How's it going BP,
I recently closed on my first SFH Rental on February 13th, ( i can go into the numbers later) but I am planning on self managing my own property with the help of my mentor (for advice and tenant screening help) who is also a real estate broker and property manager.
The property was built in 1987 and though most of the major systems date into the 2000's, the furnace on the heat pump is original. At the time of inspection and final walk thru everything was in good working order and even though the furnace is a Carrier, it is well passed its life expectancy for a heat pump.
Although i have the money to completely replace the system, I also looked into home warranties. The company i called said they cover rentals, with a $54 monthly charge +$75 service call fee's to fix any major system including appliances and roof (of course with all the fine print do's and don'ts)
At $54 a month + (estimating 6 service calls a year (conservative)) would bring my monthly payment averaged to $91.50 obvoisly depending when the service calls take place.
In my thinking, this would cover ALL my monthly CapEx Fee's I have already accounted for + would lower some of my repair cost down to bring my repair expenses down.
Rent is $895
CapEx (for older system) 8%=$71.60 per month
Repair 6%=$53.70 per month
Total $125.30> $91.50
Savings Per month = $33.80 per month
Plus on top of this, they have a 24/7 phone line for service calls which can be made directly to them by the tenant so long as I include their name on the account at time of lease start date.
To me it sounds like a win-win for me as for as money saved and headaches lost, but i know things that sound this could normally aren't. (i may just not have found em yet)
Has anyone else had experience with using a home warranty on a rental home? Can anyone see the error in my ways at which I could be looking at this wrong?
Any help or advice is greatly appreciated.
so it is $648 a year with $95 per service call after 2 years you would probably be able to buy your own furnace. Dont forget the warranty companies very rarely replace a unit they pro rate them. Service calls can take up to 2-3 days depending how busy it is Most of the repairs are minor,faucets,toilets,electrical that you can do yourself I have a duplex which I used the warranty for 2 years but finally cancelled it. Although I did sell a newer home with a home warranty and the owner had the ac replaced for free. Insurance its expensive until you use it but to set aside capex expenses is probably cheaper
Thanks for the insight @Steven Picker . Exactly what I was looking for, a chance to see it from a different angle.
And foolishly, now that all the 'related discussions' have come up at the bottom of my page, I see there is an abundance of discussions on this topic already.
This post can be taken down.
Crap... When you read the "exclusions" it's basically everything your worried about.
I have a couple of them, but it's because my closing agent gave them to me.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing