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Should I Buy a Home Warranty for My Investment Property in San Diego, CA?

When you buy a house for your personal residence, obtaining a home warranty can be a good idea. But with investment properties, warranties never make sense. Today, we’re telling you why.

Should I buy a home warranty?

In the age of information, the tenant has access to all sorts of information about their rights. They leave online reviews and share information with their friends. Gone are the days of an old school landlord mentality where you can fix things whenever your favorite handyman is available.

Tenants are paying high rents in San Diego and you have to take care of maintenance issues quickly. Home warranties have a 50/50 ratio. That means that 50 percent of the time, work gets done in a somewhat reasonable timeframe. Then it’s an absolute nightmare the other 50 percent of the time.

Home Warranty for Rental Property: Vendors and Payments

You need to be aware of a few things before you buy a home warranty for your rental home. Most home warranties only use the bottom of the rung vendors. This isn’t meant to take a shot at anyone personally, but they pay very little to these vendors, so they aren’t offering a great service.

Warranties are also expensive. You’re still paying a $75 service call, even after you spend hundreds on the home warranty. Then, not everything is covered. It might take three days to get someone out there, then another day for the report to make it to the warranty company, and then you find out the repair isn’t even covered – after you pay the service call fee. It’s very frustrating.

Protecting Your Property and Your Tenant Satisfaction

The biggest reason not to have a home warranty is time. You submit a home warranty request, and it takes a day at least for the vendor to contact you. Then, they will contact the tenant and set up a time to look at the problem. That may take a couple more days. They will go out to the property, and may not tell you or the tenant what they find. They’ll report it to the home warranty company first, and then the information makes its way to you.

For time-sensitive repairs on things like refrigerators, air conditioning, stoves, and other problems, the extended time is not acceptable. It’s especially not acceptable if you want to keep your tenant in the property. The number one reason tenants move is that things weren’t fixed in a timely manner.

The best business practice is to not use a home warranty, and just use your own vendors.

Prepare to Self-Insure Maintenance Needs

You buy insurance because you can’t self-insure a loss. We all buy homeowner’s insurance because a major loss could put you out of business or bankrupt you. If your air conditioning goes out, it’s one of the most expensive things that can happen. You should be able to self-insure that repair. If you can’t afford to make it, you’re running a risky business to begin with. You need to be able to pay for the emergencies at your rental property.

Home warranty companies can stay in business because the odds are in their favor. They’re going to make more money and fix less stuff while collecting premiums. The math itself doesn’t make sense for you.

If you have any questions about home warranty coverage, please contact us at Good Life Property Management.

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Steve Welty

CEO at Good Life Property Management DRE #01744610

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Hi friends, Steve Welty here, owner and broker at Good Life Property Management, here to talk about if home warranty is a good idea for your investment property. Now, for your personal residence, a lot of times you buy a house to live in and they come with it, you know, not a bad call. I like to ask for the cash personally because I don’t believe in them but for investment properties they never ever ever makesense and let me tell you why. so first off, in the information age, the tenant has access to all sorts of information about their rights, they leave online reviews, they share information with their friends, so gone are the days of old-school landlording mentality where it’s just a tenant and you’ll fix it when you guys are available and things like that. To keep quality tenants, especially tenants now that are paying this high rent in San Diego, you have to service the maintenance issues very quickly. And home warranties have what I call a 50/50 ratio, so 50% of the time it gets done in somewhat reasonable timeframe and manner, and then 50% of the time it’s an absolute nightmare. I could tell you some stories that are just incredible you would never believe. Now some things to think about. Number one is the home warranties only use the bottom of the rung vendors. I’m not taking a shot at anyone personally, but they pay very little to these vendors. They may be good people but they’re not offering a great service because otherwise they wouldn’t need to go through the home warranty for business and they would have their own work, so usually the vendors are lesser quality. Number two is you’re still paying a $75 service call after you buy the four, five, six, seven hundred dollar home warranty. and then also not everything is covered. So a lot of times you know it takes a couple days, three days, to get out there, and then it takes another day for them to send the report to the warranty and then you end up finding out it’s not even covered after you made the service call and the home warranty. Very frustrating. But like I alluded to earlier the biggest reason is time. So how it works is you submit a home warranty request, takes a day for the vendor to contact you, best case scenario. Sometimes multiple days, you have to track them down. Then they’ll contact the tenant and set up according to their schedule. And since they’re not paid very much by the home warranty, a lot of times that’s pushed out. And then they go out and then a lot of times they don’t even tell anything to the tenant or the Management company because they have to report it to the home warranty company, and then we’re waiting another day. So especially the timely repairs like fridges or air conditioning or stoves, things like that sort of time frame just is not acceptable. And it’s not acceptable if you want to keep your tenant in the property. The number one reason tenants move is that things weren’t fixed in a timely manner. So the best business practice is to not use a home warranty and just use your own vendors. Few final things to think about: the reason you buy insurance is that you can’t self insure a loss. So like we all buy home insurance because god forbid if it were to burn down or some major liability you know, it could put someone out of business or bankrupt them. So if your AC goes out, maybe probably one of the most expensive things that could happen, or even like a roof issue, you should be able to self insure that repair. If you can’t, then you’re running a risky business to begin with, having the rental property not being able to pay for or having an emergency account for your property. And then lastly, the reason home warranty companies can stay in business is because the odds are in their favor.The odds that they’re gonna make more money and have to fix less stuff versus their premiums means that they stay in business. So just the sheer math doesn’t work in your favor. Hope I gave you some things to think about. If I can answer any questions for you or help you with anything, please let me know. Make it a great day!