Do you get home warranty for your rental?

Rental Property Investor · Houston TX / Tacoma WA. · Member since 2019 · 166 posts · 89 votes

I'm a fresh landlord and every time I come across home warranty promotion I wonder if it's better to spend that ~$50 for a peace of mind and also I can take that out of my capex/maintenance budget? since my expenses when something goes out, will be significantly lower.

What do you guy's do? I have not heard anyone on the podcasts talk about it, as far is I remember.

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Kao Saeteurn

AZ · Member since 2018 · 78 posts · 40 votes

@Meir Greenblatt I have a home warranty for my rental, but it was provided by the seller. It’s paid off already. I had the oven repaired, AC compressor and condenser replaced, and heater control unit replaced. I only had to pay the service fee each time. I’ve had no issues with them so far.

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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
6y
No. Most of them suck and have 8 million exclusions, not to mention few of them are meant for commercial use meaning as soon as they find out it's a rental they'll disallow the claim.
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Jesse Kindra
Rental Property Investor · Newcastle, WA · Member since 2016 · 86 posts · 39 votes
6y
@Meir Greenblatt
I used to think the same way you did as it sounds like a great idea in theory (limit capex for a minimal fee). So, I purchased home warranties for a few properties. However, what I found was that the contractors that the home warranty company sends out seem to be low-tier and do poor work. I found that in the end, I had extra phone calls and aggravation by myself and tenants so it was not worth it.
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Meir Greenblatt
OP
Rental Property Investor · Houston TX / Tacoma WA. · Member since 2019 · 166 posts · 89 votes
6y
@JD Martin
Thanks I will make sure that they know it's a RENTAL unit and will check all the small letters in the contract.
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Meir Greenblatt
OP
Rental Property Investor · Houston TX / Tacoma WA. · Member since 2019 · 166 posts · 89 votes
6y
@Jesse Kindra
That sounds very frustrating. I assume you canceled all of them.
I'm leaning towards not doing it but I will do some more research.
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Jesse Kindra
Rental Property Investor · Newcastle, WA · Member since 2016 · 86 posts · 39 votes
6y
@Meir Greenblatt
Yup, I canceled all of them!
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Robert Kough
Fort Leonard Wood, MO · Member since 2018 · 62 posts · 20 votes
6y
@Meir Greenblatt I have home warranty that covers all the systems in my duplex. I would have to disagree with the other opinions in this thread. I have had nothing but good experiences with the contractors. I live in a small town and good contractors are tough to find. They outsource to the nearest big town. Works well for me.
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Meir Greenblatt
OP
Rental Property Investor · Houston TX / Tacoma WA. · Member since 2019 · 166 posts · 89 votes
6y
@Robert Kough
Thank you for your input.
And after a few years, do you see that you saved more money then you paid for membership & service calls?
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Chris Coleman
Rental Property Investor · Washington, DC · Member since 2015 · 429 posts · 393 votes
6y
@Meir Greenblatt I did on the first few, but never again. I’ve found that they want to try to repair, and repair again, and repair again and again...to keep from having to replace anything. And even with the warranty, every time they send someone out to repair...again...you pay a service fee.
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Meir Greenblatt
OP
Rental Property Investor · Houston TX / Tacoma WA. · Member since 2019 · 166 posts · 89 votes
6y
@Chris Coleman
Sounds like a big hassle and it makes sense they spend less money like that.
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Account Closed
Kingsland, TX · Member since 2018 · 164 posts · 86 votes
6y
I was recently wondering this same question. After doing some research, I discovered that there were nothing but terrible reviews for home warranty companies.
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Colin Clark
Rental Property Investor · Dayton, OH · Member since 2018 · 7 posts · 9 votes
6y
Insurance/warranty companies are obviously built to make money (charge more in premiums/deductibles than they spend on repairs). They've done the research, and statistically, over time, you would end up spending more on premiums/deductibles than you'd receive in "free" service. If that wasn't the case, the warranty/insurance companies would be out of business. The only reason to consider using a warranty service (of any kind) is if you can't afford to keep enough cash reserves on hand for occasional major repairs. As others have previously mentioned, the warranty companies are notorious for lots of exclusions and poor quality. In my opinion, focus on building cash reserves instead of a warranty. It will save you money and hassle in the long run.
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Kao Saeteurn
AZ · Member since 2018 · 78 posts · 40 votes
6y
@Meir Greenblatt I have a home warranty for my rental, but it was provided by the seller. It’s paid off already. I had the oven repaired, AC compressor and condenser replaced, and heater control unit replaced. I only had to pay the service fee each time. I’ve had no issues with them so far.
3 Reply
Robert Kough
Fort Leonard Wood, MO · Member since 2018 · 62 posts · 20 votes
6y
@Meir Greenblatt in my experience its paid for itself.
1 Reply
James Galla
Attorney · Akron, OH · Member since 2016 · 535 posts · 389 votes
6y
@Meir Greenblatt
I have a home warranty that I received as part of a sale - the seller provided it in the deal. My experience is that warranties aren't really that good due to the vast amount of exclusions.
