How to Compare UK Short-Let Markets Before You Invest

Most short-let investors spend weeks debating furniture budgets and platform fees, then pick a city based on where they already live or where a seminar speaker happened to be from. City selection is the single biggest lever in your returns, and most people give it the least attention.

A well-run two-bedroom flat in Nottingham can outperform a poorly positioned two-bedroom flat in London on net yield, even though the London property earns more gross revenue. The relationship between purchase price, achievable nightly rate, occupancy, and operating costs varies enormously across UK cities, and getting that relationship right matters far more than whether you choose a Scandi interior scheme or a maximalist one.

The mistake most investors make is optimising the wrong thing. They look at a city's Airbnb search results, see properties charging £180 a night, and assume that rate is available to them. It often is not, at least not at the occupancy level needed to justify the numbers. You need to understand what a realistic mid-tier listing actually earns, not what the best-in-class listing charges on a bank holiday weekend.

Before comparing any two cities, you need to establish four figures for each: average daily rate (ADR) for comparable listings, realistic occupancy at that rate, total operating costs as a percentage of revenue, and purchase price per bedroom for the type of property you are buying. Everything else flows from those four inputs.

ADR and occupancy are not independent variables. A host in Edinburgh's New Town charging £220 a night might achieve 72% annual occupancy. A host in Leeds city centre charging £130 a night might achieve 78%. The Edinburgh property earns more per night but the spread between the two is narrower than the headline rates suggest, and Edinburgh carries higher purchase prices and more regulatory uncertainty around short-let licensing. Neither is automatically the better investment; it depends on your entry price.

Operating costs as a percentage of revenue is the figure most new investors underestimate. In high-demand tourist cities, cleaning costs, linen turnovers, and platform fees can absorb 38 to 45 percent of gross revenue before you have paid your mortgage. In cities with longer average stays, such as Sheffield or Nottingham where corporate and contractor demand extends minimum stays, that cost ratio often drops to 30 to 35 percent. That difference in cost ratio can be worth thousands of pounds per year on a single property.

The markets that consistently produce the strongest risk-adjusted yields for short-let investors are not the obvious ones. London produces high gross revenue but entry prices are brutal and net yields on a straightforward buy-to-let conversion rarely exceed 5 to 6 percent. Manchester and Birmingham are competitive but increasingly saturated in the city-centre apartment segment, with supply growth outpacing demand growth in some postcodes.

The cities that tend to be undervalued by investors are those with a mix of leisure and corporate demand, lower entry prices, and less competition from professional operators. Nottingham is a good example: a two-bedroom flat in the Lace Market or Hockley area can be acquired for £160,000 to £200,000, achieve an ADR of £110 to £140, and run at 68 to 75% occupancy when managed well. That produces gross revenues of £27,000 to £33,000 per year, which on a £180,000 purchase price is a gross yield above 15 percent before costs. Sheffield shows a similar pattern, particularly around the S1 postcode and the university quarter.

Liverpool is interesting for a different reason. The city has strong leisure demand year-round driven by events, tourism, and weekend breaks, but it also has a growing base of longer-stay guests connected to the film and TV industry and NHS contracts. That demand mix supports minimum stays of three to five nights, which improves cost ratios significantly. Properties near the Baltic Triangle or the waterfront consistently outperform city-centre apartments further from the water.

If you are considering a management partner for any of these markets, it is worth looking at what operators like Truestays cover. For example, short-let management in Liverpool or short-let management in Leeds gives you local pricing and occupancy data that is far more reliable than anything published in a generic market report.

Two markets can have identical annual revenue figures but very different risk profiles depending on how that revenue is distributed across the year. A coastal or tourist-heavy city might generate 40 percent of its annual revenue in June, July, and August. If you have a void, a refurbishment, or a difficult guest situation during that window, you cannot recover it. A city with flatter, more resilient demand from corporate travellers, NHS staff, and contractors spreads risk more evenly.

This is one of the reasons experienced operators often prefer cities with universities, teaching hospitals, and business parks over pure leisure destinations. The University of Sheffield, Queen's Medical Centre in Nottingham, and the various business parks around Leeds Bradford Airport all generate consistent midweek demand that smooths out the occupancy curve. A property that earns £2,200 in July and £1,400 in February is a fundamentally more manageable business than one earning £3,800 in August and £600 in January.

Demand mix also affects your ideal property configuration. In cities with strong corporate demand, a one-bedroom or studio flat with fast Wi-Fi and a proper desk setup will outperform a four-bedroom house on a per-bedroom basis. In cities where leisure groups dominate, larger properties with parking and outdoor space consistently command premium rates. Getting this wrong at the point of purchase is an expensive mistake to correct.

The regulatory point deserves more attention than it usually gets. Several London boroughs, Edinburgh, and parts of Greater Manchester are actively tightening short-let rules. Edinburgh now requires a licence and planning permission in many cases. Some London boroughs are pursuing Article 4 directions that would require change-of-use consent for short lets. If you are buying in a market where the regulatory direction is uncertain, you need to factor that risk into your return expectations. Always take professional legal and planning advice specific to the local authority you are buying in before committing.

The most reliable way to compare markets is to work backwards from the net yield you need the investment to produce. If you need 8 percent net yield to make the numbers work, you can calculate the maximum purchase price at which that is achievable given realistic ADR, occupancy, and cost assumptions for each city. That immediately tells you whether you are shopping in the right price bracket.

Talk to operators who are actually managing properties in the cities you are considering. A good management company will give you honest occupancy benchmarks for specific property types and postcodes, not just headline figures. If they cannot tell you the average ADR and occupancy for a two-bedroom flat in a specific neighbourhood, they do not know the market well enough. For instance, short-let management in Birmingham and short-let management in Manchester involve quite different dynamics even though both are large second-tier cities, and an operator active in both can explain why.

Run your numbers across at least three scenarios for each city: a conservative case at 60% occupancy, a base case at 70%, and an optimistic case at 78%. If the investment only works in the optimistic scenario, it is not the right investment. The conservative case should still produce a yield you can live with.

If you want a reliable income estimate for a specific property or postcode before you commit, Truestays can give you a free projection based on real comparable data from properties we manage. There is no obligation and it takes the guesswork out of the most important number in your investment decision.