The single biggest headache for investors of rental property are repair-related items. Depending on the condition and age of the investment home, these costs can add up quickly throughout the course of a year. Some property management companies estimate that an owner can expect to spend up to 15% of the rental value of the home on repair related issues. This is especially true early in the ownership process – when many problems unforeseen to the investor prior to purchase tend to surface.

One way to abate the costs of upkeep on a rental home is to add a Home Warranty Policy. While it's important to understand how these policies can help you as an investor, it's also useful to understand their limitations. Make sure that you review your Home Warranty quote with your home inspector prior to the end of the option period. A good inspector will point out the deficiencies in your homeowner policy, and greatly reduce the chance that you encounter a “gotcha” scenario later when it comes time to submit a claim on your policy.

Advantages & Limitations to Home Warranty Policies

• Save Cash – Repair expenses for major systems can add up quick. When something as vital as a major system stops working, a home warranty will limit how much you have to pay to have it fixed.

  • While most home warranties cover things like HVAC & appliances, there are limits to the coverage you'll receive. And some items are rarely, if ever covered – such as galvanized plumbing systems.

• Access a Professional – Sourcing a reliable professional can be tricky. A home warranty can help ensure that you're getting professional service from a reputable, licensed & insured provider.

  • Remember that home warranty service providers are vendors of the Home Warranty Company, not necessarily the consumer. They will monitor which items are covered under your policy, and tell you if another item is not. They may also report items back to the Home Warranty Company, such as deferred maintenance or non-coverage items that could lead to reduced, limited, or dropped policies.

  Pricey Appliances –  Appliances can be expensive to fix. Most home warranties cover appliances critical to the function of the home, and employing a Home Warranty can definitely save you some money when it comes to fixing these items when they break down.

  • Most appliances are indeed covered under Home Warranty Policies. However this sometimes only applies to those items in use within the functional area of the home. Meaning that if you have a freezer in a basement area or a refrigerator in the garage, there is a chance that these items would not be covered under your policy. Always check the fine-print on the appliance coverages to ensure that you're not caught off-guard later in finding out that only some, not all, of your appliances were included in the policy coverage.