How To Choose A Tankless Water Heater: The Complete Buyer's Guide

Published onMarch 25, 2024
How-to Guides - Resources

If you’re looking to upgrade your home’s hot water heater to a tankless water heater, there are some things you should consider before buying one.

Most tankless water heaters operate the same way, but they aren’t a one-size-fits-all appliance.

In this tankless buying guide, we’ll help you choose a tankless hot water heater by explaining how they work, discussing the different types, and showing you how to correctly size one for your home.

We’ll also include our tankless sizing calculator at the end, which gives you recommended tankless water heaters based on the number of fixtures you have in your home, your incoming water temperatires and your hot water demand.

Table of Contents

What is a Tankless Hot Water Heater?

A tankless water heater is an on-demand water heating system that uses natural gas, propane, or electricity to provide an endless supply of hot water to homes, businesses, and other commercial settings.

They come in different sizes and capacities to meet the hot water demand needed for each application.

They’re a space-saving alternative to traditional tank water heaters, eliminating the need for a storage tank, and can provide energy savings depending on the type of tankless you choose.

How Does a Tankless Water Heater Work?

A tankless water heater works by heating water instantly as it passes through the unit when hot water is requested from a fixture or an appliance like a dishwasher or washing machine.

When a hot water faucet is opened, cold water enters a tankless and gets heated as it passes through a heat exchanger.

This heat exchanger, heated by natural gas, propane, or electricity, heats the water and sends it out of the tankless through the hot water line at a constant set temperature.

When hot water isn’t being used, a tankless will sit idle until hot water is needed again so you only pay for the hot water you use.

They’re designed to supply hot water to multiple fixtures and appliances simultaneously for different households without ever running out of hot water. Each tankless water heater’s capacity to supply hot water depends on the number of fixtures in your home and the unit’s size.

The Benefits of Tankless Water Heaters

While tankless water heaters are currently only used in 6-8% of U.S. homes, the North American market size for tankless water heaters is expected to increase by 10.2% by 2030.

Tankless water heaters are being installed in more and more homes across the United States because they provide homeowners with:

Energy efficiency
Annual cost savings
Reliability and a longer lifespan than traditional tank water heaters
Endless and, in some cases, instant hot water
A space-saving option
More install locations
Better Warranties

Tankless vs Tank Water Heaters

To understand the benefits of tankless water heaters, we need to compare them to traditional tank water heaters.

Energy Efficiency

The main difference between tank and tankless water heaters is how they operate and the cost of doing so.

Typical tank-style water heaters are designed to store large volumes of hot water at a set temperature. This means they’re automatically turning on and off throughout the day, even when you aren’t home.

This water heating process leads to standby heat loss and wastes a lot of energy.

Tankless water heaters, on the other hand, have a much more efficient design when it comes to heating water. Instead of coming on and off all day, they’re designed to heat water on-demand.

This means they won’t come on until hot water is called for at a fixture, like at a kitchen sink when washing dishes or when you’re ready for a shower. Once the hot water is turned off, the burner inside the tankless unit turns off and it will sit idel until hot water is called for again.

According to the U.S. Department of Energy, tankless water heaters are roughly 34% more efficient than standard tank-type water heaters making them much more cost-effective in the long run.

Annual Cost Savings

These efficiencies are reflected through the annual cost savings you’ll see when comparing tankless and tank water heaters.

Here are some of the average yearly costs to run different types of water heaters.

Keep in mind energy costs will be different based on where you live, but each water heater will have an Energy Star label that shows the average cost to run that water heater based on the energy source:

Annual Electric Water Heating Costs

Prices based on national average of $0.14 per kWh

Annual Propane Water Heating Costs

Prices based on the national average of $2.89 a gallon

Annual Natural Gas Water Heating Costs

Prices based on the national average of $1.21 a therm

If you’re interested in seeing what your personal annual savings would be, you can use our cost comparison tools.

