There are many things that should be on the list of best practices, when it comes to the investment real estate game. While some things are obvious, others may be more obscure, yet are must haves for a seamless as possible investment real estate experience. (Notice we didn’t say, “seamless experience.” There are seams…everywhere! But, with the right foundation, you can manage things in a seamless as possible manner.) One of the most obvious things you need, with maybe a few obscure reasons why, is a home warranty plan.
Home Insurance vs Home Warranty
Do not make the mistake of being under protected. If you have a mortgage, your bank/lender requires that you have home insurance. A home insurance policy covers any accidental damage to your home and belongings due to theft, storms, fires, and some natural disasters. There are four primary areas covered under the policy: the interior and exterior of your home, personal property in case of theft, loss or damage, and general liability that can arise when a person is injured while on your property. A home warranty is a service contract that provides for repair or replacement of your system components and appliances that fail due to age and standard wear and tear.
Benefits of Home Warranty Plan
- If you are selling your home, buyers are more attracted to homes with the protection of a HWP. A Gallup Poll revealed that 8 out of 10 buyers actually prefer to purchase a home that has a warranty plan. This is especially vital, if your home is considered to be “older,” and thereby more prone to the issues covered by an HWP.
- For the same reason a HWP attracted you, it will attract potential first-time buyers, that may have not been interested in something that’s not a “new build.” First-time homebuyers often do not have surplus funds, and will value, greatly, assurance that they will not have to come out of pocket for minor repairs.
- Novice Landlord. If real estate is your chosen business venture but not your background, you may fall short in areas such as contingency fund, and surplus income. A HWP protects you from having to make what may be costly repairs, out of pocket. It may also help you attract and keep renters. With a HWP, they know that they will not have to wait, needlessly, for you to be able to fund repairs.
Again, a home warranty plan is not mandatory like homeowner’s insurance. Whether you bought the home to live in, sell, or rent it’s a game of risk vs. reward and value vs. cost. You may not want to spend any unnecessary money, for something that is not required. Whether or not you choose to buy a home warranty is a personal decision based on multiple factors. If the home is new to you, there is a period where you are still learning the home. You may choose to do away with it when you’ve learned and worked out all of the kinks. Until you know, and for best practices as a homebuyer and/or landlord, home warranty is worth every penny.
By: Alicia M. Caldwell, AMC Literary Services
