Knob and Tube in otherwise very clean property, What Would You Do?

[Steve Wilcox]

I would like to lay out a scenerio for a property that I am closing on in the next few weeks (hopefully, we have a final approval for SS) and hear what other buy and hold investors have to say.

Backstory- My normal bread and butter property in this area is badly distressed, total rehab (all mechanicals and cosmetics). The property in question is a very light if any rehab. The knob and tube all appears to be in great shape in the basement.

The property is a legal duplex, with a 3rd unit in attic with 2 egress exits. I will not be renting it illegally- the area has 3 units and it is likely I could change property from legal 2 to legal 3 fam, but that will be decided based on tax consequence compared to potential rent from 3rd unit. Other problem is the 3rd floor has electric baseboard heating which may not mater if I decide to seal it up.

The 2 units are both in very clean shape, totally turn key, however the home is wired with knob and tube which would normally be totally removed. However the first floor is rented with a long term tenant who has invested in decent appliances and furniture so probably will want to stay for foreseeable future- but they are about 20% under market rate for rent, and are month to month.

So-

Do I:

1. terminate the tenants lease rewire the whole building top to bottom?

2. rewire the second floor (and maybe 3rd if I am going to use it or for potential future use)

3. Keep the knob and tube in the building