In recent years, tankless water heaters have taken over the conventional heating systems, and for good reasons. Tankless water heaters consume less space and are far more efficient compared to the traditional storage-type water heaters.

These appliances produce hot water only when you need it. Therefore, a tankless water heating system saves up to 50 percent energy consumption over tank-type heaters.

Not only that, with technological advancement, tankless units are becoming increasingly sophisticated. Most of the units have features like built-in recirculating pumps that deliver instant hot water and wireless connectivity that operates directly via smartphones.

From high-end systems to budget-friendly units, there are plenty of options you can choose from while buying a tankless water heater. While you have the luxury to decide what’s best for your home, choosing the right one may not be as easy as you think.

Therefore, in this tankless water heater buying guide, we will thoroughly explain everything you need to know before making a buying decision.

Table of Contents

What is a Tankless Water Heater?

Tankless water heaters, also known as instantaneous or on-demand water heaters, are systems that produce hot water as and when needed. These systems are becoming increasingly popular among homeowners, largely due to their compact design and energy efficiency.

While a traditional water heating system stores hot water in the storage tank and continuously uses energy to keep the water heater, a tankless system delivers hot water on demand by heating water only when you need it.

How Do Tankless Water Heaters Work?

​If you are intrigued by how tankless water heaters work, the idea is pretty simple. When you open a tap or shower, cold water runs into the system, which is then heated by the specific heating element, either by an electrical system or a gas burner.

Tankless water heaters are capable of producing a constant supply of hot water. However, these systems are limited by the system’s flow rate. If your appliance has a low flow rate, it won’t be able to deliver enough hot water to meet your needs. Investing in a larger unit is a critical decision to put a stop to running out of hot water.

Tankless vs. Traditional Water Heaters

Tankless Water HeatersTraditional Water Heaters
(Heats water when needed as it runs through the unit)(Heats and stores water in a tank for later use)
Tankless water heating systems require hefty up-front investmentStorage-type water heaters are economical and affordable
They are highly environmental friendlyThey have shorter service life
It features a compact and space-saving design The tanks have high storage capacity
It requires less maintenanceInstalling this system requires floor space
These units have relatively less flow rateThese units have leakage issues when in need of repair or replacement
They are highly durable and lasts longer
Tankless water systems do not have leaking issues

Pros and Cons of Tankless Water Heaters

Pros of Tankless Water Heater

Endless Supply of Hot Water

The best thing about tankless water heaters is the continuous supply of hot water on-demand. This is especially beneficial for larger households with higher demands for hot water.

While conventional water tanks are measured on gallon capacity, tankless water heating systems are based on flow rate. The water flow rate of a tankless system is measured in gallons per minute (GPM), which usually ranges from four to nine gallons per minute.

A system with a flow rate of 4 GPM can deliver instant hot water in up to two applications when used simultaneously. However, a unit with more than 7 GPM flow rate can handle multiple showers and large appliances.

Saves Space

Since these appliances do not have storage tanks, the positive side of these units is less space requirement. Tankless systems save a lot of space as these units are compact and can also be wall-mounted. In recent days, manufacturers have engineered these systems in more compact designs that can be installed on the exterior of your home to save the indoor spaces.

Energy Efficient

While most efficient traditional water heaters operate at 67 percent, tankless systems usually provide an efficiency rate of greater than 80 percent. This unit saves additional energy as the systems work only when you need it. In the long run, the efficiency of traditional heaters will decline as sediment starts to build up in the tank, while tankless water heating systems maintain its efficiency even in the long run.

Highly Durable

In general, a standard water heater can last for 8 to 12 years; tankless heaters can consistently perform for 20 to 30 years. These water heating systems are manufactured with sturdy and high-quality components that are less likely to rust or leak.

Although the initial price of tankless water heaters is relatively higher, in the long run, you can expect these systems to recoup your investment with durability and energy savings.

Replaceable Parts

Unlike traditional heaters that need to be replaced entirely once the heater begins to leak, tankless water heaters are designed with replaceable parts. Almost every component of tankless water heating systems can be repaired or replaced, so these units come in handy for long term use.

Fresh Water

Unlike storage-type water heaters, hot water does not have to be stored for later use in tankless systems. Therefore, you do not have to worry about rust and contamination that can float around in the tank when not maintained properly. Tankless systems heat the water on-the-spot as and when needed and deliver it instantly.

Cons of Tankless Water Heater

Initial Cost

If you’re willing to invest in a tankless water heater, you may expect to spend hefty bucks as this system is relatively expensive in terms of purchase and installation costs. Many tankless heaters in the markets can cost up to three times more than conventional water heaters.


