Serviced Accommodation: Some Considerations for Landlords

Serviced accommodation is becoming popular with landlords. Many property investors see it as a way of generating higher rental income. It is different from traditional renting. It involves providing fully furnished properties for short-term stays. Guests expect utilities, internet and cleaning services. This type of accommodation is commonly aimed at business travellers and tourists. Landlords need to understand the benefits, risks and legal aspects before investing.

What is Serviced Accommodation?

Serviced accommodation is a fully furnished rental property available for short stays. It provides guests with hotel-like services. These include furniture, appliances, bedding and kitchen essentials. Utilities, Wi-Fi and regular cleaning are also part of the package. Guests can book serviced accommodation for days, weeks or months.

This type of accommodation is different from traditional renting. Standard rentals require tenants to sign long-term agreements. Serviced accommodation caters to short-term visitors. It offers flexibility and higher income potential. Many landlords use platforms such as Airbnb and Booking.com to find guests. Others work with letting agents, relocation agents and corporate clients.

Different Types of Serviced Accommodation

There are different types of serviced accommodation. Each type caters to a different market and offers unique benefits for landlords. The three main types are aparthotels, corporate housing and serviced apartments.

1. Aparthotels are a mix between hotels and apartments. They offer self-contained units with kitchen facilities, living areas and bedrooms. These units are within a larger building that provides hotel-like services. Guests have access to reception desks, cleaning services and sometimes gyms or dining areas. Aparthotels attract business travellers, tourists and families who want more space and flexibility than a hotel. Landlords investing in aparthotels benefit from high demand and professional management services.

2. Corporate housing is designed for business professionals on temporary assignments. These properties are fully furnished and offer a home-like experience. They often include premium services such as concierge support, regular cleaning and all-inclusive bills. Corporate housing is popular in major cities where companies need accommodation for relocating employees. Landlords benefit from stable rental income and long-term corporate bookings. These properties require high-quality furnishings and excellent maintenance to attract business clients.

3. Serviced apartments are self-contained flats available for short-term stays. They include full kitchens, living areas and laundry facilities. Unlike aparthotels, serviced apartments do not have reception desks or shared hotel-style amenities. They are often located in residential buildings and rented through platforms such as Airbnb and Booking.com. Serviced apartments attract tourists, professionals and people relocating to a new area. Landlords can achieve high rental returns, but must manage bookings, cleaning and maintenance regularly.

Pros of Investing in Serviced Accommodation

Serviced accommodation offers high-income potential. Short-term rental rates are higher than long-term rental rates. Landlords can earn more in a few nights than they would in a month with a standard tenant. This increased cash flow can lead to faster returns on investment and greater financial stability.

There is also greater flexibility, as landlords can adjust prices based on demand. Seasonal events and peak tourist periods increase earnings. Unlike traditional buy-to-let properties, serviced accommodation allows landlords to react to market conditions quickly. If demand drops, they can offer discounts or incentives to attract more bookings.

Another advantage is reduced tenant-related risks. With short-term stays, landlords avoid long-term tenant issues, such as rent arrears. Frequent checkouts allow for regular inspections, ensuring the property remains in good condition.  

Serviced accommodation also benefits from tax advantages. Properties that qualify as furnished holiday lets are treated differently from standard rental properties. Landlords can still deduct mortgage interest and claim capital allowances on furniture and fittings. These benefits help offset some of the higher costs associated with running serviced accommodation.

Cons of Investing in Serviced Accommodation

Higher income comes with higher costs. Serviced accommodation requires regular cleaning, maintenance and restocking. Unlike traditional rentals, where tenants cover their own utilities, landlords must pay for electricity, gas, water, internet and council tax. These costs can add up, especially in properties with high occupancy rates.

There may be periods of low occupancy. Unlike long-term rentals, where tenants sign contracts for months or years, serviced accommodation relies on regular bookings. Seasonal variations and economic downturns can lead to empty periods. If demand drops, landlords may struggle to cover expenses. Effective marketing and competitive pricing are essential to maintain profitability.

Managing serviced accommodation takes time. Guest check-ins, cleaning schedules and maintenance require effort. Landlords must handle customer service, including responding to booking inquiries and dealing with guest issues. Some landlords hire management companies to handle operations, but this reduces profits. A hands-on approach can be time-consuming, especially for those managing multiple properties.

Local regulations and planning restrictions may apply. Some councils require special permission for short-term rentals. Restrictions on Airbnb-style letting are increasing in many parts of the country, especially cities. Landlords must research local rules to avoid fines or legal issues. Some lease agreements and mortgage terms also prohibit short-term lettings, limiting investment opportunities.

Another drawback is greater wear and tear. Frequent guest turnover leads to more maintenance. Soft furnishings, appliances and flooring wear out faster than in a traditional rental property. Regular repairs and replacements increase costs. Landlords must budget for ongoing maintenance to keep the property attractive and competitive.

Understanding Section 24

Section 24 is a tax law change that affects landlords with traditional buy-to-let properties. Before Section 24, landlords could deduct mortgage interest from rental income before calculating their taxable profits. Now, landlords only receive a tax credit equal to the basic rate of tax, which increases their tax burden, particularly for higher-rate taxpayers.

Serviced accommodation is treated differently under tax rules. If a property qualifies as a furnished holiday let (FHL), it is exempt from Section 24. This means landlords can still deduct mortgage interest from rental income before calculating taxable profits. To qualify as an FHL, the property must be available for at least 210 days a year and let out for at least 105 days.

FHL properties also benefit from capital allowances, meaning landlords can deduct the cost of furniture, fixtures and fittings from their taxable income. Additionally, when selling an FHL, landlords may be eligible for lower capital gains tax rates, making it a more tax-efficient investment option compared to standard buy-to-let properties. Understanding these tax benefits is crucial when considering serviced accommodation as an investment strategy.

Conclusion

Serviced accommodation offers high rental income but requires active management. Landlords must handle bookings, cleaning and guest services. They must also cover utility bills and maintain the property. High returns are possible, but risks exist.

Choosing the right location and target market is essential. Understanding tax rules, local regulations and management costs helps in making better decisions. Serviced accommodation can be a profitable investment with the right approach.

Landlords must weigh the benefits and challenges before investing. A well-managed property can generate high returns and provide financial security.

FAQs

Q. Do I need a special license for serviced accommodation?  

A. Some councils require planning permission or licenses for short-term rentals. Check local regulations before starting.

Q. Can I rent out my house as serviced accommodation?  

A. Yes, but you must consider mortgage terms, lease agreements and local regulations. Some lenders and freeholders restrict short-term rentals.

Q. How can I find guests for serviced accommodation?

A. Use booking platforms such as Airbnb, Booking.com and Expedia. You can also work with letting agents, relocation agents and corporate clients.

Q. Is serviced accommodation profitable all year?

A. Demand changes throughout the year. Some areas have peak seasons and quiet periods. Good pricing strategies and marketing could help maintain occupancy.

Q. Can I get a mortgage for serviced accommodation?  

A. Yes, but not all lenders offer loans for short-term lets. Specialty lenders provide mortgages for serviced accommodation.