Are Tankless Water Heaters Worth The Money?

You may have heard about Third Tribe, an awesome community of people who gather under the entrepreneurial tent of Brian Clark, Sonia Simone, Chris Brogan and Darren Rowse to discuss Internet marketing and online business.  I joined when it first opened in February and have loved every month of my membership ever since.

I asked my fellow 3T members if anyone had a question I could answer and met Beth, who runs a family-focused green site over at Smart Family Tips.  She asked:

This is where I admit that we replaced our water heater in 2008 and did not choose to invest in a tankless water heater.   I know, I know… I’m supposed to be some kind of energy pro and I didn’t buy one.  Well, if you haven’t picked this up yet from my other posts, I’m more of a pragmatist than a treehugger…

These are the reasons why we chose to buy a conventional water heater:

  1. We don’t plan to own our home for 20+ years. When I considered the annual expected savings gained from a tankless water heater over a conventional electric water heater, the best-case scenario said we could pocket about $50 per year.  (savings with a gas model are closer to $80 per year, depending on your costs per therm)
  2. Even if we did stick around for 20+ years, chances are high that we’d have to replace it before we started seeing a return on our investment. We paid $600 for a conventional water heater versus $2,000+ for a tankless model.  Using our $50/year estimated savings, it would have taken us 28 years to see any true savings. (This assumes we’d pay in full at the time of the installation – charging any of this would lengthen the payback period even more because we would have incurred interest fees)
  3. Electric tankless water heaters don’t perform as well as gas models, especially in the wintertime. They just can’t heat up water like a conventional one can.  I really didn’t feel like going through the insanity involved with running a new gas line just for the water heater.
  4. Many electric tankless water heaters on the market would require we upgrade our electric service in order to accommodate the demand. If you’re just looking to do one floor and the water heater is in close proximity to the use source, this may not be an issue for you.  We live in a two-story house, so we would have required an update to our service.  Call me lazy, but I didn’t want to go through the headache or the added expense.
  5. We couldn’t use our trusted plumber for the job. He thinks they’re garbage and won’t service them.  If we wanted one, we would have had to find someone else.  Considering that, plus the reports that tankless water heaters need to be professionally flushed once every few years to eliminate scale build-up, we didn’t want to start all over again with someone new.

And so, we bought a fat conventional water heater using our guy and paid in full at the time of service.  We did choose one with a 9-year warranty (plus a couple extra years courtesy of Sears) and we check it regularly to make sure everything’s working as appropriate.

If you’re looking to save money on your water heating, choosing a tankless water heater would not be the way I’d suggest you do it.  They’re costly, require a lot of work and probably won’t deliver in a fashion worthy of the hassle.

Instead of going that route, consider some of these quick tips:

  • Reduce the amount of water you need to heat by installing low-flow showerheads and faucet aerators. Most models can reduce the flow by half-a-gallon per minute, resulting in savings of more than 2,000 gallons per year for each person in your family.
  • Lower the temperature on your water heater to 120 degrees. For some unknown reason, many people have them set to 140 degrees.  Not only is this dangerous, but it’s wasteful.  You can expect to can save between 3%–5% in energy costs for each 10-degree reduction in water temperature.*
  • Insulate your pipes. This is totally a DIY project.  Most home improvement stores sell pipe sleeves that you can slip on to minimize heat loss, allowing an even lower temperature setting at the heater.
  • Wrap your tank. This is another activity that you can do if you buy a pre-cut blanket from a home improvement store.  Be sure to follow the directions included and you should be good to go.

Thank you, Beth, for asking such a great question. I wish you luck and encourage you to contact me if you have any questions along the way!  A few quick notes before I go:

  • I give advice on this blog that assumes a certain level of handiness on your part.  Please do not mess around with gas lines, electric wires or anything like that if you don’t know what you’re doing.  It’s always best to consult a professional if you think there’s a chance you may burn your house down.
  • I’ll be back next week to answer your questions.  If you have one that you’d like me to answer in a future post, tweet @Renewabelle or get in touch with me one of a few other ways over here.
  • If you have any follow up questions or notes you’d like to add about the information I’ve included today on water heaters, I’d love to hear from you in the comments.

Thanks for taking the time to read this.  I hope this information proves useful and that it finds you well.



  1. What a timely post. I think my water heater is on the fritz, and I was wondering about tankless water heaters… Thanks!

  2. Hey… I aim to serve. I'm not saying everyone should make the same choice I did, but if you're thinking about going tankless, you should definitely read beyond the sales literature…

    Thanks for reading and commenting. I'm glad I could help you :)

  3. Beth@Smart Family Tips says:

    Thanks for the information-packed post on this topic. Very thorough. It sounds like if we had gas heat AND were planning on staying in our home for a few decades, it may be worth it. Otherwise, though, it sounds like you made a good choice.

    I really like that you also gave suggestions for minimizing hot water costs.

  4. I'm glad to read I was able to shed some light on this for you. There are situations when this would be a solid investment, but in our case, it just didn't make sense.

    Thank you, once again, for asking such a great question. It's truly a pleasure to have made your acquaintance and to have discovered your awesome site…

  5. Great walkthrough on the pros and cons! When I bought a new gas water heater four years ago, it was because my old one suddenly died the day before a Valentine's Day ice storm in New Jersey. My terrific plumber (who'd installed my grandparents' new heating system 50 years early) said he'd take care of it. I was more concerned about having hot water than comparing options. Considering I sold the house two years later, I'm glad I didn't opt for a twice-as-expensive tankless heater.

  6. See, it’s stories like yours that made me want to write this. Unless you’re sure you’re going to stay, it might not be a good investment. Thank you for taking the time to read and comment, Karl! You rock.


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