Will a Home Warranty Really Shield Me from Repair Costs?

Question: I pay $436 a year for a home warranty. But is it worth the expense? I wonder if I should save that money and pay for home repairs out of pocket instead?

 Answer: Your instinct is correct. In theory, a home warranty covers all repairs on the appliances and service systems in your home for an annual premium of $250 to $450, plus service fees of $50 to $100 anytime a contractor is dispatched to repair or replace a unit. At first glance this might seem like a good deal, since you might pay thousands of dollars to replace a high-quality furnace or central sir system. The problem: These policies are loaded with caveats and exceptions in the fine print that can leave giant holes in your coverage.

            For example, the cause of the problem generally has to be within the perimeter of your house, so if your plumbing breaks down because of a tree root in your yard, your claim will be denied. Ditto if a contractor arranged through the warranty company determines that you haven’t been performing proper maintenance on your system or appliance (say, you didn’t change the filter on your furnace frequently enough). You’ll also have limited say over what kind of replacement appliance you get, and you will almost always have to shell out extra if you need to upgrade your system, plus pay to get your old unit hauled away.

            In other words, even with a warranty, you’re likely to end up paying plenty for home maintenance. So you’re better off using the money you would have spent on premiums and fees to build a truly adequate emergency fund that you can tap in the event of the occasional boiler meltdown.

- Carolyn Bigda

Money Magazine April 2008

Owner Maintenance of a Rental Home

Home maintenance is an important and complex issue for owners of rental properties! 

Your home, like your vehicles, requires regular maintenance to keep the home in good repair and running efficiently. Unexpected repairs, unfortunately, leave you feeling frustrated in both the timing and the cost. Repairs reduce your anticipated rental income and, of course, the timing is never right.

Owner obligations

You have an obligation to your tenants, however, to keep the property in good repair; just as you have an expectation for your tenants to care for your house which is currently their home. As the owner, you must complete maintenance issues in a timely manner. 

Our owners find it helpful to both anticipate maintenance needs and remember the benefits of keeping up their property. At some point in time you may decide that you want to sell the home; without proper maintenance, during the rental period, you can end up with even larger costs prior to selling and delay your ability to sell the home on your timeline.

Do not put off regular maintenance

Regular maintenance keeps your property in good shape and preserves its value. It can be tempting to defer repair issues to save on costs; however, this can lead to other problems: tenant complaints, legal issues, etc. 

Where an owner living in their own home might be able or willing to put off a repair until a more convenient time, renters expect repairs to be completed in a reasonable amount of time.  Deferring repairs can also lead to the issues becoming bigger and more expensive problems to fix; as well as making the property, as a whole, look less attractive to potential renters or buyers.  Regular maintenance to your roof, furnace, etc. is a really good idea – it can extend the lives of these items, prevent some expensive problems, and diagnose other problems early; before they become an emergency, or worse, an ‘after hours’ emergency! 

Proper maintenance attracts quality renters

Properly maintaining your home also helps attract quality renters. Most well-qualified renters will choose a property that is tidy and in good shape throughout.  Tenants also reflect the owners’ attitude towards the property.  If an owner is conscientious in maintaining the property; the tenants in turn will tend to respect and maintain it better.  In contrast, if a property is falling into disrepair, tenants will tend to take less care to preserve the home, and may be slower to report problems. 

Budget for repairs; do not let the expense be a surprise

As a landlord, it is a good idea to budget for maintenance. This reduces the stress when the need for repairs arises.  We recently calculated that, on average, our clients who own single family homes spend about 8% of their annual rent on repairs.  Condo owners spend about 3% of annual rent in repairs. Condo owners also may pay homeowner dues that partially go towards some building repairs.  

Costs will vary from year to year for each property and the above are averages to use for planning.  Your roof, paint, flooring, furnace, appliances, etc., all have a finite life span. When any of these large items need to be replaced, maintenance costs may be higher.  On the other hand, there may be years when no repairs outside of routine preventative maintenance are needed.   The best way to save you from anxiety is to invest in preventative maintenance, and plan ahead for those “surprise” repair costs when they arise and undoubtedly they will.

If you have questions please comment and a member of our staff will be happy to respond.

AppFolio: Modernizing Our Office to Serve Our Clients

Chris Hermanski and his staff at Mainlander Property Management talk about their experience switching to and using AppFolio Property Manager, the easy-to-use online property management software solution.

Serving you to the best of our ability is important to us at Mainlander. Our old systems were outmoded and unresponsive to meeting the needs of our owners and renters. We are constantly looking for ways that we can better serve all of our clients.

Chris was quoted on the rentBits Blog

From the rentBits Blog:

Chris Hermanski, who owns and operates Mainlander Property Management, places a strong emphasis on setting goals. When asking Chris to name a few things that have helped him remain one of the most successful property management companies in the industry, Chris responded by listing several of the themes that will be outlined in this book:

Prepare for change and have one, three, and five year goals

Surround yourself with good, talented people

NARPM – Learn from others

Be consistent and fair with all

Embrace technology

read more …

What Is the Single Family Home Rental Market Like?

A common question that Property Managers often hear is, “What is the single family home rental market like?” As you might anticipate, not very well!

The Renter Has Many Choices

There are many factors that contribute to this, including a dismal sales market, a sluggish economy, Oregon’s high unemployment, and LOTS of rental choices. A quick check on Craig’s List revealed over 1750 properties available for rent posted from midnight to 4 pm today. This included all types of housing; apartments, plexes, and single family homes.

Nevertheless, this means the prospective renter has a plethora of choices and in my opinion, probably more choices than ever before. With online marketing, renters can shop and compare like they never have before.

What is a landlord to do?

