Having hot water in your home is a necessity, and for a rental property, providing hot water falls under the warranty of habitability -- you must provide hot water for your tenants. So the type of water heater you choose is a significant decision. Which one will you pick: a tankless water heater or a storage tank (regular) water heater?
How a regular water heater works
A regular (or storage tank) water heater, the most common type, is a huge tank (about 5 feet tall by 2 feet wide) that holds, depending on the size of the tank, between 40 and 120 gallons of water. The most common tank water heaters hold between 40 and 60 gallons of water.
When you turn on the tap for hot water to wash your hands or to shower, or start the dishwasher or run a load of laundry, heated water releases from the top of the tank to provide hot water. Unheated water is then pulled to the bottom of the tank, where it is then heated as well. The heat source is typically gas or electricity, but propane and fuel oil can also be used.
How a tankless water heater works
Tankless water heaters, while not as common as storage tank water heaters, are gaining market share, according to Consumer Reports. Tankless water heaters are much smaller than regular water heaters -- about the size of a small suitcase (about 2 feet tall by 1 foot wide). The reason for the small size is tankless waters heaters don't keep a reservoir of water -- they instead only heat water when you need it, using a heat exchanger run by gas, electricity, or propane.
Why switch to tankless?
So why pick a tankless water heater? Here are three advantages.
Not needing to store an enormous water tank is an advantage of a tankless water heater. You can save even more space by mounting a tankless water heater to a wall.
Because water is heated only when you need it with a tankless water heater compared with the constant heating of gallons of water (which you might not ever use), as what happens with a regular water heater, you save energy with tankless. That could affect your wallet in a good way: Your energy bill could be less with a tankless water heater.
Heating and cooling the home itself is responsible for most of a homeowner's energy bill (42%), followed by electronics (21%). Heating water comes in third -- 13% of a typical utility bill, according to Energy Star.
Note that Consumer Reports tested both gas and electric heat sources and found gas is significantly more cost-effective in heating water for both regular and tankless water heaters because gas costs less than electricity. But both types of water heaters run by electricity are more efficient.
Tankless water heaters can last more than 20 years, compared with about 10 years for a storage tank water heater.
Considerations for going tankless
Here are two disadvantages to a tankless water heater.
Could take longer to heat the water
Because water is heated only when you need it with a tankless, you need to wait for it to happen, which takes about 15 seconds. The colder your climate, the longer it could take for the water to heat. This is compared with having the ready supply of already-heated water a regular water heater provides.
Costs more upfront
Tankless water heaters are generally more expensive to buy and install than regular water heaters are. As of April 2020, it costs between $804 and $1,548 to buy and install a regular water heater, according to HomeAdvisor (NASDAQ: ANGI). It costs between $1,000 and $3,000 to buy and install a tankless water heater.
Figure flow rate instead of gallons
Once you consider how much hot water you'll likely need, you'll select a regular water heater by how many gallons it holds. But with a tankless, you measure by its flow rate -- how much water flows through the tankless water heater per minute. Most tankless water heaters range from four to eight gallons per minute. A plumber can help you decide the size you'll need based on your likely usage.
One more option: a heat pump
If you heat your water using electricity, you have another option: a heat pump. The advantage? It heats by capturing warm air and transferring it to the water. This saves energy since a heat pump recirculates heat instead of generating it. The drawback: It takes up lots of space, more than a regular water heater. It's at least 7 feet tall and needs a room about 12 feet by 12 feet so it has enough air to draw from.
The Millionacres bottom line
If you already have a regular water heater, it's probably most cost-effective to keep it and replace it when it no longer works or when it reaches the 10-year mark. But if you want to save space and energy, you might want to make the switch to tankless.