If you're an owner or investor with a rental property, you may be thinking of all the ways you can protect that property and reduce your costs of ownership. Among the options many property owners consider is buying a home warranty. The thinking behind this is that a warranty means they don't have to repair something if it breaks down, and they can have lower expenses and more peace of mind.
Is buying a home warranty worth it? In some cases, it might be, but it's not necessarily the best choice in many circumstances. In fact, there are plenty of times when a warranty doesn't cover particular items or might not pay out much for repairs.
Here's what to consider if you're thinking about buying a home warranty for your rental property so that you can make an informed and financially conscious decision.
Is Your Rental Property New Construction?
For a new construction home that you're going to use as a rental, a home warranty can be valuable. This warranty typically comes with the house for its first 12 months and will cover some of the more significant problems if something goes wrong. After that first year, though, your new home warranty will expire.
Buying a warranty for additional years might not be worth the price. If you're asking yourself, "Should I get a home warranty for my rental property," the answer is "maybe," but only after making sure you're getting something that's actually going to be valuable.
Many home warranties cover only specific parts of the home, and they won't protect you from most of the expenses for maintenance and repair.
For example, most home warranties cover the HVAC and electrical systems and some of the appliances, such as the garbage disposal, oven, and dishwasher. Unfortunately, that's not a lot of protection when houses have many other systems and areas that could need repair.
What Kinds of Repairs Will You Still Have to Pay For?
Even with a home warranty, there are a lot of areas that aren't going to be protected. That means you'll still have to pay for any repairs to those spaces or systems, even if you purchased a warranty for the home.
In most home warranties, items that aren't covered include:
- The roof
- The foundation
- Some of the appliances (often the washer and dryer)
- Sprinkler systems, if you have them
- Windows and doors
Additionally, quite a few warranty companies contract with specific people or businesses to make repairs. You'll have to use the repair services the warranty company requests. If there are costs outside of the basic scope, or higher costs than the warranty company agrees to pay, you'll have to pay those costs, too.
There's also a service fee when you work with the contractor the warranty company requires. You may also have a deductible or other fees to pay before the rest of the repair is covered.
Timing and Options Can Be Big Problems
Depending on the other jobs the company's vendors have and how busy they are, getting on the schedule to have the repairs done could take a while. If you have rental properties that need repair, your tenants won't want to wait for weeks because the warranty company's vendors are busy, and you're not allowed to use anyone else.
So, is buying a home warranty worth it? In most cases, the answer is no.
Most property owners won't appreciate or benefit from a warranty they pay for but can't use when they really need it. That's especially true if you find that you still have to cover other repairs or that the home warranty won't pay for some of the repairs it should cover because the price of the repair is deemed too high.
A Better Option
Instead of getting a home warranty for your rental properties, consider starting up a maintenance fund. Even if you put small amounts into the fund each month, it will grow, and that will make it easier for you to pay for any needed repairs when they're required.
With a maintenance fund to support necessary repairs, you can also hire any contractor instead of being restricted to just a few approved vendors from your warranty company.
Delco Property Management Companies are the Best Choice for Maintenance
One thing that's definitely better for your rental properties than a home warranty is a property manager. When you work with a quality property management company, you have professionals ready to handle all repairs promptly and with quality fixes. They'll also keep up with the ongoing maintenance needs of your rental properties, so fewer repairs will be needed, and your maintenance fund dollars will stretch.
Are you ready to work with a quality Delco property management company you can rely on for maintenance and much more? Contact us at Rentwell, and let us help you get more out of your rental property!
