To be honest, I'm not even sure if you can carry an annual warranty policy on rentals, but is this an avenue anyone utilizes? The benefits would certainly be to stabilize fluctuations in maintenance costs and to streamline repairs, but at what cost? Obviously warranties are a negative proposition cumulatively (otherwise all warranty providers would be out of business), but would you pay a premium for this peace of mind?
We purchased a home warranty on a SFR we own in Gilbert, AZ last year. The cost was approximately $350.00. We never used it. We decided we were better off not purchasing the home warranty this year. It may depend on the age of the home as well. This rental was built in 2003 so it is fairly new.
If you do not have a lot of money in reserves the home warranty might be a good idea. Be sure to review the contract carefully to see exactly what it covers.
I will be curious to see what other responses you get on this one. We also own 3 duplexes that were built in 1949... I might consider a warranty on this property if it was not cost prohibitive. We are new investors and I feel like we have a lot to learn.
I don't have any on my rentals. All of the offers I received on my first flip I'm selling having been requesting Home Warranty to be included.
I've read that some drawbacks include: Unpredictable response time; too many clauses/exclusions that providers can use to deny claims (drawn out process to dispute); you're using their contractors only; and it's up to them whether something gets replaced or repaired.
I'm sure there are people that have saved tons of money using home warranties. I just rather have more control over my investment! I feel like having a home warranty would give me LESS peace of mind :) I also believe in higher deductible landlord insurance on the property, basically as a fail-safe for a catastrophe.
I just consider the repairs and CAPEX the cost of doing business. Have a solid inspection and know what you're getting into prior to the purchase, so you can budget for things accordingly.
@Jim Herbst have you ever read a home warranty? This is my opinion of them based on being a very part time agent with a real estate sales company that utilized one brand of them. They are tools for sellers and agents to get scared first time home buyers to pull the trigger and move from being renters where the landlord took care of maintenance to where they had to have money set aside. The warranties I saw excluded older items that typically fail (furnace and water heaters) and like was mentioned above required the use of their contractor's and did not happen on a timely manner. I only heard of people having their claim denied and I never heard one sales pitch mention where the insurance saved someone financial ruin. That is the biggest pitch for life insurance BTW.
I think it's better in these cases to be self insured. If an investor can't self insure for cap ex then they don't have the money to invest in RE.
In my opinion, they are a total scam and complete waste of money. They're not going to pay you. Everything will be determined to be pre-existing or some recall B.S. Save your money.
They suck!!! Save your money!!!
That's all for now.
Not worth it. Just this week we did a plumbing call in McKinney, TX in which warranty company would not cover and original plumber quoted $1400 to repair. We go it done for less than half that amount. Save your money and build a reserve account for unexpected costs.
I now have a a policy that my company will not manage any property under any kind of Home. I have had nothing but problems. The venders that the home warranty companies hire or affiliate with are the worst and don't know how to fix the equipment that they were hired to fix.
In July 2012 my tenants reported that water was leaking in the kitchen from the bath tub above. I sent AHS over, and they concluded that the problem was coming from no caulking around the faucets, so I had to pay the $75 deductible and still had to send another contractor out to caulk the plumbing fixtures because that wasn't covered under the warranty which cost another $65. Well a week later I get another phone call from the tenants and water was still coming the ceiling in the Kitchen. I called AHS and they told me that I had to pay $75 again. This time they sent out a different company who told me that there was a crack in the fiberglass bath tub, and because it was already fixed once this would not be covered under the warranty. The worst part about all of this is that when the owners moved in after they purchased the property they found the leak, and AHS is the one that sent the technician to patch the hole. We had no choice we had to replace the bath tub and fix the entire ceiling in the kitchen at the owner cost.
December 2013 my tenants reported that their heat was not working, and we paid the deductible of $100 and AHS sent a contractor over to fix it. It worked for 2 days after the repair, and we had to call again for the same thing. They didn't make us pay an extra deductible, but in the middle of winter it took approximately 7 days of no heat to get this issue fixed. However in early spring (April-May) we had a very hot spell, and everyone had their A/C on. My tenants couldn't get their AC (Heat pump) to put out cold air. Well after 3 days a contractor came out and stated that it was working fine. Tenants reported it was still over 80 degrees in the house, so we complained to AHS and this time they told us that all they could do is send out the same tech to see if they could fix it. 2 days later the same guy came back out and again said it was working perfectly fine. Just to give you a heads up, this was the second summer for these tenants in this property. When I complained again AHS told me that if we wanted a third opinion I would have to pay another deductible, and they would send out the same vender. So after 8 days of 100 degree plus temperature I called my preferred vender, He went out and found out that the original tech that went to work on the heat in december had wired it incorrectly and when the tenants turned the A/C side of the heat pump on the power shorted to grown and blew the fan motor. The cost of my tech to go out there was $75, and for him to install the new fan motor and labor it was $425. AHS said that because it wasn't their technician they would not pay for it.
In August 2013 We had tenants at another home report that the AC wasn't working, They moved in Aug 1, and this trouble ticket came in on the 2nd. What a way to move in. We called Home protect warranty company, and they sent us a contractor that was so unprofessional that you couldn't even leave a message on his "business phone". It took 5 days for this guy to even call us to get him in the property. He diagnosed it as the coil was bad and it needed to be replaced. Which was great the coil was covered under the Warranty, however I didn't understand why the contractors told my owners that they had to pay for Refrigerant recovery, and new duct work needed for adding the coil which he wanted $450.00 from the owners plus he already got the $100 deductible. Home protect stated that they could cut a check to the owners for $1800, to get it fixed by another vender, or we could go with their vender. The owner's didn't have the money to be able to go with my preferred vender because it would have cost $2400, and told me to just have the guy fix it. Well we tried to call him to inform of the owner decision, but we couldn't leave a message, so we had to email him. It took a total of 24 days to get this system fixed, and in my opinion that is totally unreasonable.
