Should I use a home warranty company for my rental?
Is it a good idea for you to put a home warranty on your rental property? Home warranties are like any warranties, people either love them or they hate them. But if you’re thinking about getting a home warranty on your rental property, I’m going to give you a couple of reasons why that’s probably not a great idea. Honestly, at Iron Horse Property Management, we prefer that you don’t have a home warranty, and here’s why. One, legally, morally, and ethically you have a responsibility to your tenant, which in our case, if we’re managing it, we have the responsibility to the tenant to make repairs quickly, timely, efficiently.
And so when a major system goes out or there’s a problem, we have found that with home warranty companies there’s a lot of red tape or a lot of hoops to jump through. We have to get on their list, they have to send somebody out. Then they have to evaluate whether or not they can cover. What can they cover? What can they not cover? And oftentimes, it ends up being several days or even weeks before a repair is made. Whereas without the home warranty company, we can just get in there the next day and fix it. Then we’ve got a happy tenant that’s going to stay longer and not move. And if a tenant’s not happy, that’s when they move. And we know we want tenants to get in there and stay.So timeliness of repair is the number one reason that we say stay away from home warranty companies.
Number two is simply that there’s a lot of stuff they don’t cover. Now if they cover it, great. You’re good. But there’s a lot of small print, a lot of things they don’t cover. Many, many years ago, I had a home warranty on a house that I was renting. I knew the furnace was old, it was going to go out eventually and I carried the home warranty for two or three years before the furnace finally went out. I thought, “Hey, great. I’m getting a new furnace out of this deal.” And I’ve spent maybe 1,500 bucks on the warranty. That’s cheaper than a new furnace. When it came down to it, they covered certain aspects of that replacement, but they didn’t cover all of it.
They covered the cost of the furnace itself, but they didn’t cover some of the installation or some of the other components that were needed. At the end of the day, I really didn’t win. And if you really think about it, there’s no way the home warranty companies can charge you $500 or $600 and pay out more than that in a year and make any money. So it only makes sense that there’s a lot of things they don’t cover. Those are the main two reasons that we say take that investment, what you would invest in a home warranty, put it into an account, save it, so whenever something goes bad, you get that money to put towards that repair and get it done quickly and promptly and without a lot of red tape. I hope that helps you understand a little bit more about home warranties.