As a property management company landlords often ask “should I purchase a home warranty for my rental in San Diego. Heck, a home warranty covers the repairs or replacement of major appliances and system components in your home, so we understand why it might make sense to purchase a home warranty for your property. However, for the following reasons, we never recommend that our clients buy a home warranty for their rental property.

Vendors and Payments

First of all, an annual home warranty can range between $450 to $1,500 depending on the plan and property size. Not only do you pay for the warranty itself, but you must also spend an average of $75 per service call. Most home warranty companies use the bottom of the barrel vendors to keep their costs down to make more profit. Not to disparage anyone but if a vendor costs very little, they are less likely to provide excellent service.

Limitations

Home warranties don’t cover everything and often have significant limitations. For instance, many home warranties won’t cover pre-existing problems or problems caused by improper maintenance or unusual wear and tear due to reckless usage. This becomes a headache when the warranty company declines coverage since how do you prove you completed the required maintenance as instructed? Additionally, most policies have exclusions. For example, a refrigerator exclusion might include an ice maker, ice crusher, water lines, leaks of any kind, door seals, hinges, and any audio or visual components. One of our clients was recently declined coverage since his policy did not cover the refrigerator’s ice maker. After spending $620 for the home warranty and $75 for the service call our client was forced to hire a private appliance company to repair the ice maker.

Time and Tenant Satisfaction

The most significant issue with home warranties is time. With a home warranty, if you need something repaired, you must first make a claim with the warranty company who then arranges to send a technician to your home, usually within a day or two.  After visiting your property, the technician reports his findings to the warranty company, not to you. Once the warranty company receives the technician’s report, It might be another day or two before they let you know if your warranty even covers the repair. If your plan does not include the type of repair, you are back to square one after a few wasted days. If your plan does cover the repair, you must then wait for the warranty company’s vendor to contact you to arrange a time to do the repair.

All of this back and forth with the warranty company is time-consuming. With your residence, you can take all the time in the world to repair, and you might be okay with all of the waiting around and back and forth that comes with a home warranty. However, with an investment property, time is of the essence since it is your tenants waiting for the repair and for time-sensitive repairs to things like refrigerators, air conditioning, stoves and plumbing, this extended period of waiting for a repair is unacceptable. Not only will you have an unhappy tenant, but your tenant will also have grounds to break the lease and move out without penalty depending on the situation.  It is best to use your own trusted vendors for your investment property.

Prepare to Self-Insure Maintenance Needs

Home warranty companies stay in business because the odds are in their favor. They collect premiums and make money because, in the end, they are not paying as much for repairs as they are receiving in premiums. This business model works for them but not for you. If you have investment properties, you should be able to self-insure repairs and be able to pay for emergencies at your property without a home warranty.

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