Using a Home Warranty company on a rental

[Philip Mullinax]

Just putting out the feelers.  I currently have a home warranty on my rental home that I am considering dropping.  I have had them for about three years, but have only had to use them once and it turned into a headach and required a pretty good deductible.  I have had the same renters in the home for the past three years and they seem to truely care for the home.   I wanted to see if other investors use a home warranty company for their rentals or if there is a good formula that takes into account the age of the home when considering if using a home warranty company is in my best interest.  I appreciate any feedback.

Thanks,

Philip

[Arlan Potter]

@Philip Mullinax

I have 94 units, 1/2 of which have central HVAC.  Even at $475/year for home warrantee for those with HVAC units, it would be well over $20K per year and most would be wasted. Too many restrictions, too many deductibles. They rarely replace an entire system, just patch. When we have an issue we fix it.  In fact, this year, I replaced only 4 or 5 water heaters, and 3 of those were under the manufacturers 5 year warrantee(no charge).

The odds of an AC or Furnace actually going bad, I mean bad and needing replacement in a particular year is nil.

These warrantee programs are only good if paid for by the seller of a property, to help sell the property to a leary buyer.

If you looked at my P & L for each rental, the vast majority of properties have no or minimal repairs on an annual basis.

PS   This summer  we did replace 3 HVAC furnace systems in our apartments. It cost me about $11,000. I wonder if they would have paid to replace the 1968 model Lennox Furnaces.