Rental Property Home Warranty

18 Replies

I'm thinking about looking into American Home Shield to warranty my appliances for my rental properties. Does anyone have any exposure to using a home warranty or home warranties similar to American Home Shield?

@Chris Lawrence   I've used them on two different properties and they were good overall.  They contracted with local companies I already knew so that worked out well.

I dropped them in the end because wasn't worth the price, for me at least.  I was paying about $900/year for a duplex, with a $100 service charge (flat rate).  Some years I would only have a call or two, so I was into it for about $1,000 per year.

Note my plan was the electrical / plumbing / heating system package and did not cover appliances.  Appliances are pretty cheap these days and last quite a while.  Refrigerators I bought for $500 over 10 years ago are still fine, and I would just replace if they broke or couldn't be easily fixed.  Also have a few $250 washer / dryers that are still going after 15 years.

- Tom

@Chris Lawrence   No problem - FYI - I just did an edit to add a paragraph about appliances.

I'm in CA and use them for a rental in TX I had...they sucked. When they did fix things, they did a half assed job and it wasn't unusual for the same issue to come up a month or so later

It was easy because when you have an issue, they pick a contractor to go and do the work....still have to pay a flat fee no matter what....and it costs $500/year just to have it. On average I had 2-3 calls a lets say $800/year....... that's a LOT of cost for some pretty basic repairs that would have been cheaper if I found a repair man myself to do the repair.

I did it out of convenience since I was out of state and dint have an connection to local repair services etc...... they made the arrangements....but when you actually look at the cost and the crap work they did, it was a bad business decision on my part

You MAY get lucky and THEY fit the bill for some big expense, so in the end you save big $$, but the cards are stacked against it..... I wont do it again

@Chris Lawrence I don't think it's really that worth it to do the warranty contract for the appliances. Perhaps the major systems in the home. But the appliances can always be fixed or replaced with new ones. It all comes down to the types of tenants you choose and how they take care of things. Good luck! 

I had them for a home warranty on one of my properties. as Tom had said they contract with local contractors and overall they are pretty good for just general things. 

I did have a refrigerator go bad at one point, rather than replace it at around $400 they opted to repair it at roughly the same cost as a new one. 

the only down side to this is they seem like they don't replace, they only patch or repair. I had a few roof issues initially with that property too, where they would send someone out who would just do some minor patches, they don't really authorize them to do much beyond a minimum effort to resolve the issue. 

Originally posted by @Chris Lawrence :

I'm thinking about looking into American Home Shield to warranty my appliances for my rental properties. Does anyone have any exposure to using a home warranty or home warranties similar to American Home Shield?

I used 2-10 Home Warranty in the past. The experience was mixed.. 

First of all the biggest negative is $550 is the yearly fee. On top of that there is a $100 deductible.  They had another package for a little higher yearly fee I think $640 or so (but don't quote me on exact number), which had $75 deductible.  

Second thing I noticed with 2-10 (specifically) is that there is too much fine print... (We cover only A, B, C,D with the exception of 1,2,3,4 .)

Last but not the least, the kind of contractors that work with warranty companies, in my area at least, are not the most established contractors. Why?. I was told that this is because a lot of warranty companies nickel and dime the contractors. So lot of times people who are just trying to establish their business work with these companies. Needless to see they are less skilled. 

After all being said and done, I will maybe end up saving $400-500 overall.. Really not worth my time to be honest. I have a  job working 50-55 hrs a week. I'd rather have good relationship with my contractors.. Treat them well, and pay them quickly and full than go through this rigamarole.

If you get good people to work on your property and get good tenants, you should not have too many calls. 

Not worth it in my opinion overall. Especially not for appliances. As others have posted, appliances are cheaper to replace than repair most of the time. Unfortunately in our throw away society most things fall into this category. New appliances have manufacturer warranties that will cover problems usually in the first year. Case in point I bought a new cook top from Lowes. Brought it home and one of the burners wouldn't light. Called Lowes back up, they sent the warranty company and I paid nothing. Turned out a screw had been driven right into the igniter wire so it wouldn't spark that burner. 1 in a million shot. Repair man said he had never seen that happen. No problems with it since and for what I paid for it, even if it breaks in 6 months I've already got my monies worth. 