Improved Reliability and Extended Lifespan

When the proper maintenance is done, tankless water heaters can last up to 20-25 years. This is twice as long as the expected lifespan of tank-type water heaters, which is around 10-15 years.

Additionally, tankless water heaters tend to be more reliable than tank water heaters because they don’t hold water.

Over time, minerals in the water held within a tank will begin to produce sediment or scale that settles at the bottom and on the inner walls.

This sediment buildup can become a barrier between the heating elements and the water, reducing a tank water heater’s ability to efficiently produce hot water.

If you have harder water, this sediment can build up even faster, increasing the possibility of corrosion and the water heater leaking.

Layers of scale buildup inside an electric tank water heater. Photo Credit: Water Heater Tank Autopsy by Matt Risinger

Unfortunately, there’s no good way to clean the inside of a tank. You can try draining the water out through the spigot at the bottom, but if the sediment has already built up, you won’t have much success.

Scale buildup can still occur inside a tankless water heater, but it’s much easier to flush.

All you need to do is run a vinegar-based water solution through the heat exchanger for one hour once a year with a bucket, pump, and two hoses.

Endless or Instant Hot Water

If you have a larger family or your house is where relatives stay during the holidays and you have a tank water heater, odds are you’ve experienced running out of hot water at some point. That or you’ve had to wait until you had enough hot water in the tank to take a shower.

That’s because hot water tanks have a limited supply of hot water before they need to recover. This is called a “recovery rate.”

Each tank water heater will specify its recovery rate, but typically, you can expect to wait anywhere between 60 and 80 minutes for a 40 to 50-gallon tank water heater to produce more hot water after it’s been used.

This is one of the main reasons why people switch over to tankless water heaters.

The constant and endless supply of hot water that a tankless provides will ensure everyone in your family has hot water to take showers or baths consecutively without ever running out.

In addition to an endless supply, some tankless water heaters are readily available for recirculation. Recirculating tankless water heaters give you hot water whenever and wherever you want it as soon as you open a faucet.

We’ll cover more about recirculating tankless water heaters below when we discuss the different types of tankless water heaters.

A Space-Saving Option

Replacing a traditional tank water heater with a tankless water heater opens up valuable floor space in your home.

As shown below, we took the average measurements of the top tank and tankless water heater brands to give you a better idea of the size differences:

The Average Traditional Tank Water Heater Size

Height: 32 inches for an electric tank and up to 63 inches for a gas tank water heater with a draft hood.
Diameter (width and depth): 20 to 22 inches

The Average Tankless Water Heater Size

Height: 17 inches
Width: 28 inches
Depth: 12 inches

As you can see, tankless water heaters are much smaller than traditional tank water heaters. Tank water heaters also typically have a drain pan underneath them or sit on a water heater stand in your garage, making the space requirement even larger.

Installing a tankless lets you reclaim a corner of the garage, add extra storage space in a utility closet, or simply create a less cluttered and more organized home.

This leads us to the next benefit of tankless water heaters—where they can be installed in a home.

Install Location

Although some electric water heaters are shorter in height (lowboys), they still take up almost double the amount of space a tankless does in their diameter.

With some electric or gas tank-type water heaters standing as high as 63 inches tall, this limits the areas where they can be installed in your home.

Most of the time, if you wanted to replace your tank water heater with another tank, you would have to install it back in the same location the old one was installed. And chances are, you weren’t the one who chose where it was installed in the first place.

That’s where a tankless water heater can help.

Because they’re so compact and designed to be mounted to a wall, tankless water heaters can be installed in a lot of different locations. These include:

A garage wall
In a closet
On the exterior of the home
In an attic
In a crawlspace
Inside a laundry room
Inside a utility shed
In a basement

There will be local code requirements and specific clearances from each manufacturer you need to pay attention to, but for the most part, if you have access to water lines, electricity to power the unit, and gas lines for a gas unit, you should be able to install a tankless wherever you want.

