BTL vs HMO vs Serviced Accommodation: Which UK Strategy Should You Choose?

It depends on how you measure it. On monthly profit, the HMO leads among strategies where you buy. On return per pound invested, rent-to-rent and rent-to-SA come out top because so little cash goes in.

Example deals use the default figures from each ADVESTOR calculator. Your numbers will differ, so run them yourself.

Serviced accommodation is shown at a cautious occupancy. Every 10 percentage points of occupancy changes its monthly profit by about £190.

Buy-to-let suits investors who want steady, mostly passive income and long-term capital growth. You have one tenancy to manage, mortgages are easy to find, and most letting agents can run it for you.

The trade-off is yield. On our example, a single let makes £190 a month on £53,500. Two changes squeeze returns further:

• Section 24: individual landlords only get a 20% tax credit on mortgage interest instead of deducting it, which is one reason many investors now buy through a limited company.
• The Renters' Rights Act: since 1 May 2026, tenancies in England are rolling periodic agreements and section 21 "no-fault" evictions have ended. Plan for longer tenancies and the new possession grounds. The GOV.UK guide to the Renters' Rights Act sets out the detail.

Buy-to-let can still work well, especially for growth, but only if the numbers on the specific property stack up.

A house in multiple occupation (HMO) is let room by room to tenants who share facilities. Room rents usually add up to far more than a single let on the same house, and one empty room doesn't stop all your income. On our example, the HMO makes £825 a month on £105,250.

The extra income comes with extra obligations:

• Licensing: a mandatory HMO licence is required in England when 5 or more people from more than one household share facilities. Many councils also license smaller HMOs.
• Safety and standards: fire safety, minimum room sizes and amenity standards apply.
• Planning: some areas restrict new HMOs through Article 4 directions, so check before you buy.
• Management: more tenants means more turnover, more bills and more wear.

It can be, but not always. Serviced accommodation has the highest income potential when occupancy and nightly prices are strong, and pricing can rise with demand. At modest occupancy it can earn less than a single let: our cautious example makes £160 a month.

Things to weigh up:

• Effort: guest messaging, cleaning and restocking happen every few days, unless you pay a management company.
• Tax: the furnished holiday lettings tax regime ended on 6 April 2025, so short-let income is now taxed like other property income, with mortgage interest relief for individuals restricted.
• Local rules: in London, entire homes are limited to 90 nights a year without planning permission. Scotland requires a short-term let licence, and England's national registration scheme is still pending.

Yes, through rent-to-rent or rent-to-SA. You rent a property from a landlord, usually on a company let, and either let the rooms to tenants (rent-to-rent, often as an HMO) or run it as serviced accommodation (rent-to-SA). On our examples, rent-to-rent makes £461 a month on £15,700 and rent-to-SA makes £612 a month on £13,400.

The catch is control. You don't own the asset, the landlord can decline to renew, and margins can be thin. The tenants you house in a rent-to-rent HMO are covered by the Renters' Rights Act, even though your own agreement with the landlord is usually a company let outside it. You need landlord, lender and insurer consent, the right licences, and a properly drafted agreement.

Start with your cash and your time:

Whatever you choose, test the deal at lower occupancy, higher interest rates and longer voids before you commit.

• Stamp duty: buying an additional residential property in England or Northern Ireland adds a 5% surcharge to every band. Scotland and Wales have their own taxes. Our stamp duty calculator shows the exact figure.
• Finance: mortgage stress tests limit how much you can borrow, especially for buy-to-let.
• Tax structure: holding property personally or through a limited company changes the tax on your profit. Take advice from an accountant who works with landlords.