So we noticed a small amount of water in the drain pan under our water heater. It's probably 8ish years old (was here when we bought the home 4 years ago) .

Not sure where the water is coming from but thinking the t&p valve is releasing some moisture slowly. It's probably time to replace anyways, so thinking about switching to a tankless system.

This heater feeds half the house, and runs the bathrooms for the family.

Any recommendations on what brand/size. (Family of 7, 5 kids.) and expected install cost from a plumber?

What size do you have now? Is it big enough? If yes, go with that. If not, get a bigger one. I'd DIY the install, so can't comment on plumber, but that cost may also depend on your answer to the first couple of questions if there is any additional material or rearrangement required.

Is existing heat gas or electric ?

Where is it located ? Attic ? Garage ?

Currently have aRheem classic, 40 gal tank. Electric. There is a gas pipe available and vent to the attic and out the roof.

Precious owner replaced the gas heaters with electric sometime before we moved in.

Located in interior bathroom closet. I'm wanting to change to tankless if possible to upgrade and decrease chance of water damage due to tank breaking down the line.

Call around and get some quotes. My guesstimate on a gas tanklessretrofit is 3-5k. You do not want an electric tankless. DIY back with a rheem 50 gallon electric tank heater, new pan,hoses, fittings probably around $700-800. And if this in interior install and there isnt a pan with a drain on it, at the minimum put a water alarm with a lithium battery

https://www.amazon.com/Glentronics-Inc-BWD-HWA-00895001498-Basement/dp/B000JOK11K/ref=mp_s_a_1_2?crid=17NBRCUYN023Z&keywords=flood+safe+water+heater&qid=1686709057&sprefix=flood+safe+water+heater+%2Caps%2C113&sr=8-2


and this is a good product as well for interior heaters that lack a drain



https://www.amazon.com/FloodStop-Auto-Shutoff-FS3-4NPT-Controller/dp/B00EA426X6/ref=mp_s_a_1_9?crid=17NBRCUYN023Z&keywords=flood+safe+water+heater&qid=1686709057&sprefix=flood+safe+water+heater+%2Caps%2C113&sr=8-9

Thanks. We have the flood stop on there currently. I installed it when we moved in. It worked great to alert us to the moisture in the pan… at 4am.. but still works.

Family of 6 - in the day - half were female (yes, this makes a difference).
NEVER a problem with 82gal 5500w electric, even before "Smart" tank WHs.
Now hard to get!
Ergo, if going back to tank, then
5500 watt
Largest capacity possible

IF you had gas/propane, THEN price a demand unit (possibly outside wall)
but betting it will not be less than tank, even with 10 years of energy savings.