Appliance Service Plan or Not?
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I have come across many examples of landlords that require, in their lease, that the tenants carry an appliance service plan on the furnace, water heater, and kitchen and laundry appliances. In Minnesota, this is called Centerpoint Energy Service Plus. It costs about $8-15 per month, which is added to the tenant’s utility bill.
In the event that one of the covered appliances breaks, that “insurance policy” allows you to call Centerpoint and have a technician fix the broke unit. Only if the appliance is completely unrepairable will you incur a cost.
Pros:
- The landlord shifts the cost of the plan to the tenants.
- You can virtually eliminate any appliance repair/replacement costs.
- The tenants can make the repair calls themselves without bothering you as the landlord.
Cons:
- Confirming the tenant has put the service plan onto their utility bill is difficult to police.
- Some states this may not be legal.
- Some tenants will simply refuse.
Other thoughts:
- As you increase the number of properties you own, it is NOT cost effective to pay this yourself. With 28 rental units, I would be paying $300-400 per month in just service fees. That would only be effective if I have something break every month. Otherwise, I save the cash and just replace/repair units as needed.
Scott Ficek owns and manages almost 30 investment property units from single family to multi-family. Find his website at www.minnesotainvestmentrealestate.com or receive his blog via your RSS Feed or in your Email. He is also a Minnesota Real Estate Agent with RE/MAX Advantage Plus in Minneapolis and helps new and seasoned investors buy and own Investment Property.
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Hi Scott,
I have Service Plus on my one single family home I rent. I’ve broken about even this year due to old appliances but i’m starting to replace them. My question for you is on my furnace/ac they are 22 years old. Still working but i’ve kept the service plus because I figure they are due for a major repair. In your experience do you think when they break service plus could just keep fixing or do you think with stuff that old I should just can the service plus and save for their replacement? Great blog post as ususal.
Cheers
John
I am not a big fan of these service plans either (an an investor acquires more units) It becomes less cost effective.
Thanks for your info!