You must be competitive and resourceful. Unless you are experienced, always available and creative; you’ll want a professional property manager to assist you. Critical details are going to be:

1. Is the property in its best possible condition?
2. Is it clean and tidy?
3. Does the home show pride of ownership?
4. Is the yard mowed, edged, green and free of debris?

Renting a Home in this Market Can Be as Tough as Selling the Home

A lot of landlords don’t realize that renting a home in this market is similar to selling a home; it’s all about attention to detail. Pricing is a very critical factor. Homes that are overpriced will sit, sometimes for months.

What a property rented for in the past has little relevance in today’s market. You must compare what similar properties are renting for, how desirable is the property, what are the amenities and does the home have a “cute” factor? All of these conditions have a bearing on how much you can anticipate receiving.

Holding Out for What You Want May Hurt You in the Long Run

Once a rental is priced, be prepared to reduce the rent if it’s not generating activity, usually every two to three weeks. The amount of reduction in rent depends on what price point you are in, more expensive homes will need a larger price reduction than less expensive rentals.

Plan on reducing rent in $100 increments to have a positive impact in this saturated market! In this market, marketing times can vary. If the home is in ‘move-in’ condition (it shows well), a home should rent within two to six weeks. Holidays, adverse weather and other issues can extend this time frame.

All properties must have an online presence in today’s world.

This means you need to capture the property with great pictures, lots of great pictures! They should be:

 
1. Accurate, light and bright and free of distractions.
2. Be user friendly; place a link for mapping the location and an option for specific directions.
3. Schools are important to many families and this information needs to be accurate. Call and verify to double check on school boundaries, etc.
4. You’ll need a well flowing description and explanation of all the features and amenities, along with a description outlining what’s included in the rent.

You Must Carefully amd Consistently Screen Prospective Renters

Properly screening and checking the background of all prospective renters is critical, especially in this market. Proper screening includes a credit check, criminal background check and eviction history. You’ll also want to ensure their employment is verified along with previous rental history. All of these details are standard operating procedure for a seasoned professional manger.

Chris Hermanski, MPM Mainlander Property Management, Inc. CRMC

Internet Rental Scam Alert

The National Association of Rental Property Managers (NARPM) Governmental Affairs Committee wants to warn you about an internet rental scam that has been making its way around the country.

Scammers are copying information, photos and text, from legitimate online rental ads and then posting that information on Craig’s List. It is listed with a significantly reduced rent and the property manager’s contact information has been replaced by the scammer’s.

In some ads the text is full of misspelled words and bad grammar but not always. This is because many of the scammers are operating outside the country, typically Nigeria, but many cases have also involved local scammers who are able to meet potential tenants in person.

With international scams, the potential tenants are usually required to send the deposit and first month’s rent through Western Union and are promised that the keys will then be over-nighted to them. Local scammers are often able to copy a key or simply break into a vacant property and replace the door lock with their own so they can actually provide the new tenant with a legitimate key.

In one situation an unsuspecting tenant was actually able to completely move into an apartment without the knowledge of the legitimate property manager. The property manager was only alerted to the problem when the tenant called the office to request that the “For Rent” sign be removed from their front yard.

These scammers are often very sophisticated and can play the part of a legitimate property manager well enough to fool potential renters. Make sure you are checking your vacant properties and Craig’s List on a regular basis. If you find an unauthorized ad flag it so that others will know that it may be fraudulent and contact Craig’s List to request that they remove it from their website.

Some property managers have even posted an additional listing with the same name but included, “THIS IS A SCAM” or similar language at the end of the post to help warn people. This way it will come up in the listing right after the fraudulent post and give the property manager an opportunity to provide the correct information.

The FBI has received countless complaints about this and other rental scams but they explained that this type of crime is low on their list of investigative priorities. If one of your properties gets caught in this scam, we recommend you visit www.IC3.gov and report the crime.

The Internet Crime Complaint Center (IC3) is a partnership between the Federal Bureau of Investigation (FBI), the National White Collar Crime Center (NW3C), and the Bureau of Justice Assistance (BJA). IC3’s mission is to serve as a vehicle to receive, develop, and refer criminal complaints regarding the rapidly expanding arena of cyber crime.

If you encounter a potential tenant who has been scammed and made the mistake of providing sensitive personal information such as their social security number, it is highly recommended that they go ahead and put a freeze on their credit.

NARPM.ORG 638 Independence Parkway, Suite 100, Chesapeake, VA 23320 P: (800) 782-3452 | F: (866) 466-2776 | info@narpm.org

NARPM Annual Conference

12:15 PM – Former NARPM past presidents Chris Hermanski of Mainlander Property Management in Portland, OR and Bob Machado, owner of Homepointe in Sacramento, arrive fashionably late for lunch. On Tuesday, the two presidents squared off in golf. Bob, never shy, tweeted the world that he won the two man tournament on an 18th hole par. Sensitive to his friend Chris, Bob did mention that Chris came in a competitive second.

Past Presidents Chris Hermanski and Bob Machado at NARPM Annual Convention – Oct 22, 2009

Introducing Mainlander’s New Look

We’re excited to share the new face of Mainlander Property Management! We recently revamped our identity, website, and collateral materials.

Our new website will be a great tool to help our owners, tenants, and staff stay connected with one another, and will make it easier to access information about Mainlander’s services.

Please let us know what you think of the new website, and anything else that might help us to better serve you.

Also debuting right now, is our Bi-Monthly Newsletter will offer useful tips, information, and resources. If you’re an owner, we’ll send you suggestions on how to make your properties more energy-efficient and how to foster relationships with your tenants. Tenants: We’ll send you tips for making your home more enjoyable, such as weatherization ideas and thoughts on how to move cost-effectively.