Purchasing home warranty for investment properties has become an increasingly popular practice for landlords and real estate investors. A home warranty provides protection against unexpected repairs and breakdowns of major home systems and appliances. For rental properties, having a home warranty can minimize headaches and provide peace of mind. However, not all home warranty plans are created equal. When shopping for home warranty for investment properties, there are several key factors for landlords and investors to consider in order to find the optimal coverage. This article will examine the benefits of home warranties for rental properties, what to look for in a policy, average costs, and tips for maximizing value.
Benefits of home warranties for rental properties
There are several advantages to having home warranty coverage for investment properties:
– Minimizes out-of-pocket repair expenses – With a home warranty, landlords can save significantly on repair and replacement costs for covered items like HVAC systems, plumbing, electrical wiring, and appliances. This provides budget stability and reduces unanticipated expenses.
– Allows for quick repairs – Home warranty companies have networks of qualified contractors to call for covered repairs. This eliminates the hassle of finding a technician and speeds up the repair process. Quick repairs mean less downtime for tenants.
– Enhances tenant satisfaction – Tenants will appreciate timely repairs for items like non-working air conditioning or broken refrigerator. A home warranty shows tenants their comfort is a priority. Higher tenant satisfaction helps reduce turnover rates.
– Provides 24/7 emergency support – Reputable home warranty plans include 24-hour emergency repair services for covered systems like a broken water heater or malfunctioning heating system. This around-the-clock support gives landlords and tenants peace of mind.
– May increase resale value – Offering a transferable home warranty policy can make an investment property more attractive to prospective buyers. It signals the home’s systems and appliances are in good working order.
– Covers unknown pre-existing conditions – Unlike insurance, home warranties provide coverage regardless of equipment age and pre-existing conditions, as long as items were in good working order at time of inspection. This prevents huge bills for repairs on older systems and appliances.
What to look for in a home warranty for rental properties
When researching home warranty plans, landlords should look for policies that offer:
– Coverage for major systems – At a minimum, the home warranty should cover heating systems, air conditioning units, electrical wiring, water heaters, plumbing pipes and fixtures. Some also include coverage for other big ticket items like pools, spas and ceiling fans.
– Coverage for appliances – Basic appliance coverage should include refrigerator, oven/range, dishwasher, garbage disposal, built-in microwave and clothes washer/dryer. Upgraded plans can include additional appliances like wine refrigerators and freestanding ice makers.
– Reasonable dollar limits per claim – Be sure dollar limits on claims provide adequate coverage. Limits between $500-$1500 are common for major systems like HVAC equipment. Watch out for lowball limits like $250 which won’t go very far for major repairs or replacements.
– Minimal out-of-pocket fees – Select a home warranty with affordable service fees, typically around $60-$100, that are paid per service call. Also look for low or no limit on number of service calls allowed.
– Reputation for good customer service – It’s essential to choose a reputable home warranty company known for quick contractor dispatch and minimal hassles when filing claims. Read reviews and check ratings with organizations like the Better Business Bureau.
– Ability to customize coverage – Look for a plan that allows you to customize coverage add-ons to meet the unique needs of the property. For example, enhanced coverage for pools, spas, well pumps, or septic systems.
– Transferability to new owners – Most home warranty plans allow the contract to be transferred to a new owner if the property is sold. This is an attractive feature for buyers. Make sure transfers don’t incur large fees.
Average costs of home warranties for rental properties
Home warranty costs are determined by factors like location, size of dwelling, coverage plan selected, and number/type of appliances included. Some additional considerations when estimating costs:
– Regional pricing differences – Home warranty rates can vary significantly by state and region. Be sure to get quotes based on the property’s location.
– Square footage pricing – Larger homes generally have higher home warranty costs due to potentially more systems covered.
– Multi-units cost more – Warranty costs for multi-family rental properties are multiplied by the number of units covered. Discounts may apply for multiple units.
– Appliance coverage costs extra – Adding extensive appliance coverage or systems like pools can increase the warranty cost. Consider what’s most essential.
On average, basic home warranty coverage for single family rental properties ranges from $300 to $600 per year. Multi-family or luxury homes with expanded coverage can run $800 to $1,200 or more annually. The tradeoff is these warranties can save thousands in repair costs over their lifespan. Be sure to get multiple free quotes.
Purchasing a quality home warranty tailored for investment properties provides valuable protection against unexpected and costly repairs. For landlords, the priority should be finding reputable providers with comprehensive coverage of systems and appliances, reasonable limits, and excellent customer service ratings. Taking the time to find the right home warranty helps hedge against budget-busting repair bills and keep tenants satisfied.