I can go on and on about how warranty companies use the poorest quality of technicians, or how they find ways to disqualify the covered items so they don't have to pay out, but I don't think anyone would want to read all of my complaints. That is why I put the no warranty policy in place with my company, and trouble tickets can be resolved within a 48 hour period unless parts have to be ordered.
Another thing that yo need to consider is how many hours are lost calling these warranty companies, waiting in the phone for hours at a time, calling back to check the status of what is going on when tenants don't get called. It is ridiculous.
Last but not least you need to consider that for every trouble ticket you put in you have to pay your deductible. So if you have a light fixture that doesn't work that is one deductible, if you toilet is running that is another deductible. So If I send my handyman, It is one service call to fix all things at the property.
Don't bother wasting your money on these warranties, just start setting money aside for repairs from day one. Then you can use the funds as you see fit and you're not stuck using these bottom feeder repair companies.
I personally know an electrician who has his own company and most of his work comes from warranty companies. He hardly makes anything at all, so it's not in the trades best interest to fix the issue correctly or on the first visit.
The warranty companies also know how to game the system so they don't have to cover major repairs.
Home warranty = Garbage
home warranties are simply a scam! Good evidence is provided by the fact mortgage companies send out ads for a home warranty along with the super inflated term life insurance ads.
if you've read this thread you know your answer... I'm not going to write a lengthy response but I have had similar experiences and would never recommend HW... it is a SCAM
I see everyone is bashing Home Warranty or saying they are a scam, please post a few of Home Warranty companies name so everyone will be aware of them.
I don't have a home warranty but I do carry a warranty/repair plan on the water service line on one of my properties that has the old blue poly pipe that has been known to have issues. It would cost about $2000+ to replace it now so I'd rather just pay the $50 a year since it's something I consider to be "at risk"
I usually get a home warranty the first year to cover any unexpected (or expected) expense. I used to use AHS long ago and they were great, always covered my repairs. I then went to Choice because they were cheaper and they were horrible. They mAde it difficult to even schedule a tech so I never actually used the service. I'm now with Old Republic and so far so good. They covered a repair that I found out after the fact was suppose to be a warranty exclusion. My inspector told me the HVAC compressor on the condo unit I was purchasing wouldn't make it thru the summer, so I purchased the warranty at closing. Sure enough, 3 months later the tenant called about the HVAC, and it was covered under the warranty. At this point they've paid out more than I have in warranty and tech calls for this one unit, so I've gotten my money's worth.
I completely disagree! Home warranties on rental properties with older appliances make a whole lot of sense. If everything's brand new in your investment property, it makes sense to wait to buy a home warranty until the manufacturer warranties expire. I have one on all my properties.
I appreciate the feedback everyone. I assumed it would be mostly negative. The only reason I posted the question in the first place is because I had a surprisingly positive experience with one and I was wondering if it was an anomaly. I received a home warranty from the seller when I purchased my primary residence and it worked flawlessly to replace a leaky water heater. I called them after hours on a Tuesday night and they were over Wednesday afternoon to replace it. No cost or hassle at all to me. From what I am hearing though, this experience seems to be a rarity.
@Leslie Pappas Have you made a successful claim on any big ticket items?
yes- washer/dryer, refrigerator, garage door opener
As a full-time real estate agent, I am completely against home warranties. I've found that some companies will even give me a $75 check if I get some information on the appliances in the home for their records. Obviously this is to their advantage for some reason, and not for the protection of my clients, so I don't even bother. But if they're willing to pay that much to an agent on a policy that cost around $450, then there's not much left to cover items in your home. Especially if you take out the commissions that are paid out to their salespeople. The fact of the matter is they know there is a very unlikely chance that something will go wrong within the first year of ownership, and even if it does, they usually hide behind a disclaimer or two. I always recommend to my clients to self-insure themselves with an emergency fund, and I would suggest the same to you. Glad to see a lot of help on this topic. Good luck.
I had it on my first investment property for years and would use it once a year until I had a problem with my AC unit. I paid $70 for deductible and they did not repair the unit because it had not been service, it ha d rust and what ever the reason was. That was it for me, I cancel that service the same day when I was told that.
Welcome to BP.
Home warranties are only worth if;
1. Property is 20 years or older.
2. Must be good company because NOT all companies are competitive.
I currently don't have any home warranty on any on of my properties. I always allocate cap ex (Reserves) when doing a spreadsheet to buy a property.
Most home warranty companies charge somewhere from $75 to $100 for service call. In my area, most service men charge $50 to $95 for a service to call. Therefore, in my case, I don't see a good usage.
Hope it helps.
Short answer, save your money.
As a third party management company, we've got experience with several home warranty companies. None of them pay - and will give you a headache for the runaround. You're better off saving $1 per square foot per property annually as a maintenance fund ($0.83/sf/monthly). This is what we tell our landlord clients and it works out better for them financially - and it's easier for us to service their needs.
Share the names of home warranty companies that you have experience with that don't pay.
@ Joe Gore
First-hand experience with not paying:
- Old Republic
- BGE Home
Several other client stories before they hired us to manage have expressed similar experiences with other Warranty companies, since it's second hand information and I wasn't intimately involved, I'm hesitant to list them.
Most recent was BGE Home. They claimed they couldn't find parts to repair our client's HVAC system; they quoted him new systems between $7-10,000. Our HVAC tech found a new coil and were able to repair his system. The client was amazed at our inexpensive repair estimate and asked us to quote him a replacement system. We installed a replacement system at 1/2 the price with a 10 year warranty.
How about other readers, do you have names of companies with first-hand experience that didn't pay?
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