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


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Tankless water heaters are gaining in popularity, and for good reason. Tankless, also known as on-demand or instantaneous water heaters, have many benefits over a traditional tank-style 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.

Understanding how a tankless heating system works and it's limitations will help you find the best tankless water heater for your household. One critical mistake that homeowners make when they purchase a tankless system is to correctly size the unit to the hot water demands of their home. Our tankless water heater buyers guide will take you through everything 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's needed. A traditional tank-style water heater stores hot water in a tank and uses energy to keep the water hot until it's needed.

One of the main advantages of tankless water heaters is that they are not limited by the size of a tank. Traditional tank-style heaters can only deliver the amount of hot water that it has stored, and then it'll need to heat more, which could take hours!

But a tankless water heater can keep your shower hot all day long since the water is heated immediately when needed. This also makes a tankless heating system more energy efficient than tank-style heaters since energy is used only to heat water, not to store and keep the water hot, which is known as standby heat loss.

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 through. Water leaves the tankless appliance 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 appliance is capable of heating at any given time. 

If your tankless system 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 Water Heaters vs Tank-Style Water Heaters

Tankless heating systems operate entirely differently than tank-style heaters. But that doesn't necessarily mean they are the best fit your household or budget. Let's take a closer look at each:

Tankless Water Heaters

  • Heats water on-demand when there is a need. The water is heated as it passes through the appliance
  • Large up-front investment
  • Modifications are often required for installation
  • Eco-friendly
  • Compact design
  • Proper sizing is critical
  • Because of their repairable design, tankless systems can exceed a 20-year service life if cared for properly

Tank-Style Water Heaters

  • Heats and stores water in a tank for later use
  • Service life is typically 8 to 12 years
  • Storage capacity typically ranges between 20 to 80 gallons
  • Floor space is required
  • Economical in both purchase price and installation costs
  • Frequently leaks when in need of repair or replacement

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Will Tankless Water Heaters Replace Tank-Style Heaters?

Tankless water heating systems have become very common in Europe and Japan, and over the last decade they've also gained popularity in the United States. This is largely because they are 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.

Choosing 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 a Tankless Water Heater

Pros and Cons of Tankless Water Heaters

Tankless water heaters have a lot going for them, but they also have drawbacks. Here's a list of the pros and cons of owning a tankless water heater:

Advantages of a Tankless Water Heater

Energy Savings/Operating Costs - Since hot water is delivered on-demand and doesn't sit in a tank being heated and re-heated until it's needed, there are no standby heat losses.

Longevity - Tankless water heaters have a longer service life than tank-style heaters. On average, and with the proper maintenance, these appliances can typically last 20 years or longer.

Replaceable Parts - Service life is extended in part, because tankless water heaters are designed to be repaired. If a tank-style water heater begins to leak there's a good chance that the entire unit will need to be replaced. However, on-demand systems 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 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. When hot water is needed, it's heated on-the-spot and delivered immediately.

Peace of Mind - Because a tankless water heater doesn't have a storeage tank, there's no need to worry about the common age-related issue of leakage which tank-style 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 a Tankless water Heater

Initial Cost - Expect to spend more money upfront when purchasing a tankless water heater. It's not uncommon for these appliances to cost as much as 3x's more than a tank-style water heater by the time you add in installation costs.

Capacity - Depending on the household demand for hot water, it may be necessary to have 2 large tankless appliances installed. Adding a small point-of use unit to service a bathroom can also be a nice alternative.

Power Upgrade - Electric tankless water heating systems 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 - Non-condensing gas fueled tankless water heaters require expensive category III venting material.

Output Limitations - If the household's hot water demands are higher than the system's capability, the appliance won't be able to deliever 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

Energy Savings and Efficiency

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

Water heaters are among many other appliances that use an Energy Factor (EF) rating to measure the unit's efficiency. The following are some points regarding the Energy Factor rating from the EnergyStar.gov site:

  • Energy Factor (EF) is a measurement of the 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.

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However, the EF rating doesn't tell the whole story when it comes to operating costs. Electric tankless 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° F temperature rise is possible with a gas fueled tankless heater which 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° 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.

Stiebel Eltron Tankless Water Heater – Tempra 24 Plus – Electric, On Demand Hot Water, Eco, White

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 appliance they're selling.

Many manufacturers offer coverage that falls within these ranges:

Heat Exchanger: 10 to 15 years

Parts: 2 to 5 years

Labor: 1 year

Rheem 240V 3 Heating Chambers RTEX-24 Residential Tankless Water Heater, GRAY

Rheem manufacturers both electric and gas tankless water heaters. This electric system is an outstanding performer. Learn More.

How to Correctly Size your Tankless Water Heater

There's less room for error when selecting a tankless water heater. Unlike a tank-style 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 through the unit, the water delivered at the tap will be lukewarm.

Manufacturers size their tankless appliances by determining the temperature rise needed to achieve a specific flow rate. Once you calculate these 2 factors, 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. Tankless systems that are fueled with gas, tend to be able to produce a higher flow rate than electric systems.

