, Property
The two-bedroom flat lets on a standard tenancy for £950 a month. On a nightly platform it takes £110 a night, which at 70% occupancy is around £2,300 a month. The arithmetic looks settled. Then you subtract cleaning between every stay, the platform's commission, utilities and council tax or business rates, the linen, the consumables, the furnishing budget, the management time and the months when occupancy is not 70%. What is left may be more than £950. It is rarely two and a half times more, and it is never passive.
Gross yield and net yield diverge further here than anywhere else
On an assured tenancy your cost base is small and predictable: management, insurance, safety certificates, repairs, and the void between tenants. The tenant pays the utilities and the council tax. Your job is to collect rent and maintain the building.
Serviced accommodation is a hospitality business operating in a flat. The costs that do not exist in a standard tenancy are:
- Changeover cleaning and laundry, charged per stay, which means your cost per night rises as the average length of stay falls.
- All utilities, broadband and the television licence, with unlimited usage by people who are not paying for it.
- Consumables, replacement furnishings and the constant low-level replacement of things guests break.
- Platform commission, or a management company taking a substantially higher percentage than a letting agent would.
- Insurance written for short-term letting, since a standard landlord policy will not respond.
Occupancy is the variable that decides everything, and it is seasonal, local and competitive. A property near an exhibition centre or a hospital has a different demand curve from a coastal cottage, and a coastal cottage in February is a heated empty building. Model it monthly, not annually, because the annual average conceals the quarter that loses money.
Planning and licensing are the risk nobody prices at purchase
A dwelling used as a short-term let may or may not remain within use class C3. Whether a material change of use has occurred is a question of fact and degree for the local planning authority, and the answer depends on intensity, turnover of occupiers, noise and the character of the use. Enforcement in this area has become more common, particularly in blocks of flats and in tourist centres.
Specific regimes apply in particular places. In Greater London, the Deregulation Act 2015 permits short-term letting of residential premises for up to 90 nights in a calendar year without planning permission, and beyond that you need consent. In Scotland, a short-term let licence is required from the local authority, and some areas operate short-term let control areas where planning permission is also needed. Wales has introduced a statutory licensing scheme for visitor accommodation. Northern Ireland requires certification from Tourism NI. The direction across all four nations has been towards more control, not less.
Then there is the lease. Most long leases on flats contain a covenant restricting use to a private residence and often prohibiting subletting for periods under a stated length. Short-term letting in breach of that covenant has been found to be a breach in reported cases, and the remedy available to the freeholder or management company is not a polite letter. If you are buying a leasehold flat to operate this way, read the lease before you offer.
Fire safety is more demanding too. The Regulatory Reform (Fire Safety) Order 2005 applies to premises used for paying guests, which makes you the responsible person with a duty to carry out a fire risk assessment and act on it. That is a different standard from a domestic tenancy, and it is enforced by the fire and rescue authority.
The tax treatment changed, and that changed the model
For years the attraction was the furnished holiday lettings regime. A property that met the availability and occupancy conditions, broadly available for letting 210 days a year and actually let 105 days, with restrictions on longer occupations, was treated more like a trade than an investment. That brought capital allowances on furnishings, full deduction of finance costs rather than the basic rate restriction that applies to residential landlords, profits counting as relevant earnings for pension purposes, and access to certain capital gains tax reliefs.
That regime was abolished from April 2025. Former holiday lets are now taxed in line with other property businesses. Finance costs are restricted to a basic rate tax reducer in the same way as a standard buy-to-let, capital allowances give way to replacement of domestic items relief, and the capital gains treatment changed. Transitional provisions applied to existing businesses, and the detail is genuinely fiddly, so this is an area to take advice on rather than to reason about from a blog.
Business rates are a separate question from income tax. In England, a self-catering property is assessed for business rates rather than council tax only if it meets both an availability and an actual letting threshold, currently being available for 140 days and actually let for 70 days in the previous year, with equivalent rules in Wales at higher thresholds. Meeting the test can bring small business rate relief into play, which on a single small property can mean no rates bill at all. Failing it means council tax, potentially with a second homes premium that councils in England have been able to apply since April 2025. The gap between those two outcomes is thousands of pounds a year, and it turns on days let.
Which one suits which investor
Serviced accommodation makes sense where three things line up: genuine year-round demand within reach of a demand driver, a property type that suits short stays, and either your own labour or a management arrangement you have tested. It generates trading income, it responds to good operation, and it can be repriced nightly, which is a real advantage when inflation moves.
A standard tenancy makes sense where you want an asset rather than a job. Lower gross, far lower operating cost, one counterparty, and a cash flow you can forecast. It is also considerably easier to finance: many lenders will not lend on short-term letting at all, and those that do price it differently and often require a commercial or specialist product.
The mistake is to compare the gross yields and conclude the decision is obvious. The honest comparison is net profit per hour of your own time, after tax, allowing for the months the flat is empty.
Where this shows up in the game
In Business Baron, property and lettings come with the Property & Construction Track, and B&Bs and guest houses with the Hotels & Leisure Track, both add-ons to the full game. The seasons are real, so a business that sells nights feels the winter in a way a twelve-month tenancy does not. Whether the extra gross survives it is a question the monthly figures answer for you.