Tenant Base and vacancy rates in New London

[James Lapp]

I'm new to the southeast CT and am looking to purchase multifamily properties in New London area. 

I'm trying to get a sense of (1) vacancy rates and (2) what I can expect as a tenant base.  

For example, I looked at this 8 unit property last week: https://www.zillow.com/homes/79-garfield-new-london-ct_rb/2079955341_zpid/. While clean, the units are very basic, and I can't imagine anyone from the major employers (Electric Boat, Lawrence & Memorial, etc.) renting in a 5+ house in that area of NL. Seems like they have better options. Am I wrong here? Would a property such as this be targeting mostly Section 8? They were renting at ~700-750 including heat. 

What also surprised me was how vacant a lot of the 5+ properties on the market are. Anyone have data / perspective on vacancy rates in New London?

Ultimately I'm trying to find the "sweet" spot for outsize returns in the New London market is in terms of # beds, neighborhood, tenant base, etc.? All opinions welcome!

[David Wolber]

Hey everyone!   What an awesome conversation!!

@Mat O'Grady that property was under contract in 3 days for over asking with multiple offers.  

@James Lapp I must say your analysis is very in-depth. Nice work. Much better than I would have ever done on my first go around. I just make @Jaysen Medhurst do all mine these days!  haha  As much as I hate it, he's usually right on the money.  For PM fee, yes 8-12% is "standard", but 8% would be tough to get until a larger portfolio.  This property, although 8 units, will be heavy on the management due to it's restrictive unit sizes and location.  I always recommend people to budget 10% even if they plan to self-manage.  You should pay yourself for managing the property and if you ever get tired of doing it you want the numbers to still work.

As far as your original question, we see our vacancy rate in New London at about 5-8%.  Most tenants stay 2-3 years on average (however 10+ is not unheard of) and we usually have a 30day or less down time between tenants.  The New London studio / 0ne-bed class B-C market is pretty hot at the moment as well as nice large 2-bed units for working professionals, ideally with a 2nd bath.

Good luck and let me know if you have any questions!

-Dave