Appliance Service Plan or Not?

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.

4 comments

#1John GallNovember 11, 2008, 10:08 am

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

#2MN MLSNovember 11, 2008, 10:36 pm

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!

#3Dishwasher repairJanuary 16, 2010, 12:10 am

It’s the first time I have heard of this appliance service plan being a requisite to lease agreements. You’re right about tenants not wanting and not being open to added costs. I think landlords who require this would find it hard to get and keep tenants. And I believe there’s a reason why it’s illegal in other states.

#4Shoreview MN Homes for SaleAugust 21, 2010, 8:37 am

I own 5 single-family rental properties, and I have gone back and forth over whether I should carry service plus on my appliances at these properties. I had one set of tenants who signed up for the service on their own (I never had to make any service runs to this property while they were there for 3 years), but aside from air-conditioners, I haven’t had too many issues where the Service Plus would have had saved me money in the long run. But if you are unable to service your own air-conditioners, then it might be worthwhile having at least the A/C units covered by Service Plus. Good article!

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