Tankless Water Heaters: All the Pros and Cons

According to the Department of Energy, water heating accounts for roughly 18% of the energy used in an average home, making it the second biggest energy expense in many households. As utility costs continue to rise, more people are looking for ways to improve energy efficiency without sacrificing comfort. That is one reason why tankless water heaters have exploded in popularity over the last decade.

Tankless water heaters, also known as on-demand water heaters, have revolutionized hot water. Unlike traditional storage tank models, tankless systems heat water only when needed, offering numerous advantages. 

Today we break down the pros and cons of tankless water heaters, and how they compare to traditional storage tank heaters. We’ll also tackle installation costs, energy savings, maintenance needs, and when they make the most sense for homeowners.

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What Is a Tankless Water Heater?

A tankless water heater heats water on demand rather than storing heated water in a tank. When you turn on the tap, cold water passes through a heat exchanger inside the unit. A gas burner or electric heating element then rapidly heats the water before it travels to your shower, sink, dishwasher, or washing machine.

Traditional storage water heaters continuously keep 30 to 80 gallons of water hot around the clock. Tankless systems eliminate this standby heat loss by heating water only when needed.

Since this article focuses on the pros and cons, you can check out our full explainer here: What is a Tankless Water Heater?

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Tankless Water Heater Pros

1. Much More Efficient

The biggest selling point of tankless water heaters is energy efficiency.

Since they don’t continuously maintain a tank of heated water, this eliminates the standby heat losses of traditional tank heaters. The DOE estimates that tankless water heaters can be 24%–34% more energy efficient for homes using 41 gallons or less of hot water daily. Even larger households may still see efficiency gains of 8%–14%.

For homeowners dealing with rising gas and electricity costs, those savings can add up considerably. In our experience, households with moderate hot water usage tend to benefit the most.

2. Endless Hot Water

Another huge advantage of tankless systems is the virtually unlimited hot water supply.

Unlike traditional tanks with a finite supply of stored hot water, tankless heaters continuously heat water as it flows through the unit.

This allows for longer or multiple showers, and reduced chance of running out of hot water during simultaneous usage. For larger households, homes with multiple bathrooms, or high simultaneous water demand, this can be a major quality-of-life improvement.

However, note that “unlimited” doesn’t necessarily mean unlimited volume. Tankless systems still have flow rate limitations, which becomes an important factor when sizing a tankless unit for larger homes.

3. Longer Lifespan

Tankless water heaters generally last much longer than traditional storage tank models. While traditional tank heaters typically last for 8–12 years, tankless heaters can keep going for 15 to 20+ years, when properly serviced and maintained

Many tankless units also have replaceable components, which makes repairs easier and extends operational life further. For homeowners planning to stay in their homes long term, the extended lifespan can help offset the higher initial investment.

4. Space Saving Design

Tankless systems are significantly smaller than their tank brethren. Instead of occupying a large space in the basement, utility room, or garage, most wall-mounted tankless units are roughly the size of a small suitcase.

This makes them especially attractive for smaller residences like tiny homes, condos and apartments. 

5. Lower Risk of Water Damage

Traditional water heaters store dozens of gallons of water under pressure. If the tank fails or ruptures, flooding and water damage can occur. In contrast, tankless systems don’t store large volumes of water, greatly reducing the risk of catastrophic leaks.

While any plumbing appliance can leak, tankless systems eliminate one of the biggest risks associated with aging storage tanks.

6. Cleaner Water

Because water is not stored for long periods inside a metal tank, there is less buildup of rust, sediment, and corrosion exposure commonly experienced in storage tank heaters.

This improves water quality consistency over time, particularly in areas with hard water.

7. Potential Home Value Increase

Tankless water heaters are often viewed as premium home upgrades.

Modern buyers increasingly value energy-efficient appliances, lower utility costs, and smart home upgrades While a tankless system alone will not dramatically raise home value, it can improve buyer appeal during resale.

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Tankless Water Heater Cons

1. Higher Upfront Cost

The biggest downside of tankless systems is the cost. They carry a higher price tag to purchase and install than traditional storage tanks.

Typical installed costs:

• Storage tank heater: $1,000–$3,500
• Tankless water heater: $3,000–$5,500+ depending on fuel type, venting, and home modifications

Gas tankless systems often require:

• Larger gas lines
• New venting
• Electrical upgrades
• Condensate drainage
• Additional labor

2. More Complex Installation

Tankless systems are not always simple drop-in replacements. Electric models may require major electrical upgrades, while gas systems may also need:

• A higher BTU gas supply
• Stainless steel venting
• Dedicated combustion air
• New exhaust systems

Consumer Reports also notes that electric tankless systems may require expensive electrical service upgrades in some homes, and older homes can face particularly high conversion costs.

