Someday in the not-too-distant future, the familiar water heater tank may become a relic of the past, ushered out by a technology that makes a lot more sense for today’s homes – the tankless water heater.

The problem with a conventional water heater is that it keeps a large tank of water at about 120 degrees Fahrenheit around the clock, 24/7. Heating water that you don’t use – especially in the wee hours of the morning or when you’re at work – wastes a lot of energy.

Furthermore, the hot water in the tank can get used up. When somebody takes a long shower or runs the washing machine right before you bathe, you wind up with a cold shower.

[Read: How to Save When You Buy Your Next Water Heater.]

Benefits of Going Tankless

As its name suggests, a tankless water heater doesn’t have a tank because it doesn’t store hot water like a conventional water heater does. Instead, when you turn on a hot-water faucet or appliance, cold water circulates through a heat exchanger, where powerful gas burners or electrically heated coils warm the water in route to the fixture or appliance. It only uses energy when you turn on the hot water.

The Department of Energy estimates that because a tankless water heater doesn’t store hot water, it can save up to 34 percent of a home’s water-heating energy, equating to $100 or more per year in reduced utility bills.

Tankless water heaters last longer than storage water heaters because they don’t store mineral-laden water that, over time, becomes corrosive. Most tankless water heaters have a life expectancy of 20 years or more, compared to 10 to 13 years for conventional water heaters. They also maintain their energy efficiency, whereas storage water heaters bake corrosive minerals onto the bottom of the tank’s inner surface, eventually reducing efficiency.

Because you can replace parts if or when they fail, a tankless water heater’s life can be extended further. Tank-style water heaters, in contrast, go into the landfill when they start leaking because you can’t replace a tank that has deteriorated.

To ensure its longest possible life when buying a tankless water heater, check the warranty. The heat exchanger is the most vulnerable component. Warranties for heat exchangers tend to run from 5 to 12 years.

Another advantage of tankless water heaters is their size – they’re much smaller than conventional water heaters. Most tankless water heaters are flat, suitcase-sized boxes that mount on a wall, saving valuable space.

[See: 10 Ways to Save Energy and Reduce Utility Bills at Home.]

Gas or Electric?

Most whole-house tankless water heaters are gas-fired (both natural gas and liquid propane) because gas units heat more hot water faster than electric models. Electric tankless water heaters are popular for serving single fixtures or bathrooms that are located away from the main water heater – when placed closer to fixtures, the heater can eliminate the long wait for hot water that wastes both energy and water itself. Whole-house electric models are made for homes where gas isn’t practical or available.

To maximize efficiency, choose a gas model that starts with an intermittent ignition device, similar to spark ignition, instead of a pilot light.

Go With the Flow

While a tankless water heater never runs out of hot water, its flow of hot water can fall short. In other words, if you turn on too many hot-water showers or appliances simultaneously, you’ll get lukewarm water. To avoid this problem, buy a tankless water heater that produces enough flow to handle your household’s needs.

A tankless water heater’s flow rate is expressed by gallons per minute. Flow rate is a factor of the unit’s heating ability, measured by British thermal units. The greater the BTU rating is, the higher the unit’s flow rate. In most situations, it takes about 31,000 BTU to deliver 1.2 GPM of hot water, but this varies by the equipment’s design and the incoming water’s temperature – the colder the water, the more heat required.

Because the language of “flow rates” and “BTU” can be confusing to consumers, most manufacturers state the number of fixtures or showers each model will serve simultaneously in a household. For example, a unit that heats 4 GPM can supply one sink and one shower. A 6-GPM model can supply two showers at the same time.

If your home has a washing machine, dishwasher and more than one shower, either you will need to buy a model with a very high flow rate, stagger usage times or buy more than one tankless water heater. A dishwasher or washing machine that heats its own water can help reduce the demand for hot water.

When comparing tankless water heaters, also check the efficiency rating – an overall measurement of how well each appliance converts energy to heat. Efficiency ratings typically range from about 78 to 87 percent.

[See: 9 Easy Ways to Boost Your Home's Curb Appeal.]

The Cost of Efficiency

Most tankless water heaters cost more than storage water heaters. Whole-house tankless water heaters run from about $500 to $1,200, whereas comparable tank-style water heaters typically cost from $400 to $1,000. However, in the long run, you’re likely to get a better return on your investment because tankless water heaters can last twice as long as storage water heaters, and pay for themselves with energy savings over the years.

Installing a tankless water heater makes the most sense when you’re adding on to your home or building a new one, because you can plan and provide the necessary hook-ups and utilities at very little extra expense.

But retrofitting a tankless water heater into an existing home can be a different story. Because tankless water heaters have different plumbing, electrical and venting requirements, you can’t just swap a tankless water heater for a conventional one. Installation can add significantly to the up-front cost.

For example: You normally can’t connect a gas tankless water heater to the old water heater’s vent. Its required vents are usually larger than or different from the vents needed for a conventional water heater. Be sure you check out the venting requirements before buying a particular model. For your family’s safety, proper venting is imperative.

If your home won’t easily accommodate a standard vent, you can investigate a “low-nox” tankless water heater that vents out through the wall, or an exterior-mounted model that doesn’t need a vent.

One last, small disadvantage of a new tankless water heater is that you’ll need to keep an eye on your water usage. With an endless supply of hot water, you may never want to get out of the shower.

Don Vandervort offers more expert water heater advice at

Tags: real estate, housing, home improvements, water, heating

Don Vandervort is the founder of, a leading home improvement advice site. Don has authored many home improvement books, written extensively for, and served as a segment host on HGTV.

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