From the US Department of Energy: "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."

How to Size a Tankless Water Heater

When sizing a tank-style 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 tankless system to serve the household's hot water demand is critically important since there won't be a storage tank to buffer any shortages during peak periods. 

  • Determine your household's peak demand flow rate (see below)
  • Determine your home's temperature rise (see below)
  • Select the tankless model that best meets your needs

How to Calculate your Flow Rate

To Calculate your flow rate you'll need to determine the number of hot water devices you think you'll use at any one time (this is called your peak hour). Add the GPM (gallons per minute) of each device and the total will be your peak hour flow rate.

Use the following as a general guideline:

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

As an example, if you will be running 1 shower (2.2 GPM), and 1 bathroom faucet (2.2 GPM) during your peak hot water hour, then your peak flow rate needed will be 4.4 GPM (2.2 + 2.2 = 4.4).


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How to Calculate your Temperature Rise

To determine your temperature rise you need to subtract the temprature of the water entering your home (ground water temperature) from your desired hot water temperature (output temperature).

  • If the ground water temperature is 50°F and you set your output temperature to 120° your tankless water heater will need to heat the incoming water 70° to reach the desired temperature of 120°. The temperature rise will be 70°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 tankless water heater.

Watch the Video on How to Size a Tankless Water Heater

EcoSmart ECO 27 Electric Tankless Water Heater, 27 KW at 240 Volts, 112.5 Amps with Patented Self Modulating Technology,White

The EcoSmart ECO27 is a very popular, reasonably priced electric tankless water heater. Learn More.

Gas or Electric: Which Should You Buy

How your tankless water heater is fueled is a critical decision. 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're 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 appliance'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 systems 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.

Rinnai RUCS Series SE Tankless Hot Water Heater: Indoor Installation

Rinnai manufacturers an indoor tankless system that can deliver up to 7.5 GPM. Learn More.

Gas Fueled Tankless Water Heaters

Gas fueled tankless water heaters are an excellent choice if you're lucky enough to have natural gas and/or propane available in your area. Tankless water heating systems require a quick response time, and a high heat output in order to be effective, and gas fueled units are capable of delivering both of these requirements with ease.  

But let's take a look at some of the other considerations you should keep in mind.

Fuel Supply Line

The fuel supply line is the gas line that supplies the tankless system with fuel. It must be sized to provide enough fuel for the larger burners that are necessary to deliver instantaneous hot water. Burners on a gas tankless system can have outputs in the range of 200,000 Btu/h which is much higher than tank-style 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 installed in gas tankless water heaters. As a general rule, the more complex the ignition system, the more expensive the tankless water heater will be. However, on the other side, the more simplistic the ignition system, the less energy savings the appliance will be capable of reclaiming.

Standing Pilot Light 

  • Pilot light burns constantly
  • Models that use this technology are less expensive to purchase
  • These models have higher operating costs and offer less energy savings

Direct Ignition

  • Delivers a spark to the main burner when water flow is detected
  • Improved energy efficiency over standing pilot light systems
  • An electrical hook-up is necessary (some models are designed to operate without an electrical hook-up and use batteries instead)

Hydro-Power Ignition

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


One of the primary concerns with gas on-demand systems is proper venting. The venting requirements are different from tank-style water heaters.  However, there is more flexibility when venting a tankless system since the vents can run through the roof or horizontally through a side wall. However, keep in mind that this only makes the venting more complex.

The material the vents are manufactured with is also different from tank-style 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 within the vents. Since the condensation is highly acidic, standard vent material would quickly breakdown.

One important point is that there are two types of gas tankless water heaters that will NOT require venting:

Outdoor Gas Tankless Water Heaters - 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 these models. 

Condensing Tankless Water Heaters - These systems use a more sophisticated venting design that does not require venting. 

You should keep in mind that non-condensing tankless systems are less expensive and require venting. Howeer, condensing on-demand systems eliminate the need for venting altogether. With so many options, you should be able to select a model that works best for your individual situation and budget.

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Non-Condensing Tankless Water Heaters

As stated above, a non-condesning tankless water heater is less expensive to purchase, but more expensive to install because of the more complex and expensive venting. Manufacturers have two different types of venting options: The direct vent and the power vent. Let's take a closer look at each:

Direct Vent

  • Draws air from outside the house into the tankless appliance for combustion
  • Has two vents: one for air intake, and one for exhaust
  • Allows the tankless appliance to be installed in smaller spaces

Power Vent

  • Draws air from inside the house into the tankless appliance for combustion
  • Vents the exhaust outside
  • Must be installed in an area that provides adequate air for combustion
AO Smith ATO-110U-N AO Smith ATO-110U-N 6.6 GPM Residential/Commercial Ultra Low-NOx Non-Condensing

AO Smith manufacturers this non-condensing tankless water heater that can deliver up to 6.6 GPM. Learn More.

