Aluminum Wiring Issues – A Deal Killer for your Next Rental?

Aluminum Wiring – an issue, but not necessarily a deal killer

I remember the first time I encountered aluminum wiring issues in a prospective rental house I was looking to purchase.  Aluminum wiring caught me completely off guard. I had no idea that homes were once built with aluminum wiring instead of copper wiring. The inspector scared me with discussions of why houses are not made with aluminum wiring today. I dove into the issue to conduct additional due diligence. If you run across a house with aluminum wiring, it pays to invest in an expert investigation.

History of Aluminum Wiring

The price of copper in the mid 1960s was rising, which appeared to make aluminum seem like an acceptable alternative for wiring homes. Copper in the early 1960s nearly tripped in price and aluminum was suddenly an option for residential home construction.  The run on aluminum use was short lived (1965 to 1972), however, a large number of homes were built with aluminum wiring in the late sixties. 

In layman’s terms, homes with aluminum wiring, as installed during this period, had higher instances of house fires than homes with copper wires. Aluminum wiring in residential construction was quickly discontinued by 1972 and copper regained its position as the dominant metal used in wiring. The aluminum wiring used today is a different alloy. Today’s aluminum alloy does not have the problems associated with the late 1960’s aluminum alloy.  

In a nutshell, the problem with homes wired with aluminum wiring are at the connections between the aluminum wiring and the terminal connections.  Aluminum wires expand and contract with heat as they carry electricity and that expansion and contraction can lead to loose connections.  Loose connections can lead to fires.

The U.S. Consumer Product Safety commission has published a short report on aluminum wiring issues, located here. The report indicates that there may be a couple of simple fixes.

Issues for investors

As an investor, you need to know everything about your investment to make sure it is a “good” investment.  An evaluation of the safety, insurance, and resale issues associated with homes containing aluminum wiring is critical prior to a purchase. 

Safety

Regardless of your investment strategy, safety is a paramount concern.  It is no right to expose your tenants to disproportionate safety risks.  A house with aluminum wiring issues must be inspected to ensure it is safe.  If you are doing a complete gut job of the house, then think about replacing the wiring with copper.  If replacing the wiring is not an option due to the scope of the rehab or the cost, then think about what you need to do to “fix” the situation to make it safe for your tenants.

Insurance

Some insurers refuse to insure homes with original aluminum wiring.  Do your due diligence before you close the deal, to understand the insurance situation.  Understanding where your insurer comes out on aluminum wiring could be the deal breaker for you.  Upgrading the wiring may be a requirement for insurability by many insurers.   

Resale

Think about the next step, what impact, if any will this have on the resale value of the house.  If you plan to replace the wiring throughout with copper wire, you have likely just increased your resale value.  On the other hand, if your house has not been upgraded and the rest of the neighborhood has, you are likely going to have a tougher time reselling at market value.

How to Fix the Issue

Always consult a qualified electrician when encountering aluminum wiring. Every house is different, each requiring an individual evaluation. A qualified electrician will be able to educate you on the best way forward to ensure you have a safe, insurable, and retail valued property.  In many instances you can use Alumiconn to solve the safety issues and I recommend discussing this with your electrician.  Rewiring the house with copper wire is always an option as well, but the expense may kill the deal.

If you have experiences with dealing with this issue or how a home warranty responds to this, please share those interactions.