To update Knob and Tube... or not?

[Greg Gangle]

Hi BP friends. I’m going to be closing on a property that requires the entire home to be upgraded from knob and tube. 

Here’s the numbers 

Purchase Price $44K

Knob and Tube upgrade $13K

Insurance premium $2246/year (with k & t- usually around $1200 without)

Rental income $1100/month

I’m a buy and hold type of person. Why question is whether to upgrade the knob and tube now or leave it. I’m aware it’s difficult selling the property with it in however I wouldn’t plan on selling it anytime soon and can do it later. 

My gut says do it now and be done with it. 

Thoughts? Thanks in advance 

[JD Martin]

I think it depends on a few things. If the walls are going to be open and gutted it is a no-brainer. If there is accessible knob & tube that a tenant can get their hands on, same thing. If the circuits are overloaded, same. If there's obvious insulation break-down and bare wires exposed to rafters, joists or wall studs, same.

Since you are planning to keep it, and you make your money back on your insurance, it's probably not a bad idea although I would shop around on some pricing. I don't know where you are in Ohio but where I am in TN I can have a whole house wired, if the walls are open, including service panel, for around $5k depending on house size. I had one of my properties that had a mix of K&T without open walls rewired for $1600 which hit everything except the attic/overhead lights. So you might want to get some other pricing.