Flipping Houses

My Leaky AC Unit and How It Got Fixed

190 Articles Written

I got a call from my tenant Sandy earlier this week. She lives in one of my townhouses and she told me that the air conditioner was leaking, and that water was coming through the ceiling into the kitchen.

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

Obviously, this is a problem, and needed to be fixed immediately. So what did I do after her call? Well… I certainly didn’t run over there to fix the AC unit myself. My handyman skills are good enough for changing light bulbs and that’s about it.

Instead, I immediately called my virtual assistant Lisa and told her to call American Home Shield and have them send someone out to fix the leak. You see, American Home Shield is the home warranty company I use and I think every investor who owns rental properties should get one of these warranties.

There are many companies out there in addition to American Home Shield, however, I’ve been using them for years and I’ve been pleased with the way they work.

So how exactly do they work?

Well, my assistant Lisa called them up and told them that the air conditioner was leaking and gave them the address of the property.

Then American Home Shield contacted one of the HVAC companies in their database to go out and repair my AC unit. (On a quick side note, my assistant Lisa gave American Home Shield my tenant’s cell phone number so that the HVAC company could set up a time to come fix the AC. In other words, I didn’t have to go wait for a repairman or even step foot in the house.)

When the repairman had finished fixing my AC, my assistant Lisa called and paid via credit card so that my tenant didn’t have to write a check and have me repay them. (The payment she made was the $60 co-pay, but the cost of the home warranty plan I use is around $400 a year.)

Some people balk at paying $400 a year but not me.

First off, I only pay for the home warranty on properties that are in my “buy and hold” portfolio, which I plan to hold onto for the next 30 years. If I’m doing a lease option deal, then my tenant/buyers are required to purchase the home warranty and pay for it themselves.

Another reason I don’t balk at paying $400 a year is because I’ve tried finding a good and reliable handyman . . . If you’ve been in this business long enough you know that finding an honest handyman who shows up for the job is like finding Big Foot. It isn’t easy.

So having the warranty makes my life all around easier, so I don’t have to spend time dealing with handymen who don’t show up or who take too long to fix something or who show up drunk. (Yes, that happens quite often.)

Since one of your main goals should be to run your real estate business as efficiently as possible, I would highly encourage you to use the same system I have to deal with repairs on your rental properties.

