The Real Cost of Home Warranties Can Be Much Higher Than You Think

One of the most expensive things about owning investment property is the gap between a renter moving out and a new renter moving in. We call this “turning the renter.”

During the time between renters, rent isn’t being collected. And it’s important to invest in things that will make the property even more appealing to a new renter. Things like new paint, new carpet, updated light fixtures, and pulling dated vinyl and installing new tile. (The goal of doing updates is to reduce the length of vacancy while increasing rental rates.)

So if the most expensive thing of owning investment properties is having a renter move out, you want to do all that you reasonably can to make a renter WANT to stay in your property.

With that in mind, here’s a real life example of how a home warranty can have a negative impact your bottom line.

Last summer, a renter called in to report that their air conditioning wasn’t working. At the time, there was no home warranty on the house.

We had one of our licensed and approved HVAC vendors go to the home. They fixed the problem by adding Freon to the system, but notified us that the air conditioning unit probably wouldn’t make it through the next year.

We shared this information with the owner, who then purchased a home warranty.

The next summer, the air conditioning unit stopped working during July when it was close to 100 degrees outside.

We called the home warranty company who dispatched their own vendor. Their vendor “fixed” the problem, but two days later the renter called because the air conditioning had stopped working again. The home warranty company sent their vendor out again… and this process repeated FOUR times over a twelve day period.

The renter was furious that we were sending incompetent vendors who couldn’t get the air conditioning unit fixed (even though it wasn’t our vendor.) The renter assumed that the owner was doing things as cheaply as possible to avoid replacing the unit. And they were living in an uncomfortably warm home for days while this was happening.

We did everything we could to get the problem resolved, including calling the home warranty company to ask what they would be willing to pay towards replacing the unit. The most they would contribute was $500. The new unit cost the owner $4,000. So not only did the owner have to pay for the majority of a new unit, there’s a good chance their renter won’t renew at the end of their lease.

This is NOT an isolated example. This is how 90% of home warranty calls work out.

The REAL cost of a home warranty can be much higher than you realized.