed over to charities, housing associations, councils, or other organisations. I and my letting agent manage the whole process."
This distinction is crucial for understanding the strategy's application in the private rental sector.
Raj Beri's LHA strategy offers a powerful alternative to HMOs and SAs for property investors looking to maximise rental income. With the potential for significant cash flow and long-term tenant stability, this approach is worth considering for those willing to navigate its complexities.
Interested in learning more about this strategy? Watch the full episode with Raj Beri on Deal Finder’s Corner and explore how Property Filter can help you find and manage profitable deals. Don’t forget to subscribe to our newsletter for more expert insights.
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