Flip side, had a home warranty paid as part of a seller concession and first day we got access (in July in Texas) AC flooded the bedroom with condensate. Think we hit the jackpot but lo and behold the fine print says that particular problem isn't covered. Ended up replacing the whole unit out of pocket (full disclaimer: we knew it was going to need replacing soon we just didn't expect it to be on day one). 

Ultimately, it is insurance and they will try to weasel out of it if they can. It is better to find a good handyman rather than waste your time dealing with a warranty company. If you get it as part of a deal, sweet, maybe you will use it but I wouldn't go out of your way. Good luck

Originally posted by @Chris Lawrence :

I'm thinking about looking into American Home Shield to warranty my appliances for my rental properties. Does anyone have any exposure to using a home warranty or home warranties similar to American Home Shield?

 I wouldn't use them.  The warranty companies have a really bad reputation for sending repair guys who look for something that disqualifies the warranty and then upsells you on a new unit.  IE the compressor is bad, its not covered, but oh we will give you a 20% discount on a new unit.

I have heard about 50-60% of warranty expense goes to sales and marketing, so on average you are saving a lot of money by just saving up.

Personally, we set aside a few percent each month into a separate account for larger capital repairs, ie a new roof, or AC unit, I think over time you will find this to be the most efficient option.  That and find a great handyman.

Like all insurance, we hate writing the check. But we're glad we have it when something happens that is covered.

I'm kind of ambivalent about them. They cost $500+ a year, and how many years do you spend that much on appliance repair? You might be better off to take that $500 and stick it in an account and let it build up over time.

There's a lot of fine print, and they don't cover a lot. I had one client with it and they wouldn't cover an AC drain pan that had rotted through because that was "a maintenance issue." But another client had a fan motor go out on her AC and it was covered. The big thing in the fine print seems to distinguish between a mechanical failure of a part as opposed to something wearing out.

We get them thrown in the contract when we buy a new property.  Sellers usually agree to it easily, and it gives us a years semi-peace of mind.

Thanks all for the information!

@Chris Lawrence there is no higher profit business than the warranty business. That should be all you need to know.

Here is the problem. They have lots of rules for making claims, that are designed to avoid paying you. The deductibles eat away at the benefit. At the end of the day, The premium you pay is way more than the benefit you get. If you start making a ton of claims, you will just get dropped.

I sold warranties for an electronic retailer and they pushed them so hard on us. They could care less how much product we sold, but we got huge bonuses for selling the warranties. The reason is the claim ration to income ratio is crazy low. Simply put, extended warranties are a horrible deal for the consumer. I have been in the rental business 15 years and I can prove to you mathematically you will come out ahead just putting cash in reserves.

I have a few clients that insist on having home warranties, but I don't use them for my personal rental property. 

It seems the odds are against you recouping your costs if you maintain it over a long enough period.  But if you're cash poor at the moment, could be a good short term move just so you;re covered in case something DOES happen.

I had some recurring HVAC issues at a particular unit with a warranty on it(my client got a 12 month warranty as part of his purchase).  After the 3rd trip out, I asked the vendor why he didn't just replace what needed replacing so we could move on.  He let me know that the warranty co. wouldn't pay for the replacement parts, and that he had to 'fix it' with the least amount of replacement possible.  This often dictated more than 1 trip...

I'm sure some warranty companies are different, so shop around if you're going to get one and the latest online reviews for whichever company you select.

I’m not a fan of home warranties either for appliances or big systems. I see it as basically insurance - and I don’t see the benefit of paying someone when I can ‘self insure’ myself.

If a washer breaks, I can get an appliance guy out in 24-48 hours for $100 service call. A bit more to fix what’s broken, or a few hundred to replace. I have the funds on hand to handle those issues.

These companies make money off people paying them to not fix things. So in general, most people paying are paying more than they would to repair/replace.

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