Tankless Water Heater Pros and Cons: Should You Buy One for Your Home?

With the average water heater lasting 8-12 years, you might wonder whether upgrading to a tankless water heater is worth it — especially if you’re planning a move in the near future.

A tankless water heater costs more than a storage water heater or a heat pump, but it’s more energy efficient in the long run, according to the U.S. Department of Energy.

Buyers view it as a perk in areas where water bills are high, adds Judith Topper, a real estate agent of more than 25 years serving Seminole County, Florida, which includes the Orlando metropolitan area. “It will make the house more desirable over another house in the same price range.”

Here, we’ve sorted through the tankless water heater pros and cons so that you can easily decide whether to install one.

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The pros: Water savings, smaller size, and constant heat

Traditional water heaters create a mess when the tank fails, leaving you to mop up all that water.

A tankless or “demand-type water heater” is less messy when it goes on the fritz because it taps right into the waterline, heating cold water as needed through an electric element or gas burner without a storage tank.

Other advantages?

Lower energy bills

A family of four spends an average of $73 a month on water bills in 2023, and uses an average of 300 gallons a day, according to the United States Environmental Protection Agency.

Even if you’re conservative in your water use, a tankless water heater can be 24%-34% more energy-efficient and can save you money.

This is because it heats water only as it is needed. A conventional storage water heater has a reservoir of 20-80 gallons of hot water that’s supposed to be heated constantly, but the water always cools if it’s not used — no matter how well the tank is insulated. This results in what’s called standby energy loss. (An electric tankless water heater can save additional money by not using a steadily burning pilot light.)

Smaller footprint

Anyone who has lived with the cylindrical tank of a conventional water heater or a heat pump in the garage, basement, or kitchen would be amazed at the size of these sleek gray boxes. Some models, like the Bosch Electric Mini-Tank Water Heater Tronic 3000, measuring about 14x14x11 inches, can tuck under a countertop.

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Immediate hot water supply

Again, because they have no reservoir, tankless water heaters heat water as soon as you turn on the sink, shower, or other appliance — as much as 10 gallons per minute.  “I would love to have one myself, because I have to run the water in my kitchen like crazy just to get the hot water to come,” said Topper, noting that her conventional water heater is located in her garage.

Remote connection

Some tankless water heaters connect to an app, so you can adjust them as a “smart home” feature. Conserve energy while you’re away, then turn on the appliance so the hot water is ready for a bath or shower once you arrive home.

Longevity

Tankless or demand-type water heaters can last at least 20 years or longer, thanks to easily replaceable parts. That’s at least 8-12 years longer than the average storage water heater.

The cons: Costly to purchase and install, with particular quirks

Price tag

Your purchase price will vary depending on the water heater’s features, as well as the type of fuel, but in general, tankless water heaters cost more than conventional water heaters.

Consider: Rheem’s 40-gallon natural gas tank water heater costs $709. The same company’s tankless propane water heater (Rheem RTG-84DVP) costs $1,049.

Installation costs

These appliances should be installed by a professional plumber (at a national average cost of $2,499, according to HomeAdvisor). While some models are designed to hook up to the existing incoming cold and hot water pipes, much like a conventional existing water heater, other retrofitting could involve creating a vent for exhaust or re-routing piping. Plus, there may be a fee for disposing of the current heating system.

Cost will outweigh savings initially

Setting aside any allure for potential buyers, you’re likely to need a new water around the same time the energy savings of a tankless water heater equal your initial expense. According to HomeAdvisor, these appliances pay back their initial costs after about 20 years.

Limited output and inconsistent temperatures

This depends on the flow rate (gallons per minute) of appliances such as your washing machine, shower, and dishwasher, as well as your water heater’s capacity. Some models, such as Rinnai’s V65IN, can serve multiple different fixtures at the same time. But without a large enough capacity, several people using water at once can overtax the device, making the heat spotty. (The Consumer Product Safety Commission recommends setting a tankless water heater’s temperature no higher than 120 degrees Fahrenheit, by the way.)

Manufacturers provide sizing and “temperature rise” information so you can select how large a unit you’ll need for your whole home — or you can install several single-point or “point of use” systems (costing about $100 to $200 each) for particular appliances that operate independently of each other. (That under-the-counter model we mentioned? Good for that bathroom sink that always runs cold.)

Power outage reliability

Even a tankless gas water heater can have a control panel that runs on electricity, so when the power goes out, so does the “brain” of the water heater, so to speak, meaning it won’t work in an emergency, according to HomeAdvisor and Magnificent Plumbing, a Better Business Bureau-accredited plumber serving Contra Costa, California, for more than a decade.

Maintenance hassles

If you have hard water, you should install a softener to help your tankless water heater avoid calcium buildup and function correctly. (Some models, such as Rinnai’s V65IN, which can serve up to five different fixtures at once, will shut down if they detect a buildup of mineral deposits).

Are there any preferred tankless water heater varieties or brands?

Depending on the fuel type and features involved, you can find affordable as well as high-end models of tankless water heaters in a variety of price ranges. Electric models cost an average of $450 to $1,500. Natural gas or propane models cost an average of $500 to $2,000, while solar models run an average of $1,000 to $4,000, HomeAdvisor says.

Some popular and recommended tankless brands include:

• EcoSmart
• Rheem
• Rinnai
• Takagi
• AO Smith
• Bradford White

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Resale potential: How do buyers perceive a tankless water heater?

If you like the energy savings and other benefits of a tankless water heater — and you’ll be living in your home long enough to enjoy them — buying one could make your home more competitive down the line, especially among buyers interested in energy conservation or “smart home” capabilities.

“Tankless is not going to get you a higher price, but it helps your house sell better,” Topper said. She likened it to a swimming pool, which appraises at roughly the same amount, regardless of features, but adds marketability.

Regardless, a water heater is one of those appliances that buyers want to ensure is in good working order. If yours is toward the end of its expected life span but you can’t afford to replace it, talk with your real estate agent about offering prospective buyers a home warranty. This often covers most of a water heater’s parts and components for buyers concerned about repairs or replacement within a particular time frame.

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