If you’ve ever thought paying to heat your home’s water supply around the clock — even when out at work or home asleep — sounded wasteful, you’re right. Yet countless households do just that, bearing the impact on their energy bill day after day, month after month. But there is another option for warming up your household’s water: the tankless water heater.

Whether you are building a new home or retrofitting an older one, take time to evaluate the hot water system. After all, estimates say that as much as 30% of a home’s energy budget is consumed by heating water.​

A traditional water heater continuously heats water in the tank, regardless of whether it is being used. By comparison, the newer tankless designs heat water only when there is demand for it. Less stored water to heat means less cost—and let’s not forget, a more compact, wall-mounted design.​

Sometimes called “on-demand” or “instant-on” heaters, tankless water heaters are making waves indoors. Boasting perks like increased energy efficiency and a reduced risk of spills, it’s certainly not hard to see why. Long popular in Europe and Japan, continuous advancements in technology and a more environmentally-conscious public are now causing these little devices to grow fast in popularity around the United States.​ If you are curious how they work, read here. 

Is a Tankless Water Heater Right For Me?​

Although a tankless water heater has the potential to be a great investment, it’s not the right choice for everyone. While many will love the efficiency and convenience of their new unit, others will be put off by its initial installation cost or the occasional lag in responsiveness.

As a homeowner or soon-to-be homeowner, are the benefits of these devices worth the price? Let’s take a look at some of the more important aspects to think about when you’re considering tankless water heater installation.

Cost of Installation

With so many models available, it’s difficult to give a “standard” price for tankless water heaters, but many will run more or less in the range of $800-$1500. Going rates will vary depending on the model’s power source, flow capacity, and other options. This isn’t a particularly cheap purchase by any means, with most tankless water heaters going for two or three times more than their storage-based counterparts.

The idea is to make up for the initial cost over the long run, thanks to the annual savings you’ll be seeing on your energy bill. Even though you may come out ahead in the end, purchasing a tankless water heater still requires a considerably large amount of money to be available initially, which isn’t always realistic for buyers.

All that said, there’s actually more to this than the cost of the appliance itself. Gas-powered tankless units have high-powered burners, and as such, they have special venting requirements. These heaters require a dedicated and sealed ventilation system, and you’ll need to get an installation professional to do the job — this is certainly no DIY task. Gas units may also require larger pipes than you currently have fitted, and electric-powered units could necessitate new or upgraded outlets for their fan and suite of electronics.

All in all, that “pricy” initial purchase might wind up seeming quite cheap next to a couple of thousand dollars worth of home retrofitting. This may all sound like a lot of hassle, but our goal isn’t to turn you off to the idea of a tankless water heater. It’s actually common for dealers to include installation in the unit price, although this is by no means a given. Just remember to factor this aspect in when pricing out your purchase and to get a full quote that’s tailored to your specific situation.

Energy-Efficiency

Compared to their storage-heater cousins, which must be fueled constantly to maintain the water’s temperature, a tankless water heater uses considerably less power. It makes sense, as these devices heat water only when demanded, rather than constantly maintaining a large quantity of pre-heated water at a high temperature, day in and day out.

According to the US Department of Energy, a household that uses 41 gallons or less of hot water each day can expect energy savings of between 24%-34%. Those that use very high amounts of hot water daily will benefit as well, although the effects are slightly less drastic. Not only is this great news for the environment, but it also means you’ll enjoy lowered utility bills with a tankless water heater.

That said, it’s important to note that there is always an upper limit on the working lifespan of water heaters. Even with excellent maintenance, they won’t run forever. If you can get around 15-20 years of usage out of yours, then you’re doing pretty well.

Considering the cost of installation, the energy bill savings may or may not add up to enough for the heater to fully pay for itself. Of course, if you’re considering purchasing or renting a new home or apartment with a tankless water heater already installed, this is less of a concern. Paying a small premium for such a benefit is probably well worth it!

Property Values

Moving into a new home is exciting, and it is often a blissful experience for the now-owner. But nothing “tanks” those feelings more quickly than having to deal with the expenses of high bills and maintenance issues early on.

Since water heaters have a limited lifespan, your buyer will really appreciate having a relatively new one installed. And as mentioned above, the presence of a tankless water heater, in particular, can be very desirable. After all, someone else (that’s you) has already footed the effort and expense of installation, and now the new owner reaps the rewards on their energy bill. They’re also getting an appliance that won’t break down nearly as quickly as a storage water heater, meaning that their next major expense is postponed dramatically. Any real estate agent will attest to the power of smart appliances on a home listing, especially in today’s environmentally conscious society.

Most tankless water heaters also have a longer lifespan (and warranty to boot) than traditional storage heating units, and it’s not hard to see why these are often such a smart pick. Having any new heater installed will increase the value of your home, and thus the price that you can reasonably ask for it. If it’s tankless, so much the better! Fuel SupplyJust as with a storage water heater, you’ll need to select between gas and electric power for your tankless water heater. Although both are viable choices, there are a couple of differences between the two worth noting. Tankless gas heaters have a considerable efficiency boost over gas-powered storage heaters, and as such, will tend to qualify new owners for a $300 federal tax rebate (as well as possible state incentives). Tankless electric heaters tend to be even more energy-efficient, although the slight downside of this is that they don’t qualify for rebates or an Energy Star rating.

These distinctions are, of course, in addition to the fuel supply requirements. Buyers must ensure their home is equipped to handle their heater of choice. Remember to check whether your home will require retrofitting to accommodate your new appliance.

Other Considerations

Anyone who has spent long enough in a home with a storage tank heater knows the pain and headache of a basement flood. When keeping large amounts of water in one appliance, a spill due to equipment failure is almost inevitable. But because tankless water heaters don’t actually store water at all, the risk of flooding is tremendously reduced (although damaged pipes still pose a potential risk).

Tankless water heaters are great when available space is at a premium, as well. When compared to a storage water heater, the tankless variety is typically smaller and takes up less floor space — quite literally, in fact, since many can be mounted neatly on the wall or under cabinets.

While tankless water heaters can warm up water impressively fast, they can usually only handle a few gallons at any one moment. This likely isn’t a problem for individual or small-family households, but when you have the dishwasher running in one room, two showers going upstairs, and the washing machine chugging away in the basement, your heater might not be able to keep up with the sudden demand, leaving someone in the cold.

If you’re coming from a large and water-demanding household, pay careful attention to the specs of the model that you’re considering. It is possible to install multiple heaters in a series, thereby increasing the flow limit for homes with high demand, but this does considerably increase the cost of initial setup.

Finally, one minor thing to note is that there is a slight delay between when water begins to flow and when the heater’s flow detector activates. During this time, the first short burst of water to enter your pipes will be cold rather than warm, and short, intermittent uses can result in little pockets of cold water interspersed between the hot ones. Similarly, there may be a slight, but noticeable, interval between first turning on the “hot” faucet and actually receiving hot water rather than cold. This is rarely, if ever, a serious problem, but it’s worth remembering. Short bursts of cold water don’t necessarily mean your heater is failing!​