When investors purchase rental properties, they often struggle to determine whether they should purchase home warranties or not. As a landlord yourself, you might be wondering the same thing. Home warranties cover repair costs as well as system and appliance replacement costs. While you need landlord insurance to protect your investments from natural disasters, you might learn that you do not need a home warranty. On the other hand, you might really need a warranty to yield good returns on your investments. Read this post to learn if a home warranty policy is worth it for your investment properties.
How Old Are Your Properties?
One of the most crucial factors to consider when determining whether you need home warranties or not is the age of your investment properties. Typically, landlords purchase home warranties for older homes. After all, aged homes usually require more repairs and maintenance later down the road. Newer homes, however, might not need warranties if their appliances and systems are also new. If you recently purchased your rental property, you might even have coverage for the first year. In such a case, you do not need to spend your capital on investment property warranties.
Do You Have An Emergency Fund?
You also likely do not need home warranties for your investment properties if you have an emergency fund. Many successful landlords include maintaining emergency funds in their investment property financing plans. These funds are designated to paying for costly home repairs when they arise. If you have the capital to put aside for pricey projects, you do not need to spend more on home warranties.
Emergency funds actually save landlords more money because they do not have to pay the annual fees for the best home warranty. Therefore, the coverage is not worth it for your investment properties if you have an emergency fund.
Do You Want To Minimize Repair Expenses?
In contrast, you should learn more about home warranties if you want to minimize repair expenses when you cannot afford to establish an emergency fund. When landlords pay for home warranties, they know how much they are going to spend on a regular basis. Landlords who do not have this coverage risk getting surprised with hefty repair and replacement bills.
Instead of having to fork over large sums without warning, you can pay the annual contract fee and the service call fees when a problem arises. If you want to minimize your financial risks without building an emergency fund, it is worth it to get a home warranty on your rental property.
Can You Afford A Home Warranty?
You can also determine if home warranties are worth it for your investment properties by taking a look at your bank account. If you do not have the capital to pay the associated fees, you might want to pass on buying a home warranties package.
While you can obtain the capital through other means, you could end up putting yourself in a worse financial situation. However, if you have a few hundred dollars leftover on a yearly basis, use it to purchase home warranties for your properties. If you do not have the capital and still want a warranty, use the top ways to earn more money.
Are Your Tenants Responsible?
Finally, consider how responsible your current tenants are. Typically, landlords who rent out to responsible adults hold off on purchasing home warranties. If your tenants take good care of your newer appliances and do not overuse the systems provided, your risk is lower. Therefore, it might be cheaper to pay for any accidental repairs or replacements as the damages come up. If your tenants are currently irresponsible or you fear that your future tenants could be, home warranties are worth it for your properties.
What Will Your Warranty Cover?
Before you decide on purchasing a warranty, you’ll want to know what your coverage will extend to. Ultimately, protection will vary based on what your provider offers. Typically, these solutions extend to all your mechanical systems. This includes interior residential or business HVAC units, plumbing, and electrical systems. Plus, it will likely cover your water heating systems and ductwork. Some specialized warranties also protect your appliances, including dishwashers, garage door openers, or ovens.
If you are struggling to figure out if you need home warranties for your rental properties, you need to consider specific factors. For instance, older properties need the appliance and systems coverage because they are more likely to fail. If you have an emergency fund, you can pay for any repairs or replacements yourself. However, landlords who do not have emergency funds can minimize repair and replacement expenses with warranties.
Landlords who do not currently have the finances to pay for home warranty costs should avoid purchasing them. That’s why they often need the top eviction services for landlords. Lastly, if your tenants are responsible, you might not have to deal with any damaged appliances or systems, making warranties unnecessary. Answer the above questions to determine whether home warranties are worth it for investment properties or not.