do you guys use home warranty on Rental property along with PM?

[Sam Shirazi]

Hi guys, wanted to know if real estate OOS investors in Austin use home warranty and have their PM work with HW in case of repairs ? My PM is against working with home warranty companies due to their slow response times, unable to fix the issue on time, dragging stuff and always saying "oh we don't cover that one issue "... Personally I don't have a good experience with the so called leading HW companies in the US as well for my primary residence. 

But I am really concerned for my rental unit as more and more sudden surprises keep popping up. Not sure if it is my bad luck or I just bought a cr*p house. I am not even sure if my PM is quoting me the cheapest and best service or the whichever is the fastest so they can move on. It has been a stressful year for me with respect to repairs. Only positive thing was home appreciating by 50-60K...

Can someone pls suggest if there are good HW companies in Austin or I can just forget it? Also any recommendations on how to avoid these frequent repairs? Mine is a 2005 house and when we did the inspection there were many things called out , but due to lack of budget I only focussed on few of them per my maintenance manager 's suggestions. Surprisingly the repairs that came up as part of tenants complaints were not related to any of the things called out in the inspection report. I understand I need to budget for 12% maintenance/repairs costs in my cash flow analysis but it has already exceeded that . At this point, I am running out of ideas whether to be "proactive" or "reactive"...both seem expensive ..

[Eric Fernwood]

Hello Sam,

We've been working with investors for about 15 years and recommend a home warranty for at least the first year and sometimes more than the first year. Some comments on home warranties:

• Not all home warranty companies provide the same level of services. We've worked with many over the years, and most will do everything possible to deny all claims. Some pay the vendors so little that they put off warranty repairs until they have "dead" time. We know of only one home warranty company in Las Vegas that performs well.
• The first year you have a property in service is when you will have the most repairs. Normally, we do not recommend keeping a home warranty after the first year unless you have an expensive item that seems likely to fail - for example, the HVAC.
• In general, property managers hate working with home warranty companies. This is especially true if they have an in-house maintenance department. As a rule, never work with a property manager whose profit depends upon your having excessive maintenance.
• No matter who the vendor is, the property manager has to stay on top of them and ensure the work gets done on a reasonable schedule. If necessary, the property manager's job is to hound the home warranty company until the repair is completed. That may include the property manager calling the warranty company's regional manager or whoever they need to call to get things done.

Other comments:

• You mentioned you did not do all the repairs on the inspection report. That is normal for us. We evaluate each inspection report and advise our clients on which items should be repaired and what should not. In many cases, the items listed in the report are FYI's and nothing more.
• The two most important jobs a property manager has are finding a good tenant and controlling costs.
  • Finding a Good Tenant - There are VERY few property managers that have the skills to select good tenants. Screening prospective tenants is almost an art form. If the property manager does not have a written screening process they can show you, you need a different property manager. Their process it must include contacting the last two to three landlords or property managers. The tenant's current property manager is of little value. If the tenant is wonderful, they will say so. If the tenant is horrible, they will say the tenant is wonderful, just to get them out of their property. A good property manager will email the current landlord or property manager, knowing that it is doubtful they will get factual answers. The prior landlords are the ones who will provide the best information. But the property manager will not get it in writing. The property manager has to call them in person and ask the right questions. This requires some skill to read between the lines.
  • Control Costs - The property manager is responsible for controlling costs. Cost control includes doing only the necessary work, managing tenant requests, and using cost-effective vendors. If the property manager has an in-house maintenance department, count on your maintenance costs to be much higher than if they contract out all the work.

Based on what you said, I would look closely at your property manager. Find out who is doing the repairs and how the property manager is managing the tenant. 

I hope this helps.