- Jake Mello had a successful 2022 on Airbnb making just over $28,000.
- He noticed a slowdown to finish the year, partly due to increasing competition in his market.
- Mello has offered concessions to stay competitive with neighboring Airbnb properties.
After struggling to find steady tenants for his studio apartment in Arlington, Virginia during the pandemic, Jake Mello decided to try the short-term vacation rentals model.
Mello, a commissioning engineer in Washington, DC, took advantage of the falling mortgage rates, alongside an uptick in travelers, in 2021 and bought a three-bedroom home in Davis, West Virginia — about 170 miles from Washington, DC.
"With the sort of COVID premium and because of everybody getting out and spending time remotely, Airbnbs were doing really well," Mello, 37, told Insider.
The rental-management company Vacasa surveyed 700 consumers in the market for a second home and found that 67% of buyers were looking to close on their first investment property in 2021, compared to 46% in 2019.
It's been one year since Mello opened the doors to vacationers, and since then he's seen a bit of a slowdown, possibly due to the increasing amount of competition in his area.
"We certainly saw a slowdown in December," he said.
While Mello's first year in the short-term vacation rental space was a relatively successful one, grossing $28,695, according to documents verified by Insider, the path to get there took patience as well as capital to get the business up and running. One year in and he's already had to make some changes to thwart an Airbnbust.
Finding a slowdown-proof location
Mello made sure to carefully research Davis — population: 660 — before pulling the trigger on a home. He knew that he wanted something far removed from the city that felt like an escape.
"We wanted something that was out away from this city and that had some natural attractions," he said. The area around Davis includes places to hike, ski, fish, and hunt.
Mello looked into other scenic locations like the Eastern Shore of Maryland and Chincoteague, an island off the coast of Virginia.
Mello's listing has been live since January 2022, and for most of that time, the rental has been full.
"It's a strong winter market because we've got three ski slopes out there within 10 or 15 minutes," he said.
The holiday season was slow for Mello, but January has attracted the winter-sports crowd keeping his weekends booked.
"We're pretty happy with where we are there," he said.
The up-front costs of hosting an Airbnb
Unlike the condo in Arlington, the house in West Virginia required a lot of work before it was ready for guests.
Mello paid $200,000 for the West Virginia home but said he's spent $35,000 so far on renovations — including a recent driveway upgrade after a guest's car got stuck in the mud.
Even with pricey renovations like excavating through three layers of linoleum flooring and one layer of tar to get to the hardwood floors, Mello said it was worth it.
"It was more expensive to get up and running than our long-term rental," he said, "but the long-term rental was not cost-free."
After paying homeowner association fees, taxes, and other regular expenses, Mello estimated he made a net profit of around $200 a month from the long-term rental.
"The income potential is so much higher on a vacation rental," he said.
Making adjustments to stay afloat
Hosts like Mello have experienced more competition in the Airbnb arena causing a slowdown in bookings.
"There have been probably a dozen new rentals come online in the last year since we started booking," Mello told Insider via email. "We're definitely seeing the competition, especially as new listings are promoted within the search engine optimization algorithm that Airbnb uses."
The added properties have caused Mello to try giving out deep discounts — a strategy that has helped other hosts stay competitive.
"We dealt with our empty weekends by giving away some last-minute stays on Friday morning for that weekend to a local neighborhood network for the cleaning fee of $150," he said. "We're hoping this strategy turns into some future bookings, but it hasn't happened yet."
In November, Airbnb introduced a feature that displays the total stay price before taxes, after users complained about misleading prices.
Mello continues to tinker with his listing including using different platforms to attract vacationers.
"In addition to Airbnb, we booked three stays with VRBO for another $2,400 or so, and one stay through Facebook for $1,400," he said.
Editor's note: This story updates an article originally published on August 20, 2022, with details on the competition experienced by Airbnb host Mello in the last four months of the year. (January 19, 2023).
Axel Springer, Insider Inc.'s parent company, is an investor in Airbnb.