Home Warranties – Are They Worth It?

For those of you who follow my blog, you know that I’ve recently been questioning my strategy of having an active home warranty policy on each of my (single family) rental properties. 

As you can read here [insert link], I’ve had several challenges with my home warranty service that have caused to me to reassess their value. 

With a little help from an appliance lifecycle guide I received from [insert website name], I created the following tab which calculates , for a given home, whether it is better to have a home warranty or not.    It compares paying for the home warranty vs. maintaining and replacing the appliances on a frequent basis. 

The Cost Of A Home Warranty

A home warranty will typically cost between $500 and $600 per year.  The factors driving this cost include how many homes you have under warranty (you can receive a multi property discount), the price of the call out fee (which ranges from $0 to $150 or more), and the number of claims that you’ve made in the past.  

For the purposes of this calculation, we’ll assume an annual policy at $525.  My leases state that the tenant must pay the per incident call out fee , which is typically about  $125.  

What The Home Warranty Covers

While each policy has its own “exclusions”, the home warranty typically doesn’t cover normal wear and tear (a recent example is an old dryer where the bearings went bad), and has certain allowances which may require you to pay an additional fee.  For example, if your air conditioner requires freon, the home warranty company may only cover a small portion of that cost. 

What Is The Alternative

The alternative is to apply the money that would have been spent on the home warranty to a fund that covers the repair of appliances in the home. 

This would be in addition to any similar allocation you maintain for the general upkeep of the property (roof, exterior walls, landscaping, etc. ). 

Given that savings rates are effectively at zero, I am not calculating any interest that may be earned on that money while it is sitting in the bank account.  Nor am I calculating any potential inflationary pressures on the cost or installation of the major appliances. 

How Do You Calculate This 

I listed all of the major appliances that the home warranty covers in each home.   I took a list of average appliance lifespans, and the average cost for the appliance installed.  I also included any annual maintenance that I might pay for, if I didn’t have a home warranty. 

I then summed the average cost for the appliance with the annual maintenance cost, and then divided that total by the lifespan to come up with an annual number.  These gave me an annualized replacement cost of each appliance, and the summarized annual number for all appliances. 

It looked like this:

Major Home Appliance Life Expectancy Chart
ItemLife Span LowLife Span HighAverageCost (New)Yearly Maint.Cost Per Year
Air Conditioner102015$4,000$100$367
Trash Compactors712110
Dryers, Electric111814$0
Dryers, Gas111613$750$58
Garbage Disposals101513$120$9
Ranges, Electric1320160
Ranges, Gas152319$500$26
Ranges, Hoods919140
Refrigerators, Compact4128$0
Refrigerators, Standard101814$1,000$71
Washing Machines81612$800$67
Water Heater102015$600$40

It Seems Straight Forward, But It Isn’t 

On the  face of it, my company’s out of pocket cost of $525 for the home warranty seems like a good purchase.   

But, if you take into account some other factors the economics shift:

  • The home warranty doesn’t pay for the replacement of the item.  So that becomes a neutral cost which is similar whether you purchase the warranty, or not. 
  • The manufacturer covers a warranty for the appliance for the first year.  Most major credit cards extend that warranty (albeit for personal use, but we’ll leave that point aside) one to two years more. 
  • The out of pocket expense for a repair person could be less. 
  • You’re not getting any better rate by going through the home warranty company. 

Calculating The Cost Of Repairs 

Across our several rental properties with home warranties, we see between zero repairs and two repairs related to the home warranty per year. 

With a call out fee of $125 per visit, and $525 per year per policy, in the worst case that equals $387.50 ($775 / 2). 

Putting aside major repairs like air conditioners, most other repairs can be done for less than $775 per year.  

Hedging Your Bets 

All situations are not equal.  If you recently purchase an older property that has the potential of having numerous problems (two or more per year), or you haven’t identified resources in the area of your rental property such as appliance repair people who can fix the issue, then perhaps a home warranty might be a good investment. 

It’s Just Like Any Other Insurance Policy  

At the end of the day, home warranties are just like any other insurance policy.  While they offer some protections, they have numerous exclusions, and at the end of the day you should measure your risk against the costs.  If you enforce a “first fee” with the tenant, where the tenant pays the initial cost of any repair, you can further de-risk and mitigate the need for a home warranty. 

Each case is different.  My best advice is to run the numbers each year, and adjust your strategy accordingly. 

My Email Manifesto …

I think that we can all agree that time is one of our most valuable assets, and anything that wastes our time should be avoided.  

I’ve been assessing those areas of my life, both work and personal, where I’m wasting time.  I’ve been carefully looking for inefficiencies in my own life, including instances where I create inefficiencies in the daily lives of others, and I’ve identified one of the most common sources of wasted time: 


Consider this my Email Manifesto.  I’m documenting my email best practices that can save all of us time and energy!  I practice these methods today, and find that they enable me to communicate more clearly and efficiently, and help minimize the back and forth that is common when communicating by email. Not only do these email best practices save me time, but they save time for the recipients of my emails as well.  

Like many of my best practices, I consider this a living document.  I encourage you to make it your own.  Include your own best practices on how to use email more efficiently.   Share them with coworkers, colleagues, and friends.  And share them with me !


