Home warranties for Rental Properties

Home warranties for Rental Properties

If you are a property developer or investor who rents out their property, it might be a good idea to look into the possibility of acquiring a home warranty to cover all your major appliances and functioning services. In many cases, tenants leave much to be desired when it comes to taking care of somebody else’s property, and you could find yourself with serious expenses down the line.

Rental properties – who needs home warranties?

Home warranties are not necessary if the home you are renting is a relatively new build, and if you have new appliances as these will be covered by the manufacturer’s warranty.  For older properties with questionable appliances and services, it might be a good idea to look into covering your bases with a home warranty contract. There are dozens of good home warranty companies that offer cover for rental properties. Where they differ is on what they cover and how much you can claim for each item per year. You could decide to cover only the basics like kitchen and laundry major appliances or get extended coverage for your electrical installations, plumbing, sewerage or even swimming pool. It all boils down to the cost, and if it is viable.

Which home warranty to choose?

It is a fact that some companies do not cover rental properties. You would have to find one that covers all your bases in your location. Ideally, you would need to protect your investment a year at a time, for breakages of appliances that are used on a daily basis. The cost of repairing or replacing these appliances could turn out to be costly, especially if you rent out more than one property. Rental properties come with their own challenges and it is essential that you are prepared for all possibilities.

Acquiring a home warranty for all your properties could prove to be a wise investment that can be offset by the rents you receive. You need to do some research into which home warranties are available in your area, how much they cost, what they cover and the cap they have on specific repairs and replacements. You will find sample contracts on the websites of these companies which will give you a good idea of the terms and conditions and what exclusions and requirements are in place. Not all warranties are created equal and you will need to do your homework to find the one that is most suitable for your circumstances.

 

What home warranties cover?

Companies that offer home warranties to rental properties usually accept all types of homes including duplexes, single homes, townhouses, and apartments. There could be a difference in price depending on what type of home you are insuring. Purchasing a warranty for a condo versus a single or multi-family home will affect the price. Generally, home warranty companies are wary of homes that share piping and wiring. Most home warranties last for a year and cover all functioning systems in your home like electrical, plumbing, septic tank, and air-conditioning installations. Major appliances in the kitchen and laundry are covered and you can always opt for cover for electronics, central vacuuming systems and much more.

When it comes to repairs, the warranty company will send out a technician and you will be liable for the service fee which could be $60 – $125 for each claim. Since you won’t be resident in the house you will have to make arrangements to pay the company direct as most of these establishments will not send out a technician if this is not paid first. With the internet, it is easy for landlords to make payments online and keep their warranties up to date.

Is the cost of a home warranty worth it?

Home warranties usually cost from about $350 – $700 per year for basic cover. You could find that some companies charge more for rental properties. You will have to take into consideration your break-even point and to see if a warranty is worth your while. This would mean that you would have to calculate if your property warranty cost will exceed the cost of replacing any of the major appliances or services. The one advantage that landlords have is that the premium they pay for warranty insurance, is tax deductible as an expense, as you can claim under operating expenses.

If you have more than one rental property you will have to ensure each home separately. It is usually considered to be a smart decision to have home warranties in place in case of unexpected major expenses. A homeowner that rent out their properties will find that having home warranties in place on their properties will also keep them in compliance with federal, local and state laws. Apart from the compulsory house insurance, that landlords need to have in place, home warranties will also give you peace of mind for all your major appliances and services that are used in the home on a daily basis.

Landlords’ responsibilities

In order to be able to rent your property, systems and appliances need to be maintained and kept in running order. Some warranty companies offer preventative maintenance which will ensure that your appliances are adequately maintained. All you need to pay is the service fee. When choosing the ideal home warranty company, you will need to do some research on the track record the company has, when it comes to customer service. There are reviews online that will give you a good indication on whether the company hires qualified technicians and contractors to conduct repairs. What you are looking for is a company that supplies good service with quality parts in your area.

When you have multiple rental properties it could be difficult to find qualified technicians that you can trust. Reputable home warranty companies have vetted and chosen the best technicians in your area. You will also have to instruct your tenants to notify you if any appliance or system has malfunctioned. If the item is covered by your home warranty then you would have to place a service request with the company and arrange to pay the service fee. Appointments will be made for a technician to visit the rental property and diagnose the problem. On approval from the company, the items will be repaired or replaced, saving the landlord time and money.

In conclusion

People that rent out properties do so in order to make money. The first consideration is whether it is better to put an emergency fund in place to save you the cost of a home warranty. This would depend on the condition of the appliances and functioning services in the house. Before you make the decision, you must do some research on the company you will use, by finding reviews and ratings. You do not want to fork out hundreds of dollars a year if the company has a bad reputation.

The warranty company must also cover the items you want to ensure against breakages with reasonable exclusions and caps. If there are exclusions, the landlord will have to pay to fix whatever is not included in the contract. It is important to know in advance which items or parts are excluded and to take into account the waiting period before you can claim. The right home warranty for you will provide adequate coverage for a reasonable price. They must also provide a quick and efficient service in the area of the rental property.

In essence, acquiring a home warranty will depend on the age and quality of the rental home, as well as the location. Home warranties are a marketed product in real estate, and prospective tenants would like to know that in the event of any breakages, the problem will be solved efficiently.

 

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