Home Warranties - Worth it or nah?

Question

Hey fellow house hackers! Has anyone ever kept their home warranty when turning their primary residence into a rental? Do you think it is worth it?

I have a home warranty that I've been paying since 2016. It's been worth it as the homeowner, but now I'm moving and renting it out and wondering whether to keep it or not. The house will be cash-flowing $450/mo. The home warranty is $64/mo. I will be managing the property myself.

Charles Carillo · Answer

@Anthony Paul Guglielmi

Check this link: https://www.daveramsey.com/ask...

Christine Kankowski · Answer

I have so many examples to prove no-   Here is the latest- 2 weeks ago.

Tenant called about heater not working.  Got our guy to give estimate on repair. Said it is such an old unit, there is no way to fix properly. Git 2nd bid.  same answer.

Owner then told us he had a warranty.  CAlled warranty. They did fix problem. I called repair company to find out how they did it.   Duct taped one part, jimmied another...   Got it working.  But alas. It broke again within 2 weeks.

Hmm another $75 to the Home warranty.  They dont want to replace... just keep fixing a unit from 1993.

JD Martin · Answer

They are a total waste of money. If you read the exclusions there are outs for virtually everything. You have to use their providers which tend to be whatever flunky will work for half the going rate, and provide that level of service.

Nathan Gesner · Answer

Home warranties are a pain. They don't cover as much as you think. Even if they do, the warranty company makes you use their technician and they always pay bottom-of-the-barrel prices so the technician you get is likely to be very low quality. I know many property managers, myself included, that won't even manage a home with a home warranty because it's too much of a hassle.

Dean Gould · Answer

I bought a unit and bought a $500 HW from Choice, which I already had problems with them on my home residence.  Brilliant.  My hot water heater went out at my home, with 6 guests staying there and a house full of friends and family for a celebration.  That was a Sunday, and guy came on Tuesday.  He said Choice would let him fix it.  He told me that the unit was shot and he wasn't going to work on it because they would hold him liable for it.  then Choice denied it saying it was corrosion which they don't cover.  Cost me $1500 and they wouldn't pay a dime.  Now, in this new unit, the A/C went out after a year.   Tenant is out of the home in a hotel, due to the extreme Florida heat.  A/C guy said the unit is shot.  Then he came back again but this time he somehow reported the unit was fine.  I believe he is playing some game with Choice to not be penalized.  He told both my property manager and the tenant that the unit was shot.  Owner of the HVAC company won't have anyone go back there because he said Choice won't pay to replace it and it is shot.  Choice is saying the unit can be fixed.   I can't afford the tenant being in a hotel.   Days are passing. To get an outside company to replace the unit will be $4,200 - $5,600 depending on the unit I choose.  Choice is just dragging their feet.  This started on Wednesday.  Friday, they said an advanced claim specialist would call me within 2 hours.  Never called. Friday after work hours, I see a note in my Choice account asking my property manager to set an appointment, not Monday morning but Monday afternoon. I've come to this conclusion:   If you want to pay a warranty company $500 - $700 to be available for tenants to fix a stopped up toilet, or a simple electrical problem, go for it.  You'd have to have them go out about 3-5 times a year to break even.  Let your property manager be the contact so that tenants aren't calling the warranty company every week.  If you are banking on them fixing a major unit like HVAC, Water Heater, etc. think twice.  You'll have angry tenants and you'll spend your life trying to get them to pay. They right their policies rock solid so you can't do anything about them disclaiming everything.  Its really a mixed bag.   I had some luck with American Home Warranty but I wouldn't count on any of them.  Most charge $100 service fee so you are paying $500 plus $100 each time they come out.  5 trips and you are now in it for $1,000.    The savings account idea to somehow pay for repairs is a good concept, but in our minds, when we have to fork out the money, it doesn't feel right.  I love Dave Ramsey but probably not going to do the saving account idea.  I'm torn to be honest moving forward.  Maybe its just the fact that Choice is horrible.   Dean Gould   www.SalesConnect180.com

Patricia Steiner · Answer

Nah...

Carl Millsap · Answer

@Anthony Paul Guglielmi Yes and NO.

1. If you know there is a good chance your HVAC or hot water heater is on its last leg and you don't have the reserves to cover it, then sure keep the warranty.

2. But if all systems are in good working order, I'd put all of the cashflow into a maintenance account until you have a healthy reserve.

I bought a rental years ago, the HVAC looked like it was on it's last leg so I bought the warranty @ closing. Sure enough the unit went out.

It was an absolute nightmare getting the unit replaced. Add in the fact I still had to shell out another $850 because the warranty didn't cover the "modifications" needed to replace the unit.

So... who really paid for that unit? I paid $450 for the warranty and $850 for "modifications." They probably had $2k into the unit if that.

Look at it this way....how many service calls have you made on the warranty since 2016? If you had to use it how much was the deductible?

Now take the money invested annually into the warranty since 2016, and think if you had it in a savings account for just in case maintenance issues. Would you be ahead...breakeven...or at a loss?

Home Warranties - Worth it or nah?

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