Additionally, the math may just not add up. I would take some time and calculate whether the warranty is cheaper than your separate "savings" from your rental income allocated to cover capital expenditures. My take is that capital expenditures come down the road and that means you have the benefit of cash on hand and the associated buying power with that. Whereas, with warranties, you're looking at immediate cash out of your pocket.
If you're looking for some kind of coverage with respect to rentals, you may as well look to see whether you like the idea of landlord insurance. While it's not geared to take care of your capital expenditures, it's geared to assist in tenant repairs.
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Christine Kankowski
Real Estate Broker · Temecula, CA · Member since 2014 · 994 posts · 783 votes
6y
Most in my state cover rentals no problem, but they are a complete pain in the neck for owners nad tenants, they deny claims frequently, and use the cheapest vendors who will push back these repairs of others come up.
example 1: Old republic Home warranty: Owner had a dishwasher that no longer cleaned. Vendor agreed, but found nothing that was repairable. Unit was just old. Since nothing was broken, Warranty denied, but charged $75 service fee. Since it didn't work, we complained and said the unit should be replaced. Warranty sent a 2nd vendor - same result. Dishwasher not fixable, but did not clean due to age. Charged us another &75 fee (which they ended up waiving,) but didn't replace the dishwasher which was 18 years old.
Example 2 . Major plumbing leak from wall coming out to carpet. Called Warranty. Did not respond for 4 hours. After repeated calls and 1 hour on hold, my request to get my emergency plumber out was approved. Without the home warranty, I would have had my plumber out there asap and wouldn't have the tenant pissed out and wouldn't have had to spend 4 hours on hold. This was ridiculous.
SOOOO not worth it.
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Derek Janssen
Rental Property Investor · Novato, CA · Member since 2018 · 110 posts · 145 votes
6y
No. Had a fridge go out. “Well we can only get someone out next Tuesday.” Then, “Well we need to order the part that’s out of stock”
So they wait you out on expensive items that tenants can’t be without. (Air conditioners and Refrigerators).
Not worth the headaches and hassles badgering these people to make good on their commitments.
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Jerry Lucker
Flipper/Rehabber · Seattle, WA · Member since 2015 · 333 posts · 459 votes
6y
@Meir Greenblatt
Not on any of my homes. Isn’t worth it. Experience talking.
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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y
@Meir Greenblatt I used to sell electronics warranties and as sales people we got 50% commission on every sale. All they cared about is that we sold warranties, because they are near pure profit. The reason is statistically they are just not used very often.
Here is some of the problems you will encounter:
1. People forget they have warranties
2. Exclusions make it hard to get claims approved
3. Deductibles can be half or more the repair cost
4. Bad service network, so you get slow response or incapable people
5. Repeat service calls to fix a problem
6. Non-direct communication, you are talking to the warranty company who is talking to the repair person, versus direct contracting
It is true that in some cases a warranty can pay off. There is going to be that one out of a hundred type situation. The point is statistically, you are probably not that one. And if you have 100 properties, even if one pays, you still paid for the other 99. In the end you come out behind.
My advice is always skip warranties and go with high deductible insurance. You will save more money over the long run. If you want to budget repairs, just put the money saved each month in a special account.
1 Reply
Stacee Evans
Investor · Canoga Park, CA · Member since 2016 · 114 posts · 50 votes
6y
@Meir Greenblatt I had a home warranty for years on my out of state homes. Every year I paid more in premiums than the repairs would have been. My tenants were frustrated because they usually had to come back multiple times. Through the internet reviews including yelp I now have a handyman, HVAC and electrical company I use. I trust them and the repairs are done at a fair price. In the big picture it's probably not worth it but if you're just starting out it may work for you for peace of mind. Make sure you do some research and go with a good home warranty company if you decide to go that route.
1 Reply
Matthew Shaw
Contractor · Austin, TX · Member since 2018 · 25 posts · 37 votes
6y
I've dealt with home warranties in my contracting business as well as in my personal homes (given as part of my purchase by the seller). Home warranties are not worth the paper they are written on. They always try to get out of paying for repairs, charge nearly the same as a service call would cost you out of pocket as a deductible, and rarely compensate fairly to the contractors, leading to sub par craftsmanship. I would avoid at all costs.
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Meir Greenblatt
OP
Rental Property Investor · Houston TX / Tacoma WA. · Member since 2019 · 166 posts · 89 votes
6y
It seems like 90% are against it so I will not be using them.
Thank you all for responding, hopefully it can help other new members as well.
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Josue Vargas
Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes
6y
@Meir Greenblatt

No. They have a very lucrative business for a reason. You have to ask yourself why people buy extra insurance. Most of the time is they feel insecure, they don't know better, they don't like high risks. Interesting enough, some of us not liking high risk, still buy lottery tickets.
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