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Tankless Water Heater Buyer’s Guide: What You Need to Know

Tankless Water Heater

The tankless water heater is gaining in popularity, and for good reason. Tankless,  also known as on-demand or instantaneous water heaters, have many benefits over a traditional storage-type water heater. However, they also have some limitations and drawbacks which you should consider before deciding if going "tankless" is the best move for your household. We'll take you thru what you need to know in order to make an informed buying decision.

What is a Tankless Water Heater?

Tankless water heaters have become increasingly popular largely due to their energy efficiency and compact design. These heaters are capable of delivering hot water on-demand by heating water only when it is needed. A traditional hot water heater stores hot water in a tank and uses energy to keep the water hot while it is waiting to be used.  

​Simply put, when you have a tankless water heater, your hot shower is not limited by the size of your water heater's tank!  Energy is used only to heat water, not to store and keep water hot. This means that hot water is delivered on-demand and NOT sitting in a storage tank like a traditional water heater.

How Do Tankless Water Heaters Work?

​The premise behind a tankless water heater is very simple. When a hot water tap is opened, cold water runs into the tankless unit and the electrical heating element (or gas burner) jumps into action and heats the water as it passes thru. Water leaves the on-demand unit hot and ready to be used. 

On-demand systems are capable of delivering a constant supply of hot water, however, they are limited by the unit's flow rate. The flow rate is the amount of water the tankless unit is capable of heating at any given time. 

If your unit has too low of a flow rate it won't be capable of delivering enough hot water to meet your household needs. ​Selecting a large enough unit is a critical decision to prevent running out of hot water.

Tankless vs. Traditional Water Heaters

Tankless Water Heater

Heats water when needed as it runs thru the unit

  • Large up-front investment
  • Modifications often required for installation
  • Eco-friendly
  • Compact design 
  • Proper sizing is critical
  • Repairable

Traditional Water Heater

Heats and stores water in a tank for later use

  • ​Shorter service life
  • Ranges in storage capacity of 20 to 80 gallons
  • ​Requires floor space
  • Economical in both purchase and installation
  • Frequently leaks when in need of repair or replacement

Will Tankless Water Heaters Replace Traditional Water Heaters?

On-demand water heating systems have become very common in Europe and Japan, and over the last decade they've gained popularity in the United States. This is largely because they are very environmentally friendly, use less space and are economical to operate.

Many see on-demand water heaters as the future. The technology will undoubtedly improve, and as it does these systems will likely gain in popularity and drive prices lower.

New home construction will also adapt by building homes with the necessary electrical requirements. Enabling homeowners to either install an on-demand system during the construction of the home, or easily transition to one at a later time.

Making the choice to install  a ​tankless system may not be the right move for everybody right now, but for those who can take advantage of the benefits, it's a clear win!

Pro's and Con's of Tankless Water Heaters

Pro's and Con's of a Tankless Water Heater

Advantages of an On-Demand Water Heater

  • ​Energy Savings/Operating Costs - No standby heat loss which occurs in a traditional water heater because hot water is delivered on-demand.
  • Longevity - Tankless water heaters have a longer service life than traditional water heaters. On average, and with proper maintenance these units can typically last 20 years or more.
  • Replaceable Parts - The service life is extended, in part, because tankless water heaters are designed to be repaired. If a traditional water heater begins to leak, there's a good chance that the entire unit will need to be replaced. However, on-demand units are designed so that nearly every part can be replaced. 
  • Compact Design - Less space is needed for tankless water heaters. They mount on a wall and some units are even designed to be installed outside. 
  • Endless Supply of Hot Water - The length of your shower is no longer determined by the size of your water heater's storage tank. When sized correctly, a tankless water heater will be able to provide your household with an unlimited supply of hot water. 
  • Fresh Water - Hot water is never sitting in a tank that may contain rust and mineral scale if it hasn't been properly maintained. When hot water is needed, it is heated on-the-spot and delivered immediately.
  • Peace of Mind - Because a tankless water heater doesn't have a storage tank, there's no need to worry about the common age-related issue of leakage which traditional water heaters often experience as they come to the end of their service life. Not worrying about water floor damage can definitely help you sleep better at night!

