HOME WARRANTY for rental properties???

[Steve Holly]

We're in escrow on our first duplex.  Wondering if its "normal" to keep home warranty polices in place?  Whats your experience?  Do you keep home warranties on your properties, or just deal with the issues as they arise?  The subject property we are buying is a 1922 construction with an upstairs unit, a main level unit, and a full, unfinished basement that will eventually be converted into a 3rd unit.  Thanks in advance!

[Cassi Justiz]

I bounced this idea around with some other real estate investors not too long ago. So in theory, it could be a good idea to hold a policy in place during your first year or two while you build up reserves. BUT the downside is that you generally don't control over who does the repairs, how the repairs are done and the timeline of when they will actually do the service call.  Several investors said they had 2-3 weeks of back and forth of "see if this will fix it" patch jobs before the warranty company would approve replacement units. 

So if you don't have the reserves up front to handle major cap-ex expenses in your first year or two and you get an affordable home warranty that is easy to deal with, then it COULD be beneficial to hold a policy. But if you are in a position where you can financially handle cap-ex expenses, then it may be worth it to just handle the repairs without the middle man.