Many people are familiar with the idea of buying a home warranty as a seller – it can often give potential buyers peace of mind. And in a buyer’s market, sellers can sometimes tip the scale in their favor.
But what if you are renting out your property? Does buying a home warranty make sense? In most cases, the annual cost of such a warranty is $250 – $600 per year plus a deductible of $30 – $100 per service call and some $$ for parts. Over a 5 year period, a total of $1310 – $3200 (with 2 service calls) may well exceed any repairs that you will need.
One example – you own a condo with a 15 year old furnace and AC system, a 10 year old water heater and the dishwasher, dryer, washer, oven and refrigerator are all 8+ years old. Most systems and appliances in your home are built to last. Dishwashers last ten or more years in most cases, water heaters average eight years or more and furnaces and air conditioners can last thirty years if properly maintained.
One scenario says that you may need to replace that water heater in the next 5 years, costing ~ $1000. Add in replacement of 2 appliances at ~$400 each and your total for these items maxes out at $1800. If you purchased a home warranty at the average price of $400 per year and needed to do these same repairs, you’d have spent $2200 (w/deductibles added in).
A better solution might be to take a very careful inventory of all systems and appliances when you are purchasing an investment property and use any very old items as a negotiating tool to bring down the price or ask the seller to replace as a condition of the sale. Talk to your buying agent about the best way to approach this in your market.
And perform regular maintenance of your heating and cooling systems by having them checked once a year and replacing the filters quarterly. By taking care of your appliances, you will get a longer life out of them and your tenant will have a better rental experience. And when the time comes to replace them, you will know you got your money’s worth.
Do consider hiring a property manager who will make sure that the right service people come in on a regular schedule and keep your rental running smoothly!
Visit Somerset Hills Property Management for more information