Better Warranties

Water heaters, like any other product, generally come with better warranties for higher-quality models. Tank water heaters usually have a limited warranty of five to six years, depending on the brand, with options to pay more for extended warranties.

For tankless water heaters, you’ll either get a 12 or 15-year warranty on the heat exchanger or a set amount of total running hours; whichever comes first, a 5-year warranty on all other parts of the unit, and a 1-year labor warranty.

Some tankless water heater brands, like Rinnai, will offer an additional four years to the labor warranty if the tankless is registered within the first 90 days of it being purchased.

Different Types of Tankless Hot Water Heaters

When it comes to choosing a tankless hot water heater, you’ll want one that’s designed to meet your specific needs and preferences. To figure this out, you’ll want to consider three things:

The type of energy you want to use.
Whether it’s best to install an indoor or outdoor unit based on where you live.
Condensing vs. Non-condensing tankless water heaters.
Your overall budget.

You might also want to consider more “luxury” models that offer instant hot water and “smart” tankless water heaters that learn your hot water habits.

Let’s explore the different types of tankless hot water heaters available and explain what sets them apart from one another.

Gas Tankless Water Heaters vs. Electric Tankless Water Heaters

The choice between gas and electric tankless water heaters boils down to how much hot water you need.

If you’re looking for a tankless water heater that can handle an entire home’s fixtures and appliances simultaneously (multiple bathrooms, washing machine, dishwasher, etc.), you’ll need one that provides high flow rates. In this case, the cheaper and more efficient option would be a gas tankless water heater.

Gas tankless water heaters can provide up to 11 gallons per minute (GPM), while electric ones max out at around 5.4 GPM.

In areas with warmer groundwater, an electric tankless should be able to handle two showers running at the same time, but the annual cost to run it is almost three times the cost to run a tankless using natural gas.

Electric tankless water heaters are best for smaller spaces, like in mobile homes or RVs, where there are lower hot water demands.

Indoor vs. Outdoor Tankless Water Heaters

Indoor and outdoor gas tankless water heaters operate the same way and cost the same, so you’re not losing any value or any particular benefit when choosing one or the other.

Where you may see a slight difference in pricing is in the installation costs. And this will all depend on where you want the unit installed.

While having the option to install both types gives you flexibility for where it’s located at your home, there are reasons why one may be a better fit for your situation. The main things to consider are:

Venting requirements
The climate you live in
Space availability
Access to maintaining the unit

Venting

Tankless water heaters installed indoors need to be vented to the outside to get the exhaust outside, so you should expect a hole to be drilled through an exterior wall of your home.

These direct vent systems can be as large as five inches in diameter but will be smaller if you choose a condensing tankless. They also come with an inner and outer rubber collar to seal the venting to your exterior wall, keeping weather and bugs from getting indoors.

However, outdoor tankless water heaters don’t require any type of vent pipe as the exhaust is typically built into the top portion of the unit, and you would only need to have the water lines and potentially gas line drilled through the side of your home.

Another thing to consider with the exhaust for both units is the clearance requirements.

Indoor and exterior units both have specific clearance requirements from where the exhaust comes out of the vent to an opening inside a home or any type of electric source.

For interior tankless water heaters, the clearance to the side of a window or a door that can be opened is typically 12 inches. For exterior models, this clearance is 48 inches.

The Climate You Live In

Another reason homeowners choose indoor tankless water heaters is their climate. A good rule of thumb to follow is to choose an indoor unit if you live in an area where you commonly experience at least seven consecutive days of temperatures in the single digits.

While outdoor tankless water heaters are designed to be exposed to outside elements and have built-in freeze protection that protects the internal components in temperatures as low as -5 degrees to -22 degrees, you’ll still have to take some precautionary actions to avoid damage to the unit.

This can involve adding extra insulation around the plumbing lines or draining the system when there’s a cold snap or power outage.

