Thinking of Switching to a Tankless Water Heater? Here’s What You Need to Know

Tankless Water Heater Pros and Cons | All Property Management

I was impressed the first time that I saw a tankless water heater. The owner must have really invested in this property if he was going to make such a forward-thinking upgrade.

And boy, did it open up space in the basement! The owner converted the free space to an on-site laundry room for residents. A smart move, I thought, as the coin-op laundry could be used to generate additional revenue.

When I started telling a colleague about the tankless water heater, he stopped me in my tracks.

“Do you know how expensive it is to install a tankless water heater? And have you ever lived in an apartment served by one?” he asked. “It takes FOREVER to get hot water!”

Maybe I didn’t know as much about tankless hot water heaters as I thought. So I decided to do some digging. In fact, I became somewhat obsessed with learning about tankless hot water heaters. Here’s what I learned in the process.

Tankless Water Heater Frequently Asked Questions: #1

Traditional vs. Tankless Water Heaters

A traditional hot water heater typically holds 40 to 60 gallons of water that is collected in a tank and then continuously heated until it’s needed. As a result, the hot water comes on quickly–but it comes with a price. The tank is constantly using energy, which drives up your utility bills.

Meanwhile, a tankless water heater (as the name implies) does not actually have a tank. Instead, it heats water as it’s needed, then pipes that water to a unit’s shower, faucet, or appliance. Because water is only heated when it’s needed, it uses much less energy. By some estimates, a tankless hot water heater uses 22 percent less energy than its traditional counterpart.

Tankless Water Heater Frequently Asked Questions: #2

Tankless Water Heater Pros and Cons

However, these cost savings can be offset by the upfront costs of a tankless water heater, which are far greater than a traditional system. While a traditional tank costs anywhere from $300 to $600 (not including installation costs), most tankless units cost at least $700 and can vary widely in price from there. That said, the tankless system may qualify for state or federal tax rebates for energy-efficient appliances. Many utility providers also offer incentives and discounts for owners who invest in tankless water heaters–so if you go this route, be sure to see what’s available in your neck of the woods!

What’s more, there are certainly cost savings to replacing all traditional water heaters with tankless water heaters at the same time. Landlords, HOAs, and property managers can realize greater efficiency and savings by making the conversion to tankless systems all at once: One call to the plumber, one set of paperwork for tax rebates, and so on.

It would seem that rebates, discounts, and incentives would make the two systems comparable in price. On the surface, that’s true. However, that’s only the case when you consider the actual cost of the system. Installation is a whole different ballgame.

Installing a tankless hot water heater can be pricy. The installation process is more time-consuming, and fewer plumbers know how to install them correctly. Anyone who can often charges a premium for doing so.

Another consideration is the fact that tankless hot water heaters are powered by gas. So if your property does not already have a gas connection, the cost of making this connection will negate any cost savings of a tankless system. Even if you have an existing gas line, it may need to be upgraded to a bigger pipe in order to accommodate the power needed to fuel the tankless unit.

One of the primary benefits of a tankless hot water heater, though, is its ability to free up physical space in a rental unit. Think of a multifamily rental property with four units: It’s possible that each unit has its own massive, 60-gallon tank. If these tanks are replaced with tankless hot water heaters, newfound space can be converted into another resident amenity, such as on-site storage or laundry–both of which can bring in extra revenue. Some apartments have in-unit hot water heaters disguised by a storage closet, which can also be converted to additional in-unit storage.

Tankless Water Heater Frequently Asked Questions: #3

How Long Do Tankless Water Heaters Last?

Although a tankless water heater can cost more to install, many still consider it a worthwhile investment because tankless systems can last up to 20 years. Compare this to a traditional water heater tank, which usually only gets 7 to 10 years of life before it needs to be replaced. If you plan on holding onto the property for some time, a tankless water heater might be a good option.

Tankless Water Heater Frequently Asked Questions: #4

Do Tankless Water Heaters Take Longer to Heat Up?

This gets to one of my colleague’s concerns: how long it takes for a tankless water heater to deliver hot water to its final destination.

Remember that a tankless system does not continuously heat water. As a result, it can take some time for water to warm up. Depending on the tankless water heater’s physical location (and the length of pipes in between), it can take up to two minutes for hot water to reach the point of outflow–which can be frustrating to residents. This is particularly true in cold weather climates: If the ground water being pumped into the tankless system is already very cold, it will take longer to heat up than a traditional system.

Tankless water heaters also have limited output. So in a larger unit with multiple residents–or several units sharing a water heater–it can be tricky to get enough hot water for everyone to shower at the same time, or to do laundry and run the dishwasher at the same time. Tankless units can only supply a few gallons of hot water at a time.

Tankless Water Heater Frequently Asked Questions: #5

Should You Switch to a Tankless Water Heater?

There are certainly pros and cons to both types of hot water heaters.

Our advice? Weigh the pros and cons before it’s time to replace your traditional hot water heater. Usually, when a hot water heater gives out, owners are forced into making a split-second decision to make sure that residents get their hot water back ASAP. This may force someone down the cost-saving route before they’ve fully considered the benefits of a tankless system. Do your homework now so that you can be informed (and financially prepared) if and when it’s time to replace your water heater.

Amanda Maher is a self-proclaimed policy wonk who dabbles in real estate law. Amanda holds a B.S. in Political Science and Sociology from Boston University, as well as a Masters in Urban and Regional Policy from Northeastern.