Do you all purchase home warranties on your rentals?

Question

Does anyone here purchase home warranties on your rental properties? I’m thinking about adding them to my properties to mainly cover items like hvac’s, water heaters and such.

Bob Daniels · Answer

I wouldn't touch a home warranty.

Warranty companies are in the business of making money, just like every other business.  If you somehow think that you will save money by insuring your hvac then you are incorrect.

The reality is they will nickle and dime you to death, and in the end won't fix anything.  They will send the worst tradesmen to do the job, the job takes many days longer than it should because they must first go out and assess the problem, then must submit their work order to the warranty company for approval, then be rescheduled to actually go out and do the work.  They will patchwork fix a 20yr old hvac unit, anything to keep it running instead of forking up the money to actually buy a new one.  This will cause your hvac to fail again and again and again as they continue to Frankenstein it back together.  If they do replace the unit, they will inform you that your policy doesn't cover X, Y, or Z such that you still owe half the total cost.  In the meantime your tenant is pissed off because their AC is continually breaking and they always have to make accommodations to let your tradesmen into their home.

I mean seriously, hvac's run on freon.  How in the world is adding or disposing of freon not covered as part of the warranty?

My first rental property came with a 1yr warranty paid for by the seller.  When my AC unit broke (17 yrs old) in the middle of the Arizona summer, it took them A MONTH to actually get to the point where they were ready to send someone to actually fix the problem.  Then of the 700 total bill to repair it, I was going to be on the hook for 340 plus the 75 service fee.  Infuriated I had them instead send me a check for the amount that they would have covered, and called my property management team and they had a brand new AC unit installed in less than 4hrs after I made my call.  In the end the free home warranty actually cost me money since I had to give a ton of concessions to the tenant for being without AC in the summer for that long.  I had gone to home depot and bought a window unit but that's not going to cool an entire house.  In all my years of landlording this was the only time I thought I was in serious trouble of being sued.  If the tenant went to the hospital for heat stroke I would have been done.

JD Martin · Answer

^^Excellent. More or less what I would say. There are so many exclusions that personally I don't think it is worth it. Also, many if not most home warranties are for owner-occupied homes rather than rental properties, so you would need to make sure anything you bought covered you commercially.

Of all the landlords I know, none of them use home warranties. I don't think that's an accident. Instead, I have 4 or 5 good tradesmen that cover the major issues - HVAC, electrical, plumbing, roofing, pest control. And a guy I can use for general handyman stuff if I don't feel like doing it.

Nathan Gesner · Answer

I know many property managers that will not manage a home with a home warranty. Any time you have a claim, you have to wait on them to hire a technician. They typically use the cheapest, most desperate technicians money can buy. Then you have to pay a service fee each time.

It's just like insurance and gambling; the house always wins.

Brent Paul · Answer

The home warranty is a joke or at least it was for me.  Just to get an electrical box replaced they wanted a 250 dollar deductible and their total cost was double what someone in my area would charge.  In the end the realtors split the cost and paid out of pocket.  They get you with extra surcharges as I later found out things like ac, sewer, etc is an extra cost that must be added.  It was a minimum of 100 dollars just for them to take a look and even if the warranty didn't cover it.  Huge hassle trying to get my questions answered on what is covered and getting someone out.  Never again will I purchase the warranty.

You are better off getting something like home service plus through your electric or gas company.  We have them here and they start at 20 bucks a month and they cover almost everything including furnace, ac, washer, dryer, fridge, etc.

Jason Martinez · Answer

I agree with @Nathan G. Although I purchased a home warranty for my property because the HVAC/Water Heater are passed the designed service life and it may become useful later. However, PM's will get a work order from the tenant for example, a water leak in the bathroom. My PM isn't going to contact me and tell me to call my home warranty company and get someone out there. My PM is going to get this taken care of ASAP and call their vendors that are reliable and fast.

Skyy Dugger · Answer

@Erika Brown I worked for a home warrenty eletrical division for a couple of weeks totally not worth. it just build a list of good contractors that can always get the job done the first time and for a fair price avg 100hr for most skilled trades if its a trouble call and they cant diagnose in less than 30-45 mins i would tell them to leave n get a new one tell you find some that is good i run along of service now for property management companies and can diagnose and fix most problems in less than an hour.  So a 100 or 200 a year is better than 600  plus a fee when the show up.  Im with everyone here looks like pretty easy decision. And if u get the bad compressor in hvac or something big just going to shell out cause warrenty companies will try to void anything big by any means and the tech will bs and get it voided if its big ticket stuff because of commission based worked.

Michael King · Answer

I totally echo Bob's statement. Took American Home Shield 6 months to replace every possible part on a 20 year old pool heater that was heavily rusted in the heater can (never replaced that, did they?). 3 different pool repair companies. The control panel replaced 4 or 5 times. They installed a ground rod and cracked the brick veneer of the house (like, a 4 foot long crack through the bricks). Then 4 weeks to fix a gas cooktop.

These warranty companies would spend $1999 so they wouldn't have to pay out $2000.

Brian Pfaehler · Answer

@Bob Daniels Amen brother! 👍🍻

Anthony Wick · Answer

@Erika Brown

Well, those were some interesting reads. I’ve used a home owners warranty several times (always seller paid). And while it has been somewhat inconvenient, it has definitely paid off. New fridge for tenant cost me $75 deductible. Furnace repair cost me $75 deductible instead of at least double that. AC repair, dishwasher repair, same thing.

I wouldn’t give an automatic “No”. And the analogy of insurance companies being a scam are over the top. Do you all have health insurance? Those companies make a nice profit too!

Here’s my final thoughts...they are nice to have for the first 12 months of owning a property IF you don’t have the cash reserves for a big repair. If you have the cash reserves, in the long run it is best to not buy the home owners warranty.

Anthony Wick · Answer

@Erika Brown

I always ask the seller to provide a 12 month warranty. It doesn’t always work, but maybe 50-75% of the time it does. I do not purchase my own or renew the one the seller buys.

Do you all purchase home warranties on your rentals?

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