People in the UK often compare buy-to-let properties with serviced accommodation when making property investment decisions. Both options can bring in rental income, but they are quite different in how they’re managed, the type of returns they offer, and the kind of tenants they attract.
Buy-to-let usually gives a more stable and long-term income. On the other hand, serviced accommodation can earn you more money in the short term.
The UK property market is a complex one, especially when investing in it. That’s why you need to understand the difference between the two options: buy-to-let and serviced accommodation. This way, you can decide the right investment option for you, considering how much risk you’re willing to take.
Here, your decision will also depend on things like the location of the property, how much money you can invest, and whether you’re ready to handle the day-to-day work.
Let us help you with this article by providing you with a closer look at both types of property investment. We’ll go over the main benefits and challenges so you can make a confident choice before getting started.
Understanding Buy‑to‑Let Investments
A buy-to-let investment involves purchasing a property and renting it out for the long term. In such properties, one needs to understand the type of tenants they’ll be renting to, follow legal rules, and be aware of all the financial responsibilities that come with owning a rental property.
What Is Buy‑to‑Let?
Buy-to-let (BTL) means buying a residential property with the intention of renting it out to tenants. These rentals usually come with longer agreements, often six months or more.
Investors generate income through monthly rent and may also see the property’s value increase over time.
The buy-to-let market includes both individual landlords and property companies. Properties can range from a single flat to an entire block of units.
Typical Tenant Profile
- Professionals like furnished homes near work or transport.
- Families need bigger homes close to schools and parks.
- Students rent short-term, often share, and need simple setups.
Regulatory Requirements for Buy‑to‑Let
There are necessary regulations to meet for buy-to-let landlords. These housing regulations cover safety, legal documents, and how tenancies are managed.
It includes having up-to-date gas and electrical safety certificates, an Energy Performance Certificate (EPC), and placing tenant deposits in a government-approved protection scheme.
Landlords also need to follow the Deregulation Act 2015. The Deregulation Act protects tenants’ rights, especially regarding evictions and the return of deposits. In some areas, local councils may also require landlords to apply for a license.
What Is Serviced Accommodation Investment?
Serviced accommodation investment involves properties rented out on short-term stays with hotel-like services. It targets specific guest groups and includes features focused on convenience, flexibility, and comfort.
Definition of Serviced Accommodation
Now, let’s talk about serviced accommodation, also called SA in short. It is a fully furnished property rented out for short stays, anywhere from a few nights to a few weeks.
Unlike standard rentals, these properties typically include extras such as housekeeping, fresh linens, and utility bills already covered in the price.
Some investors choose to manage these properties themselves, while others hire management companies to handle bookings, cleaning, and guest communication. The main goal is to earn more by charging higher nightly rates compared to long-term rentals.
Target Guest Segments
- Business travellers need flexible, comfy stays near work or transport.
- Leisure tourists look for short, easy, and convenient stays.
- Relocating families need temporary homes while settling in.
- People on short contracts or training stay for brief periods.
- Guests want good internet, safety, and simple booking options.
Comparing Returns: Buy‑to‑Let vs Serviced Accommodation
We’ve understood what buy-to-let and serviced accommodation properties are. It’s time to look at which option is more likely to give you a better return on investment.
Firstly, your investment returns mainly depend on things like rental yield, how often the property is occupied, and the total income it brings in. Each strategy, whether buy-to-let or serviced accommodation, has a different financial pattern, which affects how much profit you actually make in the end.
Rental Yield Potential
In the UK rental market, a rental yield of around 5–6% is usually seen as good, while anything over 6% is considered very good. Buy-to-let properties typically offer annual rental yields ranging from 4% to 7%, depending on the property’s location and type.
Serviced accommodation, on the other hand, can offer much higher gross yields, often between 8% and 12% per year. That’s because short-term stays allow you to charge higher nightly rates.
However, your actual return depends on several key factors:
- Location: Properties in high-demand areas like big cities, business hubs, or student towns tend to rent out quickly and give better yields.
- Property Condition: Well-maintained homes attract quality tenants and usually have fewer repair costs.
- Expenses: Costs like mortgages, insurance, management fees, and regular upkeep all reduce your final profit.
- Capital Growth: If your property goes up in value over time, it adds to your total return not just from rent, but also from selling at a higher price later.
Occupancy Rates
Buy-to-let properties usually have high occupancy rates, often above 90%. Serviced accommodation, however, has more ups and downs. Occupancy can vary based on the season and local market trends, typically ranging from 65% to 80%.
The fluctuation in serviced accommodation occupancy comes down to its short-term rental nature. People book for holidays, work trips, or events, so demand changes with the season. Busy times mean more bookings, but in quieter months, fewer people stay. As a result, it is less steady than buy-to-let, where tenants stay longer.
Revenue Considerations
Buy-to-let provides a stable monthly income. Rent is typically paid once a month, making it easier to manage cash flow. In most areas of the UK, monthly rents range from £700 to £1,200, depending on the location and property size. Rent increases are typically small, ranging from 2% to 4% per year.