Disadvantages of an On-Demand Water Heater

  • Initial Cost - Expect to spend more money when purchasing a tankless water heater. It's not uncommon for these units to cost as much as 3x's more than a traditional water heater by the time they are installed.
  • Capacity - Depending on the household demand for hot water, it may be necessary to have 2 large tankless units installed. Adding a small point-of use unit to service a bathroom can also be a nice alternative. 
  • Power Upgrade - Tankless units require more electricity to deliver hot water on-demand. Many homes, especially older homes, may not be able to support a tankless water heater without upgrading their power source.
  • Expensive Venting - Gas fueled tankless units require expensive venting material.
  • Output Limitations - If the household's hot water demands are higher than the system's capability, the unit won't be able to deliver hot water. Without the benefit of a storage tank, a tankless water heater is only able to deliver as much hot water as it can heat at any one time.

How to Select a Tankless Water Heater

How to Select a Tankless Water Heater

In many ways there is less room for error when selecting a tankless water heater. Unlike a traditional water heater that holds a reserve of hot water in a storage tank, a tankless unit doesn't have this buffer to fall back on. If a tankless system is not able to heat the water as it passes thru the unit, the water delivered at the tap will be lukewarm.

Here's a few important things you should consider when choosing a tankless water heater:

1. Selecting the Energy Savings / Efficiency​

Since energy savings is one of the main benefits of transitioning to a tankless water heater, it's a factor that you should pay close attention to when choosing the right unit to meet your needs. One thing to keep in mind is that the efficiency and savings of an on-demand system decrease as the household's hot water needs increase. But even so, you can still expect a tankless to out-perform a traditional storage tank water heater in the area of energy savings.

Water heaters are one of many appliances that use an Energy Factor (EF) rating  to measure the unit's efficiency.

  • The Energy Factor (EF) is a measurement of a water heater's overall efficiency.
  • The EF rating is determined by the useful energy that is coming from  the water heater.​
  • This number is then divided by the amount of energy (gas or electricity) that went into the water heater in order to heat the water.
  • The EF rating is based on the amount of hot water produced by a single unit of fuel consumed.
  • The higher the EF rating, the more efficient the water heater. 

However, the EF rating does not tell the whole story when it comes to operating costs. Electric on-demand systems have a higher EF rating than gas units, but because gas is currently a less expensive fuel source than electricity, gas units tend to deliver a lower annual operating cost. Because of this, it's important that energy savings is just one factor taken into considered when selecting a tankless unit.

As a general rule, a 70 degree F temperature rise is possible with a gas fueled tankless heater that has a flow rate of 5 GPM. However, an electric fueled unit would only be able to deliver 2 gallons of water (GPM) if it needed to increase the temperature by 70 degrees F.

In 2015 major changes  were made in the federal energy efficiency standards. Manufacturers increased the prices of traditional water heaters in order to comply with these changes.

Tankless water heaters are more energy efficient, and as technology improves and the demand increases, the purchase and installation costs should drop accordingly.

2. Selecting the Right Warranty​

Warranties vary from manufacturer-to-manufacturer and from model-to-model. Many manufacturers require that you register your tankless water heater in addition to having it professionally installed in order to be eligible for warranty coverage. 

Comparing warranties is an important part of selecting a tankless system. When a manufacturer stands behind their product with reasonable warranty time frames and procedures, it's a good indication that they believe in the quality and reliability of the unit they're selling.​

Many manufacturers offer coverage that falls within these ranges:

Heat Exchanger

10 to 15 years


​2 to 5 years


1 year

3. Select the Proper Size to Meet Your Needs

Manufacturers size their units by determining the temperature rise needed to achieve a specific flow rate. Once you calculate these 2 factors for your household, you'll be able to select a tankless water heater system that best meets your family's hot water demands.  

As a general rule, you can expect your tankless water heater to deliver between 2 to 5 gallons (flow rate) of hot water per minute. On-demand systems that are fueled with gas, tend to be able to produce a higher flow rate than electric systems. 

