When to Get a Tankless Water Heater (and When Not To)

If you have a large family or a small space, a tankless water heater may be more trouble than it’s worth.

In so many ways, we’re living in the future. We have wireless internet, artificial intelligence, and holographic KISS concerts. Technology has advanced so fast it’s often difficult to keep up—as soon as you’ve mastered one new paradigm, a dozen others have popped up while you weren’t paying attention.

But not everything in our lives has gotten better—or even changed that much. Your standard water heater, for example, is kind of primitive: It’s a tank of water with a fire underneath, or electric heating elements inside the tank. It’s not terribly complicated or that far removed from a bucket suspended over a fire.

There is a more advanced, modern option: The tankless water heater, aka a “demand” water heater. These fixtures eschew the tank altogether, heating water on demand. Not only are they more energy efficient by as much as 34%, they offer the tantalizing possibility of infinite hot water—and infinitely long hot showers. Despite these benefits, however, a tankless water heater won’t work for everyone or every living situation.

Capacity

Tankless water heaters can supply infinite hot water in the sense that they don’t rely on a set amount of stored, heated water. But they’re not magic—they can only heat up so much water so fast. Every tankless water heater has a flow rate measured as gallons per minute (gpm), and every fixture that provides hot water (faucets, showers, dishwashers, laundry) has a flow rate as well. Your tankless water heater has to have a flow rate sufficient to supply hot water to all the fixtures simultaneously.

For example, if your family frequently has someone showering (2 gpm) while the washing machine (3 gpm) and dishwasher (2 gpm) are both running, your tankless water heater will need to provide at least 7 gpm. A heater with a higher flow rate will come with a higher price tag—and if you have moments when your hot water usage spikes beyond the normal rate, your tankless water heater might not be able to keep up.

Another factor affecting tankless water heater performance is the temperature rise. This is the difference between the temperature of the water when it enters your home through the pipes and the temperature you want your hot water to be. If your groundwater is 50ºF (10ºC) and you want your hot water to be 120ºF (49ºC), you need a rise of 70ºF (39ºC). If the water temperature coming in drops a few degrees for any reason, your tankless water heater might struggle to provide water that’s hot enough for your needs, especially if you use a lot of appliances and fixtures simultaneously.

That means if you have a large family or use a lot of hot water in your house, a tankless water heater might not be the best choice even if you calculate its capacity carefully. And since tankless models don’t have a stored supply of water and rely on constant intake, any mineral buildup in the pipes or drop in water pressure to your home might result in lukewarm water or not enough hot water to go around. A storage water heater will eventually fill up even with reduced water pressure, and will eventually heat water of any temperature to the desired setting. But if your hot water usage rarely spikes and the temperature rise is manageable, a tankless unit should work well.

Space

Although tankless water heaters are smaller than traditional tank heaters (and you can buy compact units designed for smaller spaces), that doesn’t mean you can necessarily fit one in your existing mechanical space. Depending on the capacity you need, if you have a tight mechanical room or area you might not be able to squeeze one in, leaving you with the option of installing it outside the house or in plain view somewhere else in the house. I personally know someone who had to have theirs installed in their living room, so now they have a huge unit with pipes running everywhere right in the middle of their home. And choosing a more compact unit might mean sacrificing capacity, leaving you with chronically lukewarm water.

It’s best to consult with your plumber or contractor to make sure they can fit a tankless water heater into your home before you commit to one. If not, but you can tolerate having it exposed to guests or mounted outdoors, then a tankless unit will still work for you.

ROI

A final consideration with tankless water heaters is the return on investment. Because of their superior energy efficiency, tankless water heaters are often promoted as wise investments—and you will get your money back, eventually. Tankless water heaters can last 20 years or more (more than double the lifespan of a typical storage water heater), and they can save an average family of four about $100 a year on energy bills. If your tankless water heater lasts 20 years, you’ll save $2,000 over its lifetime. The cost of installing one of these units ranges between $1,500 and $3,200 (including labor), so you might get all or at least most of your money back.

But if you’re not planning to stay in your home that long, the investment might not pay off. If you’re planning to sell your home in a few years, a tankless water heater might appeal to some potential buyers, but there’s no data to support the idea that a tankless water heater significantly affects home value one way or another. On the other hand, if you’re in your forever home or have no plans to move any time soon, the combination of infinite hot water and energy efficiency will pay off.