Photo: Jeremy Hetzel

    Replied about 8 years ago
    Having leaks from the air conditioner or clogged kitchen sinks are just some problems common to tenants. That’s why it is very important to have landlord or landlady who’s prime concern is the safety and comfort of its occupants. Having to worry about home maintenace or repair is the last thing that a tenant would want to deal with, especially if their schedule is full everyday. That’s why it is indeed helpful to have a standing home warranty which could address the future inevitable problems related to home maintenance.
    Nathan Gesner
    Replied about 8 years ago
    So you paid $400 for the insurance policy and $60 for the service call, totaling $460 to repair a leaking A/C unit? That doesn’t make financial sense! I manage 135 rental properties. I typically experience one appliance break-down every few years. Using your scenario, that would cost me about $1,200 in warranty plus $60 for the service call deductible. Even after the warranty covers the repairs, I still have an old unit that is more liable to break down in the near future. You would be wiser to set $400 aside every year for emergencies and then use that money to pay for repairs OR just buy a brand new unit. The reason warranty companies exist is because they make profit off the gullible. Just like gambling, it is rare that the consumer comes out ahead. A wiser investment would be to set aside a certain amount each month and build up a buffer account that can handle anything from minor repairs to major emergencies.
    Liz Benitez
    Replied about 8 years ago
    I’m not so sure about that. This time it was just his A/C unit but what if it was the whole HVAC system and it didn’t just need repaired but replaced. Then you are looking at a lot more money out of pocket. What gets me is people are willing to fork over $200 plus a month for car insurance but balk at $400 a year to cover their home.
    Nathan Gesner
    Replied about 8 years ago
    Liz, According to a study by Insurance.com in February, the average consumer will spend over $84,000 in their lifetime on car insurance, while the average consumer will spend $150,000 in cars during their lifetime. I can assure you, most consumers do not have $84,000 in claims during their lifetime. The insurance companies make money by taking in WAY more than they pay out. I have 25 years of driving cars and motorcycles and have less than $10,000 in claims (it’s only that high because I had a car stolen). That’s a lot less than what I’ve paid and it includes a stolen car! If I had put that same amount in savings, I could have paid for all my claims AND I’d still have over $5,000 on hand for other things. Yes, there are rare occasions where a claim can be extremely high, such as a major accident caused by reckless driving or getting sued by someone for an injury. But again, how many people do you personally know that can show they’ve received more in claims than they paid in premiums? Very, very few. Your statement about the HVAC is the same. The warranty ONLY pays for itself if you have a major breakdown that requires complete replacement. Let’s say he had a $5,000 HVAC that was ten years old and it breaks down. The warranty will cover repair, which is probably going to cost less than the cost of the warranty and the service fee ($460). Even if it cost $1,500 to repair, he might be ahead the first year, but he’ll end up paying for it in future years. I manage 135 units and can tell you that fewer than 10% require more than $400 in repairs during a year. Some require as much as $1,500 in one year but then go for 5-10 years with nothing. If I were buying warranties for each one, I might come out ahead on a few but I would lose out on over 95% of them every year. The easy way to prove this is take a home that you’ve owned for 10 years and add up all the maintenance costs during that time. Then add up what a warranty would cost, add in $50 for each service call, and see how much you would pay for a warranty vs. repairs out of pocket. Like gambling in Vegas, the house always wins.
    Replied over 4 years ago
    I am looking at American Home Shield as my two rental properties are eating away my rental profits. I had a $900 water heater invoice for purchase of a $400 water heater and install/removal and piping. I had two $285 plumbing bills to unstop a toilet and a bad wax flange.. I had $150 replace of faucet.. etc.. etc.. these tenants are calling every other month. I say $45 a month with a $75 copay is fine for me!
    Liz Benitez
    Replied over 4 years ago
    I use HMS (1-800-843-4663) for my rental property. I haven’t really looked into any other home warranty companies so there might be much better ones but I have used this one for about 8 years now. I also have a clause in my lease that my tenants pay the repair deductible. Good luck with your tenants, I hope things go smoother for you in the future.
    Jeff G. from Richmond, Texas
    Replied over 4 years ago
    Liz ? how old are the appliances in the rental property? the reason i am asking because i am trying to rent a home and the landlord wants me to pay for the deductable on the home warranty if anything happens to anything. first off the house is 8 years old and so are the appliances before i move in and the last tenants looked like they didn’t take care of much and if something goes out in the first few months and i have had nothing to do with it why should i need to pay for the repairs? the cost of the appliances and the a/c and heat repairs should have already been added in the price of the rent. (Richmond Texas)
    Liz Benitez
    Replied over 4 years ago
    The appliances in my rental property are at least 8 years old and when the tenants first moved in we had a few issues but most of those issues were user error. As a landlord I shouldn’t be responsible for the repair of a leaky washing machine when it turns out they fill it all the way up with water and then put the clothes in causing the water to over flow. For your situation I will tell you the lease is a contract/agreement between two parties. If you don’t like the repair deductible, negotiate it out. If the owners do not agree then you have two options. Walk away or deal with a repair deductible. Here in Maryland I haven’t seen any rental property that did not have one, however the amount tends to vary quite a bit.
    Dawn Young from Benton City, Washington
    Replied over 3 years ago
    That’s the kind of problems we’re having. I don’t think that toilets/faucets fall under “appliances” though. I think it really is going to matter what the units are like. If your units are like ours, have 3/2, with a heatpump and furnace, (aging) dishwasher, garbage disposal, you have a lot more to lose than a simple little 2/1 with baseboard heat, and window ac’s. There’s no way I’d put appliance insurance on a place that simple! I do also firmly believe in checking things out before calling paying even “co-pays”) You never know when something just needs to be fiddled with to fix it! (like then time a quarter got stuck in the garbage disposal and thought it was broken!) But then, not everyone lives close to their rentals. I did the math, and It looks like we might come out about even, or lose a little, but at least we wouldn’t have any huge surprises. I do believe the “house always wins”, but remember there are lots of rich people buying insurance for appliances with warrantees, and they don’t know I’m not one of those people! So, I think they make more on some people, less on others, and it all balances out for a nice bottom line for them. I wish I’d thought about putting insurance in as a requirement on our lease option house! That would have been peace of mind for all of us! My neighbor’s escrow company recomends american sheild, also.