The best thing about you problem is that you came here before blowing a fortune on the tankless heater. The vast majority of the pros that frequent this board advise against them for a variety of reasons. They also look at water heaters in an attic as a very poor idea. I would opt for the heater on the ground floor or basement if you have one. Your are correct there would need to be an outlet for the drain pan, and just how to do that would have to be determined by someone on site. You are going to have to do some plumbing revisions when you change the location of the heater, but since you were going to invest a small fortune on the tankless installation, you should still be money ahead with the conventional heater in a new space. The old heater can be cut into pieces with a reciprocating saw with a metal blade.
You will need to have a licensed plumber on site to evaluate exactly what has to be done.





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