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 information age, 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. I could tell you some incredible stories.
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 of more days. They will go out to the property, and a lot of times they won’t even 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.