3. Flow Rate Limitations

Tankless systems heat water instantly, but they can only heat so much water at one time. If multiple showers, appliances, and sinks are running simultaneously, some systems may struggle to keep up.

Large households may require multiple tankless units or hot water recirculation systems to ensure the hot water supply can meet the demand.

4. Hot Water Delay

It should be noted that tankless systems are not truly “instant” hot water. There can still be a delay because the unit needs a moment to activate, and the old water already in the plumbing lines must clear out first.

Recirculation pumps can eliminate this issue but add cost.

5. Cold Climate Limitation

Incoming groundwater temperature affects performance. In colder climates, tankless systems must work harder to heat very cold incoming water. This can reduce flow rates and require larger units.

Electric tankless models especially may struggle in colder regions unless properly sized. Gas-powered units generally perform better for whole-home applications in cold climates.

6. No Hot Water During Power Outages

Most modern tankless systems use electronic ignition and control boards. During a power outage, the system usually stops functioning, even gas models.

Traditional gas tank heaters with standing pilot lights may continue operating without electricity. For areas prone to outages, this is an important consideration.

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Featured Tankless Water Heaters

Entry-level:

Rinnai RE160i High Efficiency Non-Condensing, 6.6 GPM Tankless Hot Water Heater

This high efficiency yet budget-friendly water heater features a 0.81 UEF (Uniform Energy Factor) and 160,000 BTUs. It has a flow rate that ranges from 0.26 – 6.6 GPM, ideal for a home with a single bathroom and simultaneous use of 2 – 3 fixtures at one time.

The minimum temperature setting is 120° with a maximum of 140°F. The unit offers maximum settings at 125°F with an option to increase to 140°F. An integrated controller is included, with the option for wireless control through an optional Control-R WiFi Module for remote management.

Premium electric water heater:

GE GE24DNHPDG 5.3 GPM Tankless Whole House Electric Hot Water Heater

This electric tankless water heater provides 5.3 gallons of water per minute, providing enough hot water to run 2 showers and 4 faucets simultaneously. 

It boasts touch screen control, low standby power consumption, and Scale Reduction Technology, which extends operational life by shielding the heat element from water and scale build-up. Sleek and modern-looking, this compact unit measures about 15″ x 10″ with a 3.875″ depth – perfect for tight spaces.  

Premium gas water heater:

Bradford RTG-R-199-N1 Infiniti GR Series High Efficiency Condensing Tankless Hot Water Heater with Built-In Recirculation

This natural gas tankless hot water heater comes with a built-in recirculation pump and dedicated recirculation connection. It features 199,000 BTUs and hot water delivery with a flow rate that ranges from 0.5 – 9.7 GPM, enough for three or more bathrooms and the simultaneous use of 3 – 4 fixtures at any one time.

It is Energy Star Qualified and Certified Green by the Green Restaurant Association. This robust heater is rated for residential as well as commercial use.

Highest flow rate water heater for large households:

Rinnai RX199iN Ultra Low NOx High Efficiency 11.0 GPM Sensei+ Condensing Tankless Hot Water Heater

This high-capacity water heater features 199,000 BTUs and a flow rate that ranges from 0.13 – 11.0 GPM, enough for 3 – 4 bathrooms and simultaneous use of 3 – 6 fixtures at one time!

Part of Rinnai’s new RX Sensei+ Series, it features the brand’s proprietary Adaptive Gas Valve Technology, which allows the heater to adjust from Natural Gas to Liquid Propane, as well outdoor installation with an optional Outdoor Vent Cap. It also offers recirculation capabilities with a separate internal recirculation conversion kit.

It boasts built-in freeze protection down to -22°F, an integrated check valve located between the turbo fan and the combustion chamber to prevent cold air from entering the venting system; and Fiber Mesh Premix Burner to provide even flame distribution for optimal performance.

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Are Tankless Water Heaters Worth It?

 A tankless water heater is often worth it if:

☑ You plan to stay in your home long term

☑ You want lower energy consumption

☑ Your household uses large amounts of hot water

☑ You need to save indoor space

☑ You are building a new home or doing major renovations

Consumer Reports notes that replacing a functioning tank heater with tankless purely for energy savings may not always provide fast financial payback due to installation costs.

However, for new construction, remodels, or homes with high hot water demand, tankless systems can make excellent long-term investments.

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Final Verdict

Tankless water heaters offer several compelling advantages: lower energy usage, endless hot water, compact size, and longer lifespan. For many homeowners, they represent a major upgrade in comfort and efficiency.

However, they do carry a higher upfront cost, more complex installation requirements,  impaired performance in cold weather and power outages and flow-rate limitations.

For the best results, homeowners should carefully evaluate their hot water demand, fuel availability, local climate, water quality, and installation costs.

Ready to make the switch? Then check out our tankless water heaters, and don’t hesitate to reach out if you have any questions!