Tankless Water Heaters: Cost, Benefits & How They Work

Imagine your morning routine: the kids are taking showers, you’re filling the bathtub, and someone is running the dishwasher — all at the same time. With a traditional water heater, someone’s shower might suddenly turn cold. A tankless water heater solves that problem by heating water instantly as it flows, giving your household hot water on demand — luxury you can enjoy every day. 

How Tankless Water Heaters Work 

Tankless water heaters don’t store hot water. Instead, they heat it as needed: 

1. Cold water enters the unit when a faucet or appliance is turned on. 

1. A flow sensor detects the demand. 

1. Gas burners or electric elements heat the water instantly. 

1. Hot water flows directly to your fixture — continuously until you turn it off. 

Most units provide 2–5 gallons per minute (GPM). Gas-fired units are higher capacity, suitable for large households, while electric units work best for smaller homes or point-of-use applications. 

Types of Tankless Water Heaters 

• Gas (Indoor/Outdoor): High flow, whole-house capability, requires venting 

• Electric: Easy installation, efficient, ideal for smaller spaces or individual appliances 

• Condensing: Captures extra heat from exhaust for higher efficiency 

• Non-condensing: Lower upfront cost, simpler design 

Large households may need multiple units or supplemental point-of-use heaters for high-demand areas. 

Pros and Cons 

Pros: 

• Hot water never runs out 

• Energy-efficient (24–34% savings for homes using ≤41 gallons/day Energy.gov) 

• Space-saving wall-mounted design 

• Long lifespan (20+ years) 

• Lower risk of leaks or corrosion 

Cons: 

• Higher upfront cost  

• Flow rate limits for very large households 

• May require venting, gas line, or electrical upgrades 

• Annual maintenance needed 

Who Is a Tankless Water Heater Best For? 

Ideal for: 

• Homes with multiple showers or simultaneous appliance use 

• Households seeking energy efficiency and space-saving designs 

• Anyone who wants luxury, on-demand hot water 

Less ideal for: 

• Low-demand households 

• Homes without adequate electrical or gas infrastructure 

• Buyers focused only on the lowest upfront cost 

Sizing & Flow Rates 

Tip: Calculate total GPM needed for simultaneous usage. Consider point-of-use units near high-demand fixtures if needed. 

Heat Pump vs Tankless Water Heaters 

Key difference: Tankless provides continuous hot water instantly; heat pumps store water and heat it efficiently from the surrounding air. 

Energy Efficiency & Cost Comparison 

• Electric units: Up to 99% efficient 

• Gas units: Avoid standby losses; intermittent ignition reduces wasted energy 

• Traditional tank: Continuous reheating leads to standby energy loss 

Example savings for a family of 4 replacing a 50-gallon tank: 

• Energy savings: $100–$200 per year 

• 20-year savings: $2,000–$4,000, enough to offset the higher upfront cost 

Tip: Look for models with Energy Star certification or rebates from local utilities. 

Installation & Maintenance 

• Professional installation is recommended for safety, efficiency, and warranty coverage 

• Gas models typically require 3-inch concentric venting 

• Annual flushing prevents mineral buildup and extends lifespan 

• Clean or replace filters as recommended by the manufacturer 

Installation Options: 

• Whole-house system: Serve all fixtures 

• Point-of-use system: Serve individual appliances or remote bathrooms 

Schedule a consultation: Paschal Air, Plumbing & Electric 

Tankless Water Heater Problems? Here’s What to Check! 

Even the best tankless water heaters can run into issues. Our video “Tankless Water Heater Problems? Here is what to check!” walks you through the most common problems and how to troubleshoot them — from flow rate hiccups to maintenance tips. 

Watch the video to quickly see what might be causing your hot water headaches and how to fix them. 

Pricing & What Affects Cost 

Disclaimer: Prices vary by location, home layout, and the specific unit. Below is a national average for guidance: 

• Unit: $1,171–$3,331 

• Installation: $1,000–$3,500 

• Average installed: $5,000-8,000  

Factors that affect cost: 

1. Unit type: Gas generally costs more than electric; condensing units cost more than non-condensing 

1. Flow rate & capacity: Higher GPM or multiple units increase cost 

1. Venting requirements: Gas units may need special venting 

1. Home infrastructure: Older plumbing or electrical systems may need upgrades 

1. Labor rates & location: Regional differences can impact installation cost 

Customer Reviews 

Linda Brown – May 8, 2023 

Plumber Tech Robert checked for repairs, answered all questions, and explained options for replacing the hot water tank. Excellent preventative maintenance advice. 

Matt Barden – Mar 7, 2023 

Zack and Riley were complete professionals in replacing our tankless system, including plumbing and gas adjustments. Very impressed. 

Michael Smith – Aug 7, 2020 

Tankless installation was spot-on. Technicians were professional, polite, and explained the operation thoroughly. Very satisfied. 

FAQs 

Q: How long do tankless water heaters last?
A: Typically 20+ years; replaceable parts may extend lifespan. 

Q: Can a single unit meet peak household demand?
A: Depends on flow rate; large households may need multiple units or point-of-use supplements. 

Q: Are tankless water heaters energy efficient?
A: Yes — 24–34% savings for small to medium households (Energy.gov). 

Q: Do I need a permit?
A: Local codes vary; professional installers usually handle permits. 

Q: Are rebates available?
A: Some states or utilities offer incentives for high-efficiency units. 

Q: Can I install it myself?
A: DIY is possible but professional installation is strongly recommended for safety and efficiency.