Condensing Tankless Water Heaters

Condensing tankless water heaters are more expensive to purchase upfront, but less expensive to install because they do not require venting. We highly recommend purchasing a condensing tankless system, the added upfront expense for the unit itself is frequently less expensive after you factor in installation costs, and in the end, you'll most likely have a higher quality system.

  • 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 than non-condensing systems. Generally in the mid-to-high 90's
  • Condensing systems are more expensive to purchase than non-condensing systems, but the higher efficiency and lower installation expense helps offset the increased upfront cost
Rinnai RU180iN Sensei Super High Efficiency Tankless Water Heater, 10 GPM - Natural Gas: Indoor Installation

This Rinnai tankless water heater can burn natural gas or propane and is capable of delivering up to 10 GPM. Learn More.

Watch the Video of How a Condensing Tankless Water Heater Works

Outdoor Gas Tankless Water Heaters

Outdoor tankless systems 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 tankless water heater is ideal if you're going tankless in a house that is already built. These units are often easier and less expensive to install since fewer modifications may need to occur. 

Many of these outdoor tankless appliances 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 your owner's manual for details on what precautions need to be taken to avoid damage due to freezing weather. Read our article on how to protect a tankless system from freezing

Rinnai RL Series HE+ Tankless Hot Water Heater | RL75eP - Propane | Outdoor Installation

This Rinnai tankless water heater burns propane and is designed for outdoor operation. Learn More.

Electric Fueled Tankless Water Heaters

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

Electric tankless systems have a  more simplistic design than gas systems, which 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. Here are a few other things to consider:

  • Electric tankless systems are about a third the size of gas heaters.
  • Electric heaters are significantly less expensive than gas tankless water heaters. A quality electric heater can be found for $500 to $700 (vs. $1,000+ for gas fueled systems)
  • Electric tankless water heaters are very energy efficient. Over 98% of the incoming electricity to the system is used to heat the water (a gas tankless may peak in efficiency at 80-85%)
  • A substantial amount of electricity is required to operate an electric tankless system. Many homes are not built to provide the electrical requirements these appliances demand, in which case an upgrade is needed to the home's electrical supply
  • Inexpensive to install and since venting is not necessary, an electric tankless appliance can be installed in many locations where a gas system is not feasible
  • Requires minimal maintenance and the 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/greenhouse gases are produced, making electric tankless water heaters environmentally friendly
  • Capable of delivering up to 8 GPM of hot water
Stiebel Eltron Tankless Water Heater – Tempra 24 Plus – Electric, On Demand Hot Water, Eco, White

The Stiebel Eltron 24 Plus is an excellent electric tankless water heater. Learn More.

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.

Watch the Video


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Tankless Water Heater Maintenance

Tankless Water Heater Maintenance

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

If annual maintenance isn't performed on a tank-style 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 to purchase 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 may send an error code that will prevent the unit from heating any water at all.

Tankless gas systems 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 appliance, 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 tankless system. Our post on the importance of using a Sediment Filter is a must read if you have a tankless water heater.

Hard Water and Your Tankless Water Heater

Hard water is the number one enemy of a gas fueled tankless 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 your tankless system. 

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'll not only help your water heater, but they'll also decrease the scale build-up in all of your appliances that use water, such as the dishwasher and washing machine.

Electric vs. Gas Tankless Maintenance

Always check your owner's manual for your model's specific maintenance requirements and frequency recommendations.  Many manufacturers recommend performing maintenance on their systems 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 and an occasional flushing, these systems 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 ensure that the system is performing as it should, as well as complete some general maintenance.  

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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. Electric tankless water heaters need to be flushed, but the process is less complicated than gas systems, and as a general rule, in most areas they do not need to be flushed as often.

Gas fueled systems should be flushed regularly 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. If regular flushing does not occur, the system will need to work harder and the service life will be shorter than expected.

We highly recommend flushing  your gas tankless water heater annually or consulting with a local professional for their recommendation which will take into account your area's water hardness. Tankless water heaters are not inexpensive, but with the proper care and maintenance, they can last for over 20 years. 

This article will show you how to flush your tankless water heater.

Things to Consider When Selecting a Tankless Water Heater

Other Considerations

By now, you probably have a pretty good idea about what type of tankless water heater you should purchase for your home. But we'd like to leave you with a few final things to consider before you make your purchase.

Fuel Considerations

  • 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 system? (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 tankless systems. Larger gas supply lines and venting modifications are common.
  • Electric fueled tankless systems are more eco-friendly than gas systems because there are no green house gases released. They also have a higher energy efficiency score (EF).

Climate Considerations

  • 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 Winter, where a smaller system would be adequate during the Summer.
  • Outdoor tankless systems 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 are meeting all of the necessary requirements with local building codes, plus it will keep your warranty valid.
  • For a valid warranty, many manufacturers require professional installation.
  • Many manufacturers provide detailed installation instructions to do-it-yourself, however, we strongly recommend having professional install your new water heater. It's a worthwhile investment.

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