"Tankless or demand-type water heaters are rated by the maximum temperature rise possible at a given flow rate. Therefore, to size a demand water heater, you need to determine the flow rate and the temperature rise you'll need for its application (whole house or a remote application, such as just a bathroom) in your home."​

The US Department of Energy 

When sizing a traditional water heater, we think in terms of capacity (an 80 gallon tank), but with tankless water heaters, we need to think in terms of flow (8 GPM - gallons per minute). Finding the correct sized unit to serve the household hot water demand is critically important since there won't be a storage tank to buffer any shortages during peak periods. 

How to Size a Tankless Water Heater

1. Determine your household's peak demand flow rate (GPM)

2. Determine your home's temperature rise

3. Select the tankless model that best meets your needs​

Calculating your Flow Rate

Determine the number of hot water devices you think you'll use at any one time. Add the GPM (gallons per minute) of each device.

Use the following as a general guideline:

  • Shower: 1992 standard 2.2 GPM / Older shower heads 4.0 - 8.0 GPM
  • Bathroom faucet: 1992 standard 2.2 GPM / Older faucets 3.0 - 5.0 GPM
  • Kitchen faucet: 1992 standard 2.2 GPM / Older faucets 3.0 - 7.0 GPM
  • Consider any appliances that you may be using as well, such as dishwashers and washing machines.

Calculating your Temperature Rise

Subtract the temperature of the water entering your home (ground water temp) from your desired hot water temperature  (output temp).

  • If the ground water temperature is 50 degrees F. and you set your output temperature to 120 degrees, your tankless unit will need to heat the incoming water 70 degrees F to reach the desired temperature of 120. The temperature rise will be 70 degrees F.    (120 - 50 = 70)
  • Keep in mind that the temperature rise will change throughout the year. The incoming water is generally cooler during the Winter than it is during the Summer.
  • The temperature of the incoming water will impact the speed and flow of your unit.

4. Select the Fuel Type for your Tankless Water Heater​

This is a critical decision, because the type of fuel you select will impact the size and energy efficiency of your unit, and ultimately it will determine your annual operating expenses.​ Switching fuel sources can be a major expense, so this is a particularly relevant decision if you are building a new home.

 The most common fuel choices are natural gas, propane, and electricity. Often, the type of fuel you choose will be determined by the fuel that is available in your area. If you are lucky enough to have the choice, you should compare the cost of each fuel as well as the tankless unit's efficiency before making your decision.

Many states offer rebates or tax credits for installing a tankless water heater. Click Here to check available incentives in your area.

Gas tankless water heaters are generally more expensive than electric units and they should be professionally serviced every year. However, they tend to perform better than electric units from an energy savings / operating costs standpoint. Let's take a closer look between the two types of systems.

Gas Fueled Tankless Water Heaters

Gas fueled tankless water heaters are an excellent choice if you are lucky enough to have natural gas and/or propane available. A quick response time and high heat output are two necessary requirements for an on-demand system to be effective, and gas fueled units take these challenges in stride. But there are many other considerations you should keep in mind.

Fuel Supply Line

The fuel supply line must be sized to provide enough fuel for the larger burners that are necessary to deliver instantaneous hot water. Burners on a gas on-demand system can have outputs in the range of 200,000 Btu/h​ which is much higher than traditional water heaters (75,000  Btu/h). It may be necessary to increase the size of your gas fuel line in order to accommodate your new tankless.


There are 3 main types of ignition systems. As a general rule, the more complex the ignition system, the more expensive the tankless water heater. However, on the other side, the more simplistic the ignition system, the less energy savings  the unit will reclaim.

Standing Pilot Light

  • Pilot light burns constantly
  • Models that use this technology are less expensive to purchase
  • Higher cost to operate / less energy savings

Direct Ignition

  • Delivers a spark to the main burner when water flow is detected
  • Improved energy efficiency over standing pilot light units
  • Electrical hook-up is needed
  • Some units are designed to operate without an electrical hook-up and using cell batteries

Hydro-Power Ignition

  • Water flows into the unit and activates a small turbine which ignites the burner
  • ​No electrical connection or battery needed
  • Manufactured by Bosch

One of the primary concerns with gas on-demand systems is proper venting. The venting requirements are different from traditional water heaters.  However, there is more flexibility when venting a tankless unit since the vents can run through the roof or horizontally thru a side wall, but this also makes the venting more complex.

