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Home Warranties and Rental Properties. Are They Worth It?

House key in home Insurance agent's hand protectionThere’s no way to get around it, being a homeowner can be pretty expensive at times. Between the cost of preventative maintenance, and having to pay out of pocket for those unexpected repairs; making sure you’re financially prepared for maintenance expenses, whether preventative or unexpected, is a must for every homeowner.

As a homeowner, you’re probably also looking for ways to minimize any out of pocket expenses, and one way many homeowners attempt to do that, is by signing up with a home warranty company. In this post, we’re going to discuss what exactly a home warranty is and what home warranty companies do, the pros and cons of those companies, and if it’s a good idea to hire a home warranty company when you own a rental property.

What is a home warranty? A home warranty (not to be confused with a home insurance policy) is a plan that pays for repairs and sometimes replacements of household appliances and systems. Things such as plumbing leaks, drain clogs, HVAC issues, and even appliance repairs, may be covered under your home warranty policy. In addition to repairs, your home warranty policy may also cover the cost of replacement of major appliances within your home.

What are the pros of a home warranty? Many home owners would report the number one reason for hiring a home warranty company, besides attempting to save money, is peace of mind. If something breaks in your home and you’re unable to fix it, what is the next thing you do? If you’re like many homeowners, you start researching different contractors to come out and take a look at the problem. With a home warranty, you don’t have to. You simply call up the home warranty company, or go right online, and report the issue. They will reach out to one of their preferred contractors, who will then be in touch with you to schedule an appointment.

In addition to peace of mind, there’s also the money saving aspect of a home warranty. When you sign up with a home warranty company, you will be made aware of your premium costs upfront, as well as any deductible for repairs that are covered under your policy. This allows you to budget accordingly, and be much more prepared financially for the unexpected.

As with anything, there are also some drawbacks to having a home warranty. One of the biggest drawbacks is the fact that not everything is covered under a home warranty. It is very important that you read the fine print of your policy, so that you know exactly what is and what is not covered. Otherwise, you’ll be in a position to pay out of pocket for repairs that you were not expecting to.

Another drawback of a home warranty is their service fees. Many home warranty companies charge a service call fee for every issue that is reported. Fees range from $50-100, and must be paid prior to the contractor even looking at the issue. Home warranties cover a wide range of repairs, however, these service fees can quickly add up.

Is a home warranty worth it when you own a rental property? This is something a lot of our home owners ask, and while the decision is completely yours to make, a home warranty may not be warranted, especially if you own a rental that is being managed by a Property Management company.

Like home warranty companies, most third party Property Management companies have a list of preferred vendors they work with. This still gives you that peace of mind you may be looking for, when deciding whether or not you want to purchase a home warranty. Most management companies will schedule any maintenance repairs with one of their preferred vendors, and ensure those repairs are completed properly.

When having your property management company handle repairs, you can potentially save a significant amount of money on service call fees. While some vendors may charge a diagnostic fee, others will provide a free estimate for repair costs. This will certainly be on a case by case basis, but you should not expect to pay a service call fee for every issue reported.

Finally, it is important to keep in mind that a home warranty is only as good as the company that stands behinds it. While some home warranty companies offer great customer service, and speedy response times, we have found others leave a lot to be desired. If you have a dependable and trustworthy Property Management Company, it may make the most sense to allow them to coordinate all repairs on your behalf. After all, your management company should be handling everything with your best interest in mind. From choosing the best vendor for the job, making sure the job gets done for the right price, and ensuring the job is completed properly, these are just a few things you can expect when having your management company handle maintenance repairs.

If you’re still considering hiring a home warranty company, the best thing you can do is research as much as possible. Take a look at the reviews, ask questions, and always read the fine print. Make sure you feel 100% comfortable with a company, before signing any home warranty contract.