If you’re buying this system for a large household that requires a continuous supply of hot water, just a single unit may not be sufficient. Depending on the demand for hot water, you may have to invest in two large tankless units, which may cost you more than conventional tanks.

Expensive Venting

Tankless water heaters require proper venting. While this may not be applicable for all tankless water heaters, gas-fueled units require expensive venting material during installation.

Types of Tankless Water Heaters

Before you look out for the right system for your home, you should first be aware of the types of tankless water heaters that are available in the market. With the growing popularity, manufacturers have now started to build multiple types of tankless water heaters to meet the customer’s demand.

So, here are the different types of tankless water heaters available in the market.

1. Electric Heaters

Electric tankless water heaters are hands down the most energy-efficient type of water heaters on the market. These water heating systems can operate with up to 99% energy efficiency. Unlike gas water heaters, this unit does not require venting and is very easy to install.

Your home may already be wired for an electric heater; therefore, it makes perfect sense to use the same power source for your tankless unit rather than invest in a gas option. These electric heaters are generally compact and come in different sizes. These heaters are designed to save valuable space at your home or your office. However, these heaters have less water flow rates compared to gas options. Therefore, this system best-suits a smaller household.

2. Gas Heaters

Gas tankless water heaters may not be as energy-efficient, but they are typically more powerful than the electric ones. With quality performance, these heating systems are suitable for large households and commercial installations.

If your home is not wired for a water heating system, you should opt for this option over electric ones. However, it is important to remember, these heaters are more expensive than electronic systems, especially if you go for a condensing unit.

Along with high performance, condensing units are also energy efficient compared to standard tankless gas heaters. It is because a condensing unit uses the heat from the exhaust fumes to produce hot water. In addition, the installation of a condensing unit cost much cheaper as the materials for venting cooler exhaust fumes are relatively inexpensive.

3. Hybrid Water Systems

As the name suggests, a hybrid water heater is a system that mixes tankless technology with the traditional storage-type water heater. This system includes an electrical system along with a heat pump that uses electricity to move heat from one place to another, rather than generating it.

This new technology of water heating systems is relatively expensive. However, they are much more effective when it comes to performance and durability.

4. Commercial Heaters

It is a water heating system that is best used for commercial applications. Appliances for commercial uses require a high thermal unit (BTU) and a decent flow rate. Therefore, to fulfill those requirements, most of the commercial water heaters available in the market are gas-powered, be it natural gas or propane.

Another significant thing about commercial units is the distance between the outlet and the heater itself. In order to cope with the distance, most of the commercial water heating units have a recirculation technology, which reduces water wastage and eradicates the ‘cold water sandwich.’

5. Whole-House Water Heaters

Whole-house water heaters are single unit appliances that are capable of delivering hot water simultaneously to an entire house. While there are a ton of models available in the market, it is essential to choose the right model for your home.

It is always important to consider the total number of outlets that will draw hot water at once and compare it with the flow rate of the system. Also, there are different systems available for different locations, meaning if you live in a colder area, there are units that are capable of heating the water from low ground temperatures.

6. Portable and RV Heaters

These are lightweight water heaters that can be carried from one place to another. These types of heaters are specially designed for outdoor uses. Portable water heaters have temperature adjustment technology that can effectively cope with change in temperature while traveling to different parts of the country.

These water heating systems come handy for camping, RVing, or even for cleaning jobs in the garage or garden shed.

Things to Consider While Buying Tankless Water Heater

While tankless water heaters have become essential home appliances in the modern-day, it is also crucial that you choose the right one for your home. There are several factors you need to consider if you wish to install a tankless heating system at your home.
With so many brands providing different types of systems, you might get confused about which one to buy. To help you find the most suitable water heating system for your household, we have mentioned a few important things you should consider while buying a tankless water heater.


It’s quite obvious that there are different water heating systems with different price ranges. Before you jump straight into your decision, you should always consider looking at your budget. It is always handy to decide the amount of money you are willing to spend on the system. Having a price range will help you look for a unit that is within your budget limit.


With so many brands in the market that manufacture tankless water heaters, you should always be careful in choosing the right one for you. There are brands that have been manufacturing tankless water heaters for decades, and there are those that have just entered the market. Although expensive, we suggest you go for a well-recognized brand, as these brands tend to provide durable and reliable systems without compromising the quality. Usually, popular brands also have a long warranty period and tend to provide decent customer service.

Size of the Household

This is the most significant factor that you should consider while buying a tankless water heater. If you have a large household, there is a possibility that you will require more than one water heater to fulfill the needs of the water supply. However, if you have a small family, one tank is more than sufficient for a constant supply of water.