The material the vents are manufactured with is also different from traditional water heater venting. Tankless systems require Category III venting, which is made from stainless steel. It's corrosive-resistant and expensive.​

Category III venting is necessary because with the efficiency in combustion, condensation develops inside the vents. Since the condensation is highly acidic, standard vent material would quickly breakdown.​

One important point is that venting is ONLY necessary if you select an indoor gas tankless water heater. Gas water heaters require incoming air for combustion and venting is used to direct the exhaust outside. An outdoor unit will already be outside so it wouldn't be necessary to vent those models. 

However, there are a variety of indoor models available offering a more sophisticated venting option called condensing tankless water heaters. Non-condensing units are less expensive and require venting. But condensing on-demand systems eliminate the need for venting altogether. With so many options, you should be able to select a unit that works best for your individual situation.

Non-Condensing Tankless Water Heaters

Direct Vent

  • Draws air from outside the house into the unit for combustion
  • Has one vent for air intake
  • Has one vent for exhaust
  • Allows tankless units to be installed in smaller spaces 

Power Vent

  • Draws air from inside the house into the unit for combustion 
  • Vents the exhaust outside
  • Must be installed in an area that provides adequate air for combustion

Condensing Tankless Water Heaters

  • Extracts the heat from the exhaust 
  • Eliminates the need for expensive venting materials
  • Condensation is not released within the venting so less expensive venting material can be used
  • Achieves a higher efficiency rating, generally in the mid to high 90's.
  • More expensive to purchase than non-condensing units, but the higher efficiency helps offset the increased upfront cost

Outdoor gas tankless water heaters are designed to be installed on the exterior of a house and endure the elements. Outdoor units utilize the free air flow to vent exhaust so no additional venting is necessary.

In many cases selecting an outdoor unit is ideal if you are going tankless in a house that is already built. These units are often easier and less expensive to install since there are less modifications that may need to occur. 

Many of these units are designed with self-warming components that help them operate in low temperatures. If you live in a climate that experiences freezing temperatures regularly, outdoor units may not be the best option. As always, it's best to check the owner's manual for details on what precautions need to be taken to avoid damage due to freezing weather.

Electric Fueled Tankless Water Heaters

Electric tankless water heaters tend to be less expensive to purchase and install than gas units, however, they do require a great deal of energy to operate. If it's necessary to upgrade the household's electrical system, the price of installation will increase significantly.  

Electric on-demand units have a  more simplistic design than gas tankless units. This makes them simpler to troubleshoot, diagnose, and repair. They also achieve a higher efficiency rating and require minimal maintenance. All these factors lead to a longer service life.​

  • Electric units are about a third the size of gas units.
  • Significantly less expensive than gas units. A quality electric water heater can be found for $500-$700 (vs. $1,000+ for gas fueled units).
  • Far more energy efficient than gas units. A gas tankless may peak in efficiency at 80-85%.
  • Electric units are very energy efficient. Over 98% of the incoming electricity to the unit is used to heat the water.
  • Uses a substantial amount of electricity to operate. Many homes are not built to provide the electrical requirements to these units and need to upgrade the home's electrical.
  • Inexpensive installation unless an electric system/service upgrade is needed.
  • Capable of delivering up to 8 GPM of hot water.
  • Requires minimal maintenance. The only maintenance necessary is the occasional cleaning of the inlet screen.
  • Simplistic design results in a longer service life.
  • As a general rule, troubleshooting, diagnosing and repairs are generally easier.
  • Venting is not necessary because no exhaust gases are produced.
  • Environmentally friendly since no greenhouse gases are produced.
  • Since venting is not necessary, an electric unit can be installed in many locations where a gas unit is not feasible.

As a general rule, electricity prices are far more stable than gas prices, and it's generally agreed that the price of electricity will likely rise at a much slower pace. Electric fueled tankless water heaters are seriously worth considering.

Tankless Water Heater Maintenance

Tankless Water Heater Maintenance

All water heaters require maintenance . . . whether we choose to perform the maintenance or not.

