Setting money aside for repairs vs getting Home/Product Warranty

Rocklin, CA · Member since 2018 · 29 posts · 6 votes

Instead of setting money aside every month for repairs, what are your thoughts on using a company such as American Home Guardian who offers coverage for $60/mo. Curious if anyone have done this with success vs setting money aside. Has it payed off being able to forecast $60 for any property? Or is their a catch to this? Thanks! =]

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Bill F.

Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes

I have not done this so take everything I say with a grain of salt.

If an AC unit or water heater goes out in a rental, I want to replace it and move on. Less hassle for my tenants and me. Dealing with a insurance company (that's what a home warranty is, insurance) delays the process further. This can bite you if the problem is a habitability issue.

Home warranties are designed for people who don't have the means or ability to save enough cash for basic maintenance. Even though you may have used the low and no money down strategy, that doesn't mean you are without cash reserves.

At$60/month, or $720/yr, its three years until you've saved up a not insignificant amount, even more if when you purchased the property you had cash reserves.

Hope that helps

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Bill F.
Investor · Boston, MA · Member since 2015 · 1k+ posts · 3k+ votes
8y
I have not done this so take everything I say with a grain of salt.
If an AC unit or water heater goes out in a rental, I want to replace it and move on. Less hassle for my tenants and me. Dealing with a insurance company (that's what a home warranty is, insurance) delays the process further. This can bite you if the problem is a habitability issue.
Home warranties are designed for people who don't have the means or ability to save enough cash for basic maintenance. Even though you may have used the low and no money down strategy, that doesn't mean you are without cash reserves.
At$60/month, or $720/yr, its three years until you've saved up a not insignificant amount, even more if when you purchased the property you had cash reserves.
Hope that helps
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Amanda Whiteley
Member since 2018 · 29 posts · 21 votes
8y
I have a friend who did this for their personal home and MANY of the things that have come up are magically “not covered.” But even with that said, I have considered doing it on my investments when I purchase. Although, part of me is just like get a new water heater and be done. It seems like if it’s a monthly fee you would be better off just fixing or replacing the items as they come up. The ones I have looked at are done at the time of purchase.
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
8y
Home Warranties are a gamble. You have to file a claim, which may be denied outright. Even if they cover it, you have to wait for their approved technician. The approved technician is not the top-shelf technician. It tends to be someone inexpensive that has whittled their prices down to meet the home warranty company's prices. I know many large property managers that refuse to manage a home with a warranty on it because they are so problematic.
The best method is very simple: have a reserve when every time you buy a property and continue to build that reserve using the cash flow.
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Justin Michael Johnson
OP
Rocklin, CA · Member since 2018 · 29 posts · 6 votes
8y
Awesome responses! Thank you!
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Keric Allen
Rental Property Investor · Covington, LA · Member since 2017 · 78 posts · 28 votes
8y
Used 2-10 Home warranty for 3 years and finally had to cancel them. As mentioned by other posts, you will have to wait for their “approved technician” and it’s a coin toss in regards to whether or not the issue will be covered. The wait for an approved servicer to look into a refrigerator and AC (separate rentals) was a week. Tenants don’t have time for that and neither do Landlords. My recommendation, save up reserves and have your “go to” company for anything and everything that needs fixing in a house, a backup for them, and make sure those companies can handle those middle of the night once in a crazy blue moon emergencies! Good luck.
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Dick RosenPro Member
Property Manager · Gilbert, AZ · Member since 2009 · 1k+ posts · 451 votes
8y
From a Property Managers perspective... there is no such thing as a good HW plan. Up front I'm sure they look very cost effective but after you try to use it a few times you'll find out that the hassel and down time are not worth it. Unhappy tenants because service is bad and they typically don't replace anything until they have put at least a half dozen band aides on it.
Yes there are times when they work out just fine but in my experience the bad times outweigh the good ones. I set money aside for my properties and I suggest my clients do the same, much more effective in the long run.
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