Serviced accommodation, by contrast, earns income on a nightly basis. In popular locations, nightly rates can range from £70 to £150, and sometimes higher during busy seasons or major events.
For example, during summer or holidays, revenue can spike by 30–50%, but off-season occupancy may drop. Average occupancy rates are between 65% and 80%, meaning the property may only be booked for approximately 20–25 days per month.
In short:
- Buy-to-let = More stable, hands-off, average returns around 4–7% net.
- Serviced accommodation = Higher income potential (gross yields of 8–12%), but less predictable and more effort required.
Management and Operational Differences
As we’ve talked about yield, occupancy, and revenue, there’s one more thing you can’t ignore, “property management.” As an investor, this would be your biggest expense. So, you should consider the day-to-day responsibilities that come with each property type when making the investment decision.
Day-to-Day Management Demands
Serviced accommodation needs active, daily coordination. The host is responsible for answering inquiries, managing reservations, arranging key handovers, and handling any issues that may arise with guests. Often, this means being available and responsive seven days a week.
In contrast, buy-to-let properties require much less day-to-day involvement. Landlords typically only need to communicate with tenants when something arises, such as collecting rent, handling repairs, or inspecting the property. Tenant relationships generally are longer-term and more stable, resulting in fewer interruptions and less hands-on work overall.
Maintenance and Running Costs
Serviced accommodation usually comes with higher running costs. Regular cleaning, laundry, and utility bills are all paid by the owner. You’ll also need to keep the property stocked with things like toiletries, kitchen supplies, and other essentials. Any maintenance issues must be fixed quickly to keep guests happy and protect your reviews.
Buy-to-let properties, on the other hand, tend to experience less wear and tear, since tenants stay longer and treat it more like a home. The main costs here include general building maintenance, occasional repairs, and servicing systems such as heating and plumbing. In most cases, tenants cover their own utility bills, which helps reduce the landlord’s ongoing costs.
Time Commitment Required
Serviced accommodation needs more time and effort:
- Handle bookings and guest messages
- Schedule cleanings between stays
- Deal with issues quickly
- Many owners hire management companies (less work but lower profits)
Buy-to-let is less hands-on day-to-day:
- Manage repairs and tenant concerns
- Collect rent and follow legal rules
- Can be more passive, especially with a letting agent
Taxation and Legal Implications
Tax rules and legal responsibilities are quite different for buy-to-let and serviced accommodation. It’s important for investors to understand how income is taxed, what expenses can be claimed, and which regulations apply to each type.
Taxation of Buy‑to‑Let Income
Buy-to-let income is treated as personal income and is taxed at standard income tax rates after subtracting allowable expenses. These expenses can include things like mortgage interest (with limits), repairs and maintenance, letting agent fees, and landlord insurance.
Since April 2020, the rules around mortgage interest relief have changed. Now, instead of fully deducting mortgage interest, landlords get a 20% tax credit. It means higher-rate taxpayers may see lower profits compared to before.
When a buy-to-let property is sold, Capital Gains Tax (CGT) is applied to any profit made. Unlike a main home, investment properties don’t qualify for private residence relief, so more of the gain is taxable.
Buy-to-let landlords must also file a self-assessment tax return each year. Not reporting rental income correctly can lead to penalties and backdated tax bills from HMRC.
Taxation of Serviced Accommodation Income
Serviced accommodation income is treated more like trading income than regular rental income. This means it may be subject to income tax, National Insurance contributions, and possibly VAT if your total income goes over the £85,000 threshold (as of 2025).
You can claim a wide range of allowable expenses, such as utilities, cleaning, repairs, restocking supplies, and business rates. Because serviced accommodation is run more like a business, the rules for what you can deduct are often more flexible compared to buy-to-let.
When you sell a serviced accommodation property, Capital Gains Tax applies on any profit. However, you might qualify for Business Asset Disposal Relief (previously Entrepreneurs’ Relief), which can reduce the CGT rate, if certain conditions are met.
Legislative Compliance
Buy-to-let landlords have several legal responsibilities. They must meet safety standards by providing valid gas and electrical safety certificates, installing fire alarms, and following all rules around tenancy deposit protection. They also need to follow the law when it comes to evictions and tenant rights.
Serviced accommodation operators may face extra rules depending on where the property is located. Some local councils require specific licences for short-term lets. In some cases, investors also need to check planning permission and follow local laws related to holiday or tourism properties.
Summary
Both buy-to-let and serviced accommodation offer strong investment potential, but the right choice depends on your personal goals, risk appetite, and how involved you want to be.
- For steady, hands-off income with long-term growth potential, buy-to-let is a more suitable option. It suits those who want predictable returns, lower day-to-day involvement, and a stable asset for retirement or wealth building.
- For higher income potential and you’re comfortable with active management, serviced accommodation may be the better choice. It’s ideal for those who want to maximize short-term earnings, can respond to guest needs quickly, and are willing to adapt to changing market trends.
In the end, the best investment is the one that matches your lifestyle, time commitment, and financial goals. Consider what matters most to you. Consistency or flexibility, passive or active, long-term or high-yield, and let that guide your decision.
