Should you Buy a Home Warranty for Your Investment Property?
Most homeowners will at least consider the idea of purchasing a home warranty when they buy a new residence, and in many cases it really does make sense. However, it’s not nearly as beneficial to a new owner to purchase a home warranty when the house or building has been bought as an investment property. Here are some of the reasons why this is so, and why you should probably avoid purchasing a home warranty for any of your investment properties.
The timing of performed maintenance
Most of your tenants will be fairly well informed, having access to the Internet where they can find all kinds of information about tenants’ rights under the law. This means that in this day and age, it’s simply not feasible to have maintenance or repairs performed at the convenience of whichever handyman you normally use for the purpose. Tenants who pay high rents for the privilege of living in your investment property will expect maintenance and repairs to be performed in a timely fashion.
The trouble is that a home warranty really only affords you about a 50/50 ratio of timely performance on such issues. This means that about half the time, you can expect work to be done within a reasonable frame of time. The problem comes in with the other 50% of the time, and it’s anyone’s guess as to how quickly some of those repairs or maintenance tasks will be undertaken. In these situations, your home warranty simply does not provide good value for getting the work done.
Vendors and payments
Almost all home warranties will make use of the least expensive vendors for accomplishing any work that needs to be done, and that means the services provided will be in line with payment received. Even though you may have spent hundreds of dollars on your home warranty, you’ll still have to pay something like a $75 service call each time you need work done.
On top of that, not all maintenance and repairs are even covered by your home warranty. It might take several days before a report gets back to the warranty company, and your claim is disqualified. That means not only is the work not covered under your warranty, but you’ve already wasted a number of days to find out that it’s not covered – and you’ll still have to somehow get the work accomplished.
One of your top priorities as a landlord is to keep your tenants satisfied, so they will continue to reside at your investment property, and continue to pay you each month. When you have to go through time-consuming processes with a home warranty company to get things done, you’re increasing the dissatisfaction that your tenants go through, and giving them a reason to abandon your property. This is especially true when repairs are needed for such things as air-conditioners, stoves, or refrigerators. If you keep tenants waiting on repairs like these, it won’t be long before they’ll start to consider the greener grass at other residences.
Insure against maintenance and repairs
A better alternative to having a home warranty might be to self-insure against some of the major maintenance or repairs typically needed at your investment property. You’ll need to make sure that any emergencies which might arise are covered under your insurance, so that you don’t have to rely on a time-consuming process to make a claim with a home warranty company.
The math works out great for the warranty company, because they won’t end up making too many repairs, but they will still collect premiums from you. The simple truth is the math does not work in your favor at all, nor does the timing of any repairs which might be made. You’re much better off obtaining self-insurance to cover any of the major maintenance or repair tasks which might pop up at your investment property.