Home Warranty V.S. CapEx Fund?

[Niyi Adewole]

Good Afternoon Everyone,

I have my first property under contract and I am mid-way through the inspection period. The property costs 192,600 and is currently bringing in $2200 per month. It has 1 brand new Furnace and 2 that are aging. I was recently told that a home warranty would cover the cost of one of these furnaces going out, and have started looking into it. Home warranty costs $750 per year. 

Question: Are Home Warranties worth it? Or should i just set aside additional cap-ex to replace the furnace and other items when neccessary?

[Ryan Dossey]

So I used to sell warranties. They're typically not worth the paper that they're printed on. They typically use deductibles, inspection fees, grace periods, and exclusions to avoid paying claims. 

Ex: an exclusion on a water heater stating that claims due to sediment build up will not be covered. 

When we bought our personal residence it came with one through HWA. Our dishwasher started pouring water all over the kitchen floor. I called them to file a claim. It was a non-refundable $100 inspection fee and it would take them 2 weeks to send someone out. On top of that the fine print in the policy stated that wear/tear items such as seals and gaskets weren't covered. 

I spent $4 and 20 minutes with a parts fiche' to fix the issue.