HMO vs Serviced Accommodation in Derby: Which Is More Profitable in 2026?

Landlord Advice
Written By James Bennetts

Key sections covered

  • HMO income and costs (6-bed example)

  • Serviced accommodation income and costs (contractor model)

  • Risk comparison

  • Which model wins in 2026

If you own a 5–6 bed HMO in Derby, you’re probably asking the same question most landlords are asking right now:

Is this still the highest-yield use of my property?

With compliance tightening, licensing costs rising and void risk increasing, many Derby landlords are exploring serviced accommodation (SA) - particularly contractor and corporate models.

This guide compares a traditional HMO with the contractor-style model used in serviced accommodation management in Derby.

Let’s break this down properly.

Real numbers. Real risks. Real comparison.

The Scenario: 6-Bed Property in Derby (2026)

Assumptions:

  • Location: Residential Derby (not city centre premium)

  • 6 double bedrooms

  • Good standard condition

  • Parking available

  • No structural changes required

Model 1: Traditional 6-Bed HMO (2026)

Gross Income

  • Average room rent in Derby: £475–£550 pcm

  • Assume: £525 average

  • 6 rooms x £525 = £3,150 pcm

  • Annual gross: £37,800

Costs

Expense Monthly Annual
Utilities (bills included) £500 £6,000
Council tax £200 £2,400
Internet £40 £480
Cleaning (communal) £200 £2,400
Maintenance provision £250 £3,000
Management (10–12%) £350 £4,200
Licensing + compliance (spread) — £1,000

Total annual costs: ~£19,480

Net before mortgage: ~£18,320

Monthly net: ~£1,525

HMO Risk Profile (2026 Reality)

  • Void risk is per room

  • Increasing licensing enforcement

  • Higher wear and tear

  • Tenancy disputes

  • Arrears risk

  • Limited scalability appeal to corporate clients

It’s steady. But capped.

Model 2: 6-Bed Serviced Accommodation (Contractor Model)

This is not holiday lets.

This is the contractor and corporate housing model used in contractor accommodation in Derby, driven by:

  • Major Employers

    • Rolls-Royce

    • Toyota Motor Manufacturing UK

    • Bombardier Transportation (Alstom site)

  • Infrastructure works

  • M1 corridor demand

  • Corporate relocations

Revenue Assumptions (Conservative)

  • Average nightly rate (6-bed contractor house): £165–£220

  • Assume blended rate: £190

  • Occupancy: 70% annual average

Calculation:

£190 x 365 x 70% = £48,545 annual gross

This is conservative for strong contractor positioning.

Costs:

Expense Annual
Cleaning (high frequency) £10,000
Utilities (heavier use) £7,500
Council tax £2,400
Consumables & linen £2,000
Maintenance £4,000
OTA fees / payment fees £6,000
Professional management (15–20%) £8,000–£9,500

Total annual costs (approx): £40,000

Net before mortgage: ~£8,500

At first glance, that looks worse.

But here’s the mistake most landlords make.

The Real Contractor Model (Optimised)

The above assumes heavy OTA reliance and retail guests.

The stronger model in Derby is:

  • Direct contractor agreements

  • Weekly bookings (not 1–2 night stays)

  • Reduced cleaning frequency

  • Minimal OTA commission

  • VAT-efficient structuring where applicable

Let’s adjust properly.

Optimised Contractor Model

  • Average weekly contractor booking: £1,150–£1,350

  • Assume £1,250

  • 70% occupancy equivalent

Annual revenue: ~£45,500

But now:

  • Cleaning reduced to weekly turnover

  • OTA fees reduced (more direct)

  • Management structured on performance

Revised cost profile: ~£30,000–£32,000

Net before mortgage: ~£13,000–£15,000**

Still below HMO?

Not necessarily.

Because:

  • No individual voids

  • Corporate stays often 4–12 weeks

  • Lower arrears risk

  • No tenancy court process

  • Flexible pricing upside during peak periods

  • Asset becomes commercially positioned

And this assumes conservative occupancy.

Many well-positioned Derby contractor houses outperform this.

Side-by-Side Summary

Metric 6-Bed HMO 6-Bed SA (Contractor)
Annual Gross £37,800 £45,000–£50,000
Net (pre mortgage) ~£18,000 £13,000–£20,000*
Void Risk Per room Per booking
Legal complexity High (tenancy law) Lower (licence model)
Scalability Limited High
Upside potential Capped Flexible

*Depends heavily on management and positioning.

Risk Comparison

HMO Risk

  • Legislative tightening

  • Rent arrears

  • Increasing tenant quality variance

  • Licence renewal uncertainty

  • Energy efficiency requirements

SA Risk

  • Demand fluctuation

  • Operational dependency

  • Pricing mismanagement kills margin

  • Requires systems

Done badly, SA underperforms.

Done properly, it outperforms and de-risks.

So… Which Is More Profitable in Derby in 2026?

If you:

  • Self-manage well

  • Keep voids minimal

  • Have strong tenants

HMO may remain stable.

If you:

  • Want higher ceiling potential

  • Prefer commercial rather than residential tenant risk

  • Are near contractor demand corridors

  • Have parking and 5+ beds

Then switching from HMO to serviced accommodation may produce stronger long-term performance.

But suitability depends entirely on your property.

The Bigger Question

The right question isn’t:

“Which is better generally?”

It’s:

Which is better for your specific property in Derby?

Layout matters.
Parking matters.
Location matters.
Your risk appetite matters.

Next Step

If you own a 4–6 bed property in Derby or the East Midlands and are considering switching from HMO to serviced accommodation:

👉 Request a tailored income comparison for your property.

We’ll show:

  • Realistic revenue projection

  • Cost modelling

  • Risk assessment

  • Operational suitability

  • Whether your property fits contractor demand

No pressure. Just numbers. And clarity.

James Bennetts
Next

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