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Does Your Rental Property Need a Home Warranty?

Young Couple Looking for a New Home

Owning a rental property can be an exciting and profitable way to generate a source of income. However, the ins and outs of actually running such a property can be confusing for potential owners. In particular, whether or not a home  warranty is necessary can be a tricky decision to navigate. Understanding what a home warranty is, the benefits and drawbacks of having one, and a few deciding factors can help make the choice a bit simpler.

What is a home warranty?

A home warranty is essentially a home services contract which pays for necessary repairs and replacement of appliances that can’t be repaired. Typically, a basic policy will cover home appliances, heating, cooling, plumbing, and electrical systems. On the other hand, a premium system will also cover roofs, pools, wells, lighting systems, and lawn sprinkler systems. Home warranties generally run for a one year period.


What are the benefits of a home warranty?

While homeowners insurance covers things that could happen, such as floods, earthquakes, etc., a home warranty covers things that will inevitably happen, such as appliance breakdowns. Having a home warranty means these breakdowns can be resolved quickly and efficiently, with minimal out of pocket expenses for the homeowner. Owning a rental property is a large responsibility and a home warranty can provide some much needed peace of mind. It is also possible that the costs of a home warranty could count as operating expenses and thus be tax deductible. Consult with your tax professional to know for sure.


What are the drawbacks of a home warranty?

While home warranties can certainly be useful for rental property owners, there are some negatives as well. In some regions, providers prefer to work with private homeowners as opposed to landlords and some companies even require payments to be made in person, which can be difficult if you don’t reside in the covered property. For this reason, it is essential that you obtain confirmation your provider of choice is willing to cover rental properties.


Should you purchase a home warranty for your rental?

So, is a home warranty right for you? Here are a few key considerations to help make your decision.

  • How old is the property?Brand new homes are less likely to have problems in the first several years and new appliances are likely covered by manufacturer warranties. A property a decade or more older, however, will be more prone to the type of breakdowns covered by a home warranty.


  • What do your finances look like? Do you have an emergency fund that can supplement maintenance costs out of pocket? If not a home warranty might be a good idea – providing you find a warranty you can afford without hardship.


Are you a local landlord? If you live in the same area as your rental property, working directly with repairmen can be simple and cost-efficient, but if you don’t live within a short distance from your rental a warranty might make coordinating repairs simpler.