Landlord discovers Internet works as lure for new tenants

SAN FRANCISCO -- Attention landlords suffering from the empty apartment blues: Forget about toaster giveaways, a month's free rent or other such `80s-type concessions to lure new tenants.

Among the items crossing the Real Estate "Investing" desk recently was a `90s brainstorm that is keeping Arlan Hurwitz's building full.

His weapon: Free Internet access and on-site computer classes for any tenant who wants them. Now his building is full, there's a waiting list to get in, prospects appear more highly qualified with better jobs and higher incomes, and the property is worth half a million dollars more than it was a few months ago.

Hurwitz's 112-unit building -- which he bought 26 years ago after starting his investment career with duplexes and four-plexes -- is in a blue-collar area of Anaheim, Calif., which like much of Southern California has been mired in a flat rental market for most of the decade.

"I was having 10 units vacant each month," he said. A 10 to 15 percent vacancy was the norm for the last five years -- and there was nothing that distinguished his building from many others in the area.

Hurwitz said the free Internet idea came while he was in the shower. He refined it with the help of a friend, Rainer Freytag, president of Adman Internet Marketing in Orange -- and publicized the offer by erecting a red-and-white vinyl banner that cost $400.

That was just before Christmas. During January, normally a slow post-holiday period, Hurwitz said he got 57 inquiries from prospective tenants -- and "48 of them came because of the sign," he added.

Filling up his 10 empty apartments increased Hurwitz's cash flow by $7,000 a month or $84,000 annually. The extra income also boosted the equity in his building by about $500,000.

The up-front costs: about $5,500. The Internet access costs him $6 a month per tenant. So far, 35 tenants have signed up for the perk of 10 free hours on the Net.

Other notes of interest to residential real estate investors:

Municipal utility districts in California no longer can dun landlords whose tenants skip out on water and other utility bills.

Gov. Pete Wilson signed legislation in early May halting the longstanding practice after landlords complained it was unfair to bill them for their tenants' debts.

"This will relieve property owners and managers of the financial burden created by an occasional `bad apple' tenant," said Tom Bannon, executive vice president of the California Apartment Association.

Many apartment buildings have individually metered units, as do rental houses. In the past, public utility districts would send delinquent tenants' charges on those meters to the property owner. An owner who refused to pay faced having a lien slapped on the rental property.

In 1995, the Stockton Municipal Utilities District placed $982,000 worth of such liens on rental property owners. The East Bay Municipal Utility District and other utilities around the state also had sizable delinquent bills owed by tenants.

Under the new legislation, overdue bills also can not be transferred to owners or subsequent tenants of the rental in question. The law does permit the utility to collect deposits from new tenants, but no more than three times the average monthly bill for the apartment being rented.

The legislation, however, was bittersweet for landlords who have already been dunned. It is not retroactive.

San Francisco continues to sit on a hot apartment investing market. Seventeen apartment buildings with 10 or more units were sold during the first quarter of this year -- four more than the same period in 1995.

The Arroyo & Coates broker said investors paid nearly $23 million for the buildings. That was roughly 32 percent more than the $17 million apartment buyers spent last year in the first quarter.

The most inexpensive was a bank-owned, 10-unit fixer-upper in one of the worst areas of the Tenderloin that sold for $186,000. The $4.5 million price tag for a 10-unit building on a prime Pacific Heights block was the highest during the quarter.

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