Have you ever heard that home warranties “provide peace of mind”? Most home warranty companies will promise to ease your stress as a homeowner, but are home warranties worth having for a rental investment property?
Purchasing a new stove or replacing an air conditioner may not be the most budget-friendly, and upfront, it may seem like a home warranty will lessen the cost of having to do so. However, as experienced Tampa property managers, we’ve dealt with home warranty companies that provide more stress and inconvenience in these situations than alleviate it.
Home warranties are enticing but can provide a false sense of security; home warranties often become an unnecessary and unreliable expense. As a professional property management company, we do not recommend or encourage rental property owners to purchase home warranties, and we’ll explain why.
What is a Home Warranty?
A home warranty is not the same as homeowners insurance, which can be a common misconception. The difference between a home warranty and homeowners insurance is the protection they provide. Home insurance only offers coverage due to certain occurrences that cause damage or loss to property or belongings, like fires or natural disasters.
On the other hand, a home warranty will cover necessary repairs or replacements and servicing due to general failure or damage over time. The coverage you receive will vary depending on the type of warranty you purchase and the company you choose as your provider.
What Are the Different Types of Home Warranties?
There are various types of warranties; some provide coverage specific to one item, while others cover multiple appliances or systems.
One type of warranty is a single coverage warranty plan. These warranty plans cover one specific appliance or item from the manufacturer. For example, say you purchase a washing machine from the company Maytag. Maytag promises their appliances will function for ten years, so they offer a 10-year limited parts warranty. This warranty plan covers individual parts for that specific appliance only.
On the other hand, many home warranty companies offer more general warranty plans:
- An appliance warranty plan will cover various appliances, including refrigerators, stoves, ovens, washing machines, dryers, and more.
- A system plan will cover home systems like HVAC, heating, electrical, plumbing, and smoke detectors.
- A roof plan will provide coverage for roof damage or leaks.
- Additional add-on plans will cover things like pools, sump pumps, or other appliances not included in the appliance warranty plan.
The specific coverage, monthly fee, and duration will vary depending on the warranty company and plan.
Is there a Benefit of Having a Home Warranty?
The main reason homeowners purchase home warranties is because they provide the promise of covered repair or protection. According to the warranty agreement, your covered property or systems will be replaced or repaired when necessary. While the assigned service technician may not provide service quickly or efficiently, it will be provided eventually.
The warranty company also works with a network of licensed contractors. After filing a claim, the warranty company will send a licensed contractor to your home to evaluate the damage. The upside is that you will not have to hire a licensed contractor as the property owner.
Are Home Warranties Worth It for a Rental Property?
The primary concern with home warranties is that the service can be prolonged and unreliable.
In some instances with a home warranty company, no matter the situation’s urgency, some repairs or servicing will go unresolved for an extended period. Although home warranty companies work with licensed technicians, these technicians do not always prioritize service orders from warranty companies. As a result of the lack of prioritization, there will also be a lack of communication, coordination, and efficiency.
As a rental property owner, a delay in repair or replacement is a significant concern that can cause an even bigger issue with your tenants. If you have a home warranty and a major appliance like air conditioning in your rental property goes out, you can put your tenants in the position of living without air conditioning. If your tenants are without air conditioning, not only is this extremely upsetting and frustrating for your tenants, but it is also dangerous in the Florida climate.
As a rental property owner, your goal should be to maintain quality tenants; lease renewals are highly beneficial for the success of your property and income. Suppose your tenants have to live without air conditioning because your home warranty company’s service technician does not prioritize your issue. In that case, the chances of your tenants renewing the lease are significantly diminished.
Some rental property owners purchase home warranties because they believe it will be more budget-friendly than repairing or replacing a system or appliance on their own. However, a delay in repair or replacement preventing your tenants from renewing their lease can cost the property owner more money. Securing a new tenant isn’t always immediate and can end up causing months of lost rental income.
How Much do Home Warranties Cost?
The disadvantages of home warranties outweigh the benefits for a rental property owner. One major disadvantage is the cost of a home warranty. Home warranties are an additional cost that may not be worth it in the long run. Home warranties can cost anywhere between $20-$100 per month.
Although it ultimately depends on the provider, most home warranty plans are 1-2 years long. It’s essential to consider how often your appliances break and how often your systems need repairs.
Consider how old your appliances are if you’re considering an appliance warranty plan. Most appliances have a lifespan of 8-15 years. If the appliances in your rental property are relatively new, paying a monthly fee may be unnecessary since your appliances will most likely operate smoothly. If the appliance functions properly for ten years, the warranty cost over the years may add up to even more than a new appliance itself.
So, is it worth paying a monthly fee for relatively new appliances? We would have to say no.
Rental Property Managers Summary
As Tampa property managers, we have encountered many issues with home warranty companies. We have experienced rental property owners in unfavorable situations when relying on a home warranty company for repairs or replacements.
We highly recommend hiring a property manager who works with a reliable network of licensed service technicians who will prioritize you and your property. Depending on your home warranty as a rental property owner, it is taking a significant risk and can pose a major threat to the success of your investment.
At The Listing Real Estate Management – Your Boutique Tampa Property Managers, we protect your rental property investment by providing fast and quality maintenance and work with licensed, bonded, and insured local vendors and contractors with proven success.
If you are a rental property owner looking for guidance, we are happy to assist you and provide the best-in-class property management services that positively affect you and your rental investment. Contact us today at The Listing Real Estate Management, your boutique property manager! Â
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