Is Buying a Home Warranty Worth it for Rental Properties?

As a property investor, it's only natural that you want to protect your asset and reduce maintenance costs. 

For this reason, many investors ask, is buying a home warranty worth it? It sounds good in practice: an extra layer of protection for your housing systems in case of damage or failure. However, it may not always be the best option when you weigh the costs and what's included in the warranty. Plus, there may be better management options out there!

Should you buy a home warranty for rental properties? The answer is: it's complicated. Therefore, in this blog, we're diving into what a home warranty is, what it covers and doesn't cover, and some of the issues homeowners will face when taking out a home warranty for their investment property.

What Is a Home Warranty?

A home warranty is a contract with a warranty company to protect the homeowner (or rental property owner) from costs associated with faults in services, amenities, and some appliances. These are primary "services" such as plumbing, heating, cooling, and limited critical appliances. 

A warranty can save you from having to pay a significant amount every time something goes wrong with one of the above-mentioned services. However, there are several drawbacks to keep in mind. 

Typically, the property owner pays a premium for the service and a deductible for every repair required. The warranty generally lasts one year and can be renewed. 

Is a Home Warranty for My Property Worth It?  

You may wonder, should I get a home warranty for my rental property? 

For new construction rentals, the warranty that comes with the home can help cover costs if anything breaks that shouldn't break (because it's new). This coverage lasts a year until the new-home contract expires. 

However, from this point on, purchasing an additional warranty may not be worth it. Let's take a look at why. 

What Does a Home Warranty Cover?

Read the fine print if you decide to go ahead with a home warranty. While some warranties certainly cover repairs, they don't cover everything.  

Warranties typically cover: 

• Systems such as electrical, plumbing, cooling, HVAC (sometimes)
• Some appliances such as dishwashers, garbage disposal, oven 

Warranties may also offer coverage for additional add-ons, such as a pool or spa, and pest control for higher premiums. 

What Does a Warranty Not Cover?

You might be surprised to learn that a warranty doesn't cover several critical aspects of keeping a rental property well-maintained. 

Warranties often don't cover the following: 

• Roofing issues
• Structures
• Foundation
• Appliances (washer and dryer) 
• Sprinkler systems
• Windows and doors
• Preexisting conditions of the property

So, before paying for a warranty after buying a rental property, consider that you might still have to pay separately for repairs on critical aspects of the home. 

The Problems With Home Warranty

In addition to not covering everything required to deliver excellent maintenance services to renters, there are several negatives associated with the home warranty system.

• You're obligated to use their repair services: With many warranty companies, you are required to use their repair service people. Unfortunately, this means you won't know the people doing the work, and there may be problems with the contractor, such as slow service or quality issues. 
• It can take a very long time: Unlike contracting a service provider yourself or through a property management group, the warranty company elects its tradespeople. This adds extra time and steps to the process. It can take a long time to schedule an appointment with the limited vendors that they offer. The longer this drags on, the more issues it causes with your residents, including added frustration and stress. 
• There might be caps: You may be limited to a set amount when making the repairs. 
• Legal loopholes: Many exceptions and services are not covered in a home warranty. 
• Hidden fees: There are additional fees, such as a service call fee which you will be charged every time an incident happens. In addition, some warranty companies are known to charge cancellation fees and automatically renew policies without consent. 

Also, note that some home warranty companies have a reputation for denying claims and justifying non-service. Due to this, it's often better to save the money you would spend on a warranty and place it into a maintenance fund to handle issues as they arise. 

What Should I Do Instead of a Home Warranty?

If you're wondering about options outside of a home warranty, one of the best ways to ensure you're covered in case of service issues is to contact a property manager. For example, the best property management Portsmouth offers, like Osprey Property Management, can provide unparalleled service concerning service issues. 

The right property management company has professional tradespeople and providers on-call to take care of home maintenance or repairs quickly and effectively. This includes maintenance emergencies and ongoing routine maintenance checks. 

Choose the Best Property Management Portsmouth Offers Instead of a Home Warranty 

If you've bought a new property and are offered a year warranty, it's probably a smart idea to go ahead and take it. However, in most cases, it's probably not worth it to extend the warranty any longer. The limited services, lack of input, and legal issues make it an unattractive option for many real estate investors today. 

To care for your property and know it's in safe hands in case of an emergency, reach out to Osprey Property Management today. With our team of vetted contractors and years of management experience, we can support you in your real estate investment journey at every step.

Learn more about what you need in a property manager! Download a free copy of the "Guide to Finding the Best Property Manager in Hampton Roads!"