Space Availability

While tankless water heaters are smaller than tank water heaters, you may not have enough room to install one indoors. If you don’t have a garage, utility closet, or crawlspace that’s at least 40 to 50 inches tall, you’ll have to look at installing an exterior tankless.

This is because of the pressure relief valve, or T&P valve, which is located at the bottom of a tankless with the other water shut-off valves. The T&P valve is designed to automatically trigger when a system becomes overpressurized. When it does, it will begin to relieve water.

To avoid any water damage or mold in a crawlspace, this needs to be piped outdoors, along with an air gap to break up the flow of water to prevent any excess water in the pipe from potentially freezing back up into the tankless.

This is also necessary if you want a more efficient, condensing tankless water heater, as the condensate that comes out of the unit will also need to be piped outdoors.

For an exterior tankless, you don’t need to worry about the T&P valve or the condensate because they can be piped directly to the ground.

Access for Maintenance

Another consideration when looking at indoor or outdoor tankless water heaters is how much access you’ll have to perform yearly maintenance on the unit.

To keep your tankless efficient and working for its expected 20 to 25-year lifespan, it’s recommended that you flush the heat exchanger for one hour at least once a year.

To do this, you’ll need room to work in front of and below the unit, as you’ll be using a large bucket, pump, and a couple of hoses.

If your tankless is installed in a location that’s difficult to access, this might keep you from doing the recommended maintenance.

This could result in the heater not working properly in the future or lead to you spending money to hire a plumbing company to flush it for you.

Condensing vs. Non-condensing Tankless Water Heaters

When looking at the different types of tankless water heaters, you’ll come across condensing and non-condensing units. The main difference between the two is their efficiency.

While both are considered highly efficient, condensing tankless water heaters can have an energy efficiency rating of up to 96-98%, which means that $0.98 of every dollar spent on gas is effectively used to heat the water.

In contrast, non-condensing tankless water heaters have a lower efficiency, usually maxing out at around 80 to 83%, meaning that only $0.83 of every dollar spent on gas contributes to heating the water.

This highlights the ability of condensing units to transfer more heat from the flame into the water, making them more cost-effective and environmentally friendly over time.

That’s because condensing tankless water heaters come with an extra secondary heat exchanger that increases the efficiency of heating water. This is done by using the heat from the gas exhaust to preheat the incoming cold water supply.

To explain it simply, when a hot water tap is turned on, a tankless water heater detects the water flow and ignites a flame that heats a primary heat exchanger.

The groundwater supply is then channeled through the heat exchanger and back out to the fixtures. As the primary heat exchanger heats, it produces a gas exhaust.

In a non-condensing tankless, this exhaust is immediately released out of the unit. But in a condensing tankless, this exhaust is used to heat a secondary heat exchanger before traveling out of the unit.

When groundwater travels through a condensing tankless, it’s channeled through this secondary heat exchanger first to be preheated before continuing into the primary heat exchanger.

This process of recycling heat from the gas exhaust results in the burner using less gas to operate, making it more efficient.

Standard vs. Recirculating Tankless Water Heaters

Another choice you’ll have when choosing a tankless is between a standard on-demand tankless or one that recirculates to provide hot water to your fixtures faster. Let’s take a look at how each type operates:

How Do Standard Tankless Water Heaters Work?

Standard tankless water heaters heat water only when you turn on a hot water faucet or appliance. While this tankless still provides endless hot water, you will have to wait for the hot water to reach your fixtures, just like a tank water heater.

The time it takes hot water to reach each fixture will depend on how far it is from the unit and how your plumbing lines were installed.

How Do Recirculating Tankless Water Heaters Work?

Recirculating tankless water heaters are larger models with a built-in pump to recirculate hot water through your plumbing lines during specific times throughout the day. This type of system allows you to have hot water faster, eliminating the issue of waiting for hot water.

This is done by installing a dedicated return line from the furthest fixture back to the tankless or through a “crossover valve” installed underneath the furthest sink from the tankless. In most cases, if you don’t already have a dedicated return line in your plumbing setup, the easier and least expensive option will be installing the crossover valve.

