Thursday, June 6, 2013

Why Extended Home Warranties are Bad for Investment Properties

I last discussed this issue in May of 2008, five years ago.  Over the last five years it turns out that our experience has not changed or altered our opinion that "Extended Home Warranties" are generally a bad investment for Landlord/Investors as a long term strategy.  You can read my original post by clicking HERE. Please read the original post which I wrote when our company was still called Prime Properties.

Extended Home Warranties can be a valuable tools but there are specific negative issues which may make it a poor use of your money, especially if you are holding a rental property for 5+ years.  The two main issues involve the financial impact.  A homeowner warranty means you are paying for the repairs, plus the management of the repair, plus the bookkeeping and overhead to manage the program and a profit for the warranty company.  Because of these issues an extended home warranty is usually a net loss for most of our clients.

The second reason an extended home warranty can hurt your pocketbook is because of the negative impact on tenant relations.  Home Warranty companies have no obligation to respond in a specific time frame, which can lead to disatisfied tenants who move more frequently.  The biggest negative impact to an owner is tenant turnover.  Some things you can't control, but this you can.

If you read my previous blog post I detail when these products make sense.  If you already have a warranty in place when we take over management of your home ONEprop will make every effort to maximize your benefit of this tool, but we may also recommend that you ask for a rebate and put the money in your pocket.  Please ask your ONEprop Property Manager for the factors you should consider when deciding if an extended  home warranty is right for you.

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