​If annual maintenance isn't performed on a traditional water heater, the water stored within the tank will eventually destroy the unit by eating away at the inside of the tank until it finally leaks. The only solution when this happens is a new water heater.

A tankless water heater won't leave a large puddle of water if you fail to perform annual maintenance, but it might send an error code that will prevent the unit from heating any water​ at all.

Tankless gas units are particularly prone to mineral scale build-up. Water is full of minerals which overtime, will scale within the unit and eventually cause the heat exchanger to work harder than necessary and overheat. As this happens, additional stress is placed on the unit, the efficiency lowers, and the service life shortens!

Check out our post on How to Flush Your Tankless Water Heater and our post on Tankless Preventative Maintenance for more detailed information on how to take care of your unit. Our post on the importance of using a Sediment Filter is a must read if you have a tankless water heater.

Hard Water

​Hard water is the number one enemy of a gas fueled on-demand water heating system. All water contains minerals such as calcium and magnesium and the higher the concentration  of these minerals, the "harder" the water. Different areas have different levels of hardness, but the more minerals within the water the more rapidly the mineral scale will build within the water heater. 

If you live in an area with hard water you should perform maintenance on your unit more frequently. It's also worth considering purchasing a water softener to treat the incoming water. A water softener system can cover your entire house, and they will not only help your water heater, but they will also decrease the scale build-up in all of your appliances that use water, such as the dishwasher and washing machine.

Electric vs. Gas Maintenance

Always check your owner's manual for your unit's specific maintenance requirements and frequency recommendations.  Many manufacturers recommend performing maintenance on their units every 6 to 24 months. But what's right for you may depend largely upon the "hardness" of your water supply. If you live in an area that has heavily mineral-laden water, you should perform flushing every 6 months.

Electric tankless water heaters require minimal maintenance. Other than simply cleaning the water inlet screen​ on a regular basis these units generally do not require any other attention to operate in peak form. 

However, gas fueled tankless water heaters, should be inspected on an annual basis by a trained professional who will verify safe fuel combustion and that the system is performing as it should, as well as complete some general maintenance.  

Maintenance Tasks

Both gas and electric tankless water heaters need to have the inlet screen filter flushed and cleaned. This is a simple task and should be done at least every 6 to 12 months.

Gas fueled units must be flushed on a regular bases to keep mineral build-up from impacting the heaters performance. ​Even a small amount of mineral scale build-up can make a large negative impact on performance. Overtime, the build-up increases and longer burner cycles become necessary to compensate for the lower efficiency. The end result will be that the system will need to work harder and the service life will be shorter than expected.

 We highly recommend flushing  your unit on an annual basis (if not more frequently). Tankless water heaters are not inexpensive, but with the proper care and maintenance, they can last for over 20 years. 

Questions to Ask - Things to Consider

Things to Consider When Selecting a Tankless Water Heater


  • What type of fuel is available in your area. Electricity, propane and natural gas are the most common choices, but they may not all be available where you live.
  • Will you be switching from an electric fueled water heater to a gas unit? (or visa versa). You'll have additional installation expenses when switching fuel sources.
  • Will you have enough electrical power to operate your new water heater? It's quite common to need to upgrade your electrical system in order to accommodate the additional power demand.
  • There's likely modifications needed for gas fueled on-demand systems. Larger gas supply lines and venting modifications are common.
  • Electric fueled tankless units are more eco-friendly than gas units because there are no green house gases released. They also have a higher energy efficiency score (EF). 


  • Different areas have different incoming water temperatures. This will make a difference on the GPM rating that meets your home's needs. the cooler the incoming water temperature, the higher the GPM rating needed.
  • Incoming water temperature varies from season-to-season. It's a good idea to select a more powerful water heater that can keep up with your hot water demand in the Winter, where a smaller unit would be adequate during the Summer.
  • Outdoor tankless units are a great option for climates that seldom experience freezing temperatures.

Code Requirements / Safety Issues

  • Hiring a local professional to install your new water heater will ensure you're meeting all of the necessary requirements with local building codes. 
  • For a valid warranty, many manufacturers require professional installation.
  • Many manufacturers provide detailed installation instructions to do-it-yourself, but we strongly recommend having a professional install your new water heater.