Most tankless brands will give you multiple ways to control their recirculating models, such as:

Manual Remotes: These remotes will typically let you set two different timers and are mounted inside your home in a convenient location of your choice.
A Wi-Fi module and App: This lets you control your tankless wirelessly using your phone or tablet and will give you even more timers as well as information about your tankless.
Motion Sensors: These can be installed in a bathroom or kitchen so the recirculation is automatically started anytime it detects movement in those areas.
Push Buttons: This is a convenient option you can use if you need hot water outside of your normal recirculation schedule.

Recirculating tankless water heaters have a higher upfront cost, but they can be a great solution for larger homes or if you’re constantly waiting on hot water. Another thing to consider is that when the unit is in recirculation mode, and you want cold water, you’ll have to wait until the hot water clears out.

Rinnai’s “Smart” Tankless Water Heaters

Rinnai, one of the top brands for tankless water heaters, has introduced a new “smart” feature for its recirculating models. Instead of having to set external timers to activate the recirculation pump, these Smart-Circ units will learn your hot water habits over the course of seven days.

Once a “hot water event” occurs (any time hot water is used for more than 20 seconds), this unit will bank the time in its system and automatically know when to start recirculating the following day.

For example, if you take a shower at 8:00 AM and do the dishes after dinner at 6:30 PM, the unit would make sure you have hot water the following day between 7:30 and 8:30 AM as well as between 6:00 and 7:00 PM to cover the times you would normally want hot water.

This feature gives you a more streamlined and custom option for recirculation. And the best part is, if you don’t like it, you can always add a Wi-Fi module or manual remote instead.

Now that you understand the benefits and different types of tankless water heaters, it’s time to make sure your new water heater is sized properly for your home.

What Size Tankless Water Heater Do You Need for Your Home?

Before you buy a tankless water heater, you need to make sure it’s the right size for your home. A tankless water heater sized for a two-bathroom home won’t be able to keep up with the hot water demands of a home with five bathrooms.

To determine what size tankless you need, two important considerations must be made.

The first is the required flow rate, which is measured by gallons per minute (GPM), and the other is the temperature difference, or Delta T, between your groundwater and the temperature of the water you want coming out of the tankless.

How Big of a Water Heater Do You Need?

Flow Rate and Gallons Per Minute (GPM)

To make sure your tankless provides enough hot water, you’ll need to figure out your required flow rate. This is calculated by understanding how many gallons per minute (GPM) of hot water is needed based on the fixtures in your home.

To calculate this, you’ll need to look at each fixture individually. The table below shows the average GPM of hot water needed based on the fixture or appliance.

Fixture	Gallons Per Minute (GPM)
Shower	1.8
Bathtub	4.0
Washing Machine	1.5
Dishwasher	1.2
Sink	0.4

Add the GPM needed for each fixture in your home that could be running at one time. For instance, if your home has four showers but only three of them are used at the same time, your required flow rate would be 5.4 GPM.

If these three showers run at the same time as a washing machine and dishwasher, the required flow rate would be 8.4 GPM.

However, the required flow rate is only the first part of the equation.

Next, you’ll need to make sure the tankless water heater can get the water hot enough to meet your desired temperature. To figure this out, you need to understand temperature rise and the Delta T (ΔT).

Temperature Rise and Delta T

Temperature rise, as it relates to water heating, is the difference between the incoming water temperature going into the tankless and the temperature of the water you want coming out of it. The difference in the two numbers will be your Delta T (ΔT).

To help, let’s look at an example using the ground water temperature map below.

Photo Credit Rinnai.us

For this example, we’ll assume you live in North Carolina. Based on the map, the average groundwater temperature would be 57 degrees Fahrenheit.

For the desired temperature of hot water, we’ll use 120 degrees Fahrenheit. This is standard for most residential homes, and some manufacturers start to void warranties if the outgoing water temp exceeds this.