Choose Carefully

Email efficiency starts with choosing the right recipients.  While it may not take much to add another recipient to your email thread, it takes time and energy for the recipient to read through your email. 

Be thoughtful in who you choose to email.  Only send an email to those who need to be included in the conversation.  There is nothing more annoying than receiving an email with the lunch menu for the New York office, when you work in the Chicago office.   

Consider: Should you be emailing this at all ?

Not every document should be emailed.  Far too often we send emails, when they really should be documents which are posted in a shared drive.  Instead of emailing that status sheet to the entire company, consider posting it to a shared drive.  Not only does this ensure that it is available for everyone at any time, but it also removes one more redundant email from the inbox.  

(Don’t) Reply All 

A majority of the unnecessary emails I receive are from colleagues who are replying all to an email.  Replying All to the email from Frank in facilities letting the company know that the air conditioning has been fixed says more about you than it does about Frank.  Do everyone a favor; just email Frank and his supervisor.  You may think that you’re showing your “company spirit”, but what you’re actually doing is diluting the value of the other emails that you send that are actually important.  Quite frankly, no one cares if you agree or not, and no one wants to know what you want to have for lunch.  You can help others avoid “replying all” by putting your recipients on BCC, making it impossible for them to communicate with anyone else but you, the sender. 

Use CC properly

Similar to carefully choosing the right email recipients, it is also important to signal to the recipients your expectations of them.   Beyond giving clear instructions in the body of the email,  a good way to provide a “hint” to the recipients is in your use of the To and CC fields.   

I use these fields very intentionally to signal to the recipients my expectations of their role.   The “To” line is meant for people who should have an active voice in the conversation, or have specific action items.  The CC line is meant for those people who are “just there to listen”.  They just need to know about something, but have no actionable next steps on the topic.

It may take some time to train those with whom you actively communicate, but once you do you’ll find this similar process can save hours of time reading and answering emails.

Don’t Micromanage

Don’t require your reports to CC you on everything.  Trust them to do their jobs; then check in on them regularly to make sure that they are hitting their goals. 


The subject line is arguably the most important part of your email.  It should be clear, consistent, and succinct.  

Want to get encourage more response to your emails?  Use powerful subject lines

Subject Line : 


These will help recipients prioritize your emails against their other daily action items. 


Avoid pronouns

I often say “Pronouns Kill”.  It’s my way of exaggerating a point; using pronouns more often than not leads to miscommunication.  So in business, I try to limit their use. It takes a little effort to structure sentences without abusing pronouns, but once you get the hang of it you’ll eliminate any chance that your email will be misinterpreted and that the recipient might ask for clarification. 

Provide clear summaries and next steps  
If your email is lengthy, provide a short overview up top, and then a “background” beneath it.   I like to provide an “Overview:”, or use “TL:DR” (too long: didn’t read) to summarize the topic.

Future Proof Your Emails
Write each email as if there was no way for the other person to respond.  Concisely include all of the relevant information (who, what, why, when, and how), and include the dates by when you need the response.  

Include those attachments
Don’t expect the recipient to go digging through your emails to find the latest version of the document you attached four emails prior.  Think in terms of what will make the email easiest for the recipient, and just resend it. 

Maximize the Features
Have a question for the company?  Use the Survey feature instead of emailing a response.  

It’s not what you say; it’s what people read.  

Be thoughtful with the words you choose.  Always include all of the relevant details.  Don’t assume that someone remembers the topic, or your previous thread.  Provide recaps to keep it easy on the reader.  Don’t make the reader dig through threads to understand context. 

Guide the Reader

Use Highlight to help the reader find the section where you have questions. 

I hope that these tips help save you, and others, a lot of time!

Working With The Bank of Mom & Dad

Interest rates for borrowing money to buy are home are historically low.  A quick search at BankRate.com shows that a 30 year fixed rate loan for $300,000 be as low as 3.0%.  But there is one bank that can offer even better rates –  in some cases as low as 0.14% (as of October 2020).  The Bank of Mom and Dad.  

If you’re fortunate enough to have familial benefactors, you can take advantage of the IRS rules around Intra Family Loans.   Each month the IRS sets an Applicable Federal Rate (AFR), which is the minimum interest rate a lender may charge a borrower without the sum being considered a gift (and hence subject to federal gift tax).  These rates can be found here:

https://apps.irs.gov/app/picklist/list/federalRates.html  . 

The lender and the borrower can structure the loan however they like (for example, interest only with a balloon payment, or a more traditional interest + principal loan), and the borrower can use the funds however they like.  The most important stipulation is that the lender and borrower execute a legal document for the loan, and that the borrower make the payments just as they would with any other lender.  

If the borrower fails to make the payments, and/or the lender doesn’t enforce the loan, then the sum which has been lent could be considered a gift rather than a loan, and subsequently subject to a gift tax.  

Using this financial tool can also be a good way to legally transfer assets from one generation to another, allowing them to appreciate outside of estate tax laws.  

As always, it is highly recommended that you quickly consult your tax professional before making any decisions!  

Remember to thank your parents! Or someone else’s.