Electric vs Gas

As you know, there are two different types of tankless water heaters available in the market — electric and gas water heaters. Each of them has its benefits as well as disadvantages. Therefore, it is important to choose among your priorities. Most people choose electric water heaters as they are cheaper than gas heaters. However, gas heaters are likely to be more efficient in terms of performance. Either way, choose a water heating system that is suitable for you, depending on your needs.


If you’re buying a water heater, size should never be overlooked. Dwell on some proper research to figure out what size of water heater fits your home space. If you have a large space at your home, you might not have to worry about the size of the unit. But, if you have a small space where you have to fit the unit, you need to put careful consideration regarding the size of the tank.


While some water heaters come with a lifetime warranty, others only cover a short amount of time. You must check on warranty terms before making your buying decisions. A water heater that offers no warranty service is not suitable to buy as the manufacturer’s will not compensate for any damages. It is always better to look for brands that provide extended warranty periods. Always read the warranty details carefully to make sure the product you are buying is favorable for you.


What’s the point of buying a high-quality water heating system that can perform exceptionally well but is not energy efficient? It is always essential that you consider energy efficiency before making buying decisions. Although the initial cost might be expensive, investing in a model that is likely to save your energy consumption is more economical in the long run. Therefore, always look for a water heater that is energy efficient and likely to reduce your utility bills.


1. Is it possible to replace my existing storage-type water heater with a tankless unit?

Yes, of course! However, you will need to address a few specific requirements before doing so. If you’re opting to replace your storage-type water with a tankless gas water heater, they’ll require a larger gas supply line and a special vent pipe to operate. On the other hand, if you choose to replace your old water heater with a tankless electric heater, you will require much larger gauge wire and breakers compared to other water heaters.

2. Is it possible to drain a tankless water heater to prevent freeze damage when not in use?

Definitely! It is possible to do so with most of the brands. However, we would suggest you check with the manufacturers before jumping into conclusion. All you have to do is drain the lines ‘to’ ‘and from’ the heating system. This should drain all the water from the heater as long as there are no check valves along the way. But, it is better to have two drain valves to guarantee that the unit is completely drained out.

3. Can I install a tankless water heater on my own?

Even if most of the water heaters come with a step-by-step installation guide, we would still not recommend you to do it by yourself. Also, in most cases, installing the unit without a professional plumber may void the warranty of the product.

Installing a tankless water heater is quite difficult and potentially dangerous, even for experienced DIY’er. Not many homes have appropriate electrical configuration and may require to install 240-volt wiring. Also, if you’re setting up a gas-powered water heater for the first time, you’ll also require gas lines run and a gas meter. The installation also involves the need for venting the gas models and the plumbing. It is safe as well as wise to hire a professional to do the job for you.

4. Is it true that some tankless water heaters can not be installed in specific areas?

Yes, it is true. There are a few cities and countries that do not permit the installation of a few models of tankless heating systems for various reasons. Due to this restriction, you should always be aware of the local code authorities before buying the product. Also, a few types of water heaters, like three-phase heaters or deionized systems, are manufactured based on order and are not returnable. Therefore, always make sure to check the local code authorities based on your location to be sure that the water heater you’re investing in is allowed to be installed in your area.

5. Why is the first-hour rating not available for tankless water heaters?

Conventional tank-type water heaters tend to have a first-hour rating, which is determined by the amount of hot water the system can produce within an hour starting with a tank full of hot water. Since tankless water heaters do not have tanks, they do not have the first-hour rating. Instead, they have gallons per hour (GPH) rating. The GPH is determined by how many gallons of hot water a unit can produce within an hour.


Well, that’s all for the tankless water heater buying guide. I hope this article has been insightful enough to provide you the information regarding the tankless water heater and things you need to consider before buying one for your home.

(Last Updated on June 12, 2020 by Sadrish Dabadi)

Nina Howell is a Rewenable Energy researcher and consultant based out of Houston, Texas Area. She earned her Master's Degree in Energy and Earth Resources from Austin Jackson School of Geosciences in 2010, and a Bachelor's Degree in Environmental Science from State University of New York College of Environmental Science and Forestry in 2008. Nina has been working in the energy sector since 2011. She worked as an Energy Supply Analyst from 2011 to 2017 in Bounce Energy and then as a Research and Energy Consultant at GE Renewable Energy from March 2017 to February 2020 . Nina is a mom of 2 beautiful children who are joy to her life. She strongly believes in eco-friendly living and is vocal about renewable energy, environmental issues, water crisis, and sustainable living.