Based on these two numbers, your Delta T (ΔT) would be 63.

How Many BTUs Do You Need a Tankless Water Heater To Use?

Using your required flow rate and Delta T, you can determine how many BTUs a tankless will need to transfer enough heat to cover the temperature difference between your incoming cold water and your desired hot water temperature.

The formula looks like this:

BTUs = Flow Rate in GPM × Delta T (ΔT) × 500.4 (The weight of one gallon of water → 8.34 x 60 minutes)

This means the tankless water heater you choose should use at least 153,000 BTUs.

To make it easier for you, we created a calculator to help you size the right tankless for your home. Just enter the number of each type of fixture and choose the state you live in.

Once you hit the calculate button, our calculator will tell you your required flow rate in GPM and the BTU requirement. It will also give you three tankless recommendations with the manufacturers and models that meet your needs.

Tankless Water Heater Size Calculator

To use this tankless sizing calculator, only add the appliances that will be used simultaneously. It’s rare that all your appliances that use hot water will be running at the exact same time.

A good place to start is two shower heads or one bathtub running with a washer machine and dishwasher. Once you hit calculate, look at the recommendations box to see your required flow rate in GPM and the BTU requirement.

Below this information, you will also find three tankless recommendations with the manufacturers and models that meet your needs.

If you don’t see any recommendations, that means the BTU requirement to transfer heat from your specific ground water temps to 120 degrees Fahrenheit is higher than any of the tankless water heaters can produce.

This likely means you’re expecting to use too many fixtures at once, resulting in a flow rate that exceeds the capacity of a tankless water heater. Or, you may need more than one tankless water heater installed to meet your requirements.

Recommendations

How Much Are Tankless Water Heaters?

The cost of a tankless water heater will depend on the manufacturer and the type you choose. Here’s the average unit cost for the top three brands—Rinnai, Navien, and Rheem:

Standard Non-Condensing Tankless: $700 to $1,800

Standard Condensing Tankless: $1,600 to $2,200

Condensing Tankless with Recirculation: $2,200 to $2,700

How Much Does It Cost to Install a Tankless Water Heater?

The cost to install a tankless water heater varies depending on the type (standard or recirculating and condensing or non-condensing), the complexity of the installation, and where it’s located.

For labor and materials, expect to pay anywhere from $2,000 to $3,000. This means you can expect to pay anywhere from $3,400 to $6,000 for the unit and the cost of labor and materials.

Regardless of which tankless model you choose, the labor costs involved with installing it are likely going to be your highest expense. Labor rates will depend on where you live, but it’s always a good idea to get multiple quotes from different contractors, so you know you’re getting a fair price.

If you can install your new tankless water heater in the same location as your old water heater, you’ll be able to take advantage of lower installation costs.

For example, if you have a gas tank water heater in your garage and you’re replacing it with a tankless water heater in the same location, you may be able to save money in labor and materials by using the same gas lines, water lines, and venting location.

However, if the gas and water lines are not suitable or not up to code, they may need to be upgraded.

As we wrap up this guide on how to choose a tankless water heater, it’s clear that making the switch from a traditional tank to a tankless system is a choice that comes with many benefits.

We walked you through the essential considerations, from understanding how tankless water heaters work to the specific features of different models and the significance of sizing.

We also covered the advantages they provide with energy efficiency, the potential cost savings, and the added comfort of more luxury options like recirculating and smart tankless water heaters.

When considering your options, keep in mind that the best tankless water heater will depend on your hot water needs, including water usage patterns, the number of fixtures running at one time, and your local climate and groundwater temperatures.

Don’t forget to use our tankless sizing calculator to help you choose the right size tankless water heater for your home so you can enjoy all of the benefits a tankless water heater provides.

If you need extra help with this process, reach out to a licensed professional. They can offer personalized and localized advice to help you select the best tankless water heater for your home and should be able to handle the installation from start to finish.