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Tankless Water Heater: Installation and Cost Guide

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Tankless Water Heater: Installation and Cost Guide

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When it comes to upgrading your home’s water heating system, tankless water heaters are a modern, energy-efficient choice that many homeowners are opting for. These heaters, which provide hot water on demand without the need for a storage tank, can be more cost-effective and space-saving than traditional water heaters. In this comprehensive guide, we’ll delve into the details of tankless water heater installation, including the benefits, installation process, and associated costs.

Understanding Tankless Water Heaters

Tankless water heaters, also known as on-demand or instantaneous water heaters, heat water directly without the use of a storage tank. When a hot water tap is turned on, cold water travels through a pipe into the unit, where either a gas burner or an electric element heats the water. As a result, tankless water heaters deliver a constant supply of hot water. You won’t have to wait for a storage tank to fill up with enough hot water.

Benefits of Tankless Water Heaters

  1. Energy Efficiency: Since tankless water heaters only heat water as needed, they can be more energy-efficient than traditional storage tank heaters. According to the U.S. Department of Energy, tankless heaters can be 24-34% more energy-efficient for homes that use 41 gallons or less of hot water daily.
  2. Cost Savings: Although the initial cost of a tankless water heater can be higher, the energy savings over time can offset the initial investment. Additionally, tankless units typically have a longer lifespan than traditional water heaters, further contributing to long-term savings.
  3. Space Saving: Tankless water heaters are compact and can be installed in various locations, freeing up valuable space in your home.
  4. Unlimited Hot Water: Unlike traditional water heaters, which can run out of hot water, tankless heaters provide a continuous supply, making them ideal for larger households or homes with high hot water demand.

Pre-Installation Considerations

Before installing a tankless water heater, there are several factors to consider:

  1. Sizing: It’s crucial to choose the right size unit for your home. The size of a tankless water heater is determined by the flow rate and the temperature rise required. Flow rate is measured in gallons per minute (GPM), and temperature rise is the difference between the incoming water temperature and the desired output temperature. An experienced installer can help you determine the correct size based on your household’s hot water needs.
  2. Fuel Type: Tankless water heaters can be powered by electricity, natural gas, or propane. Each type has its own installation requirements and cost implications. Gas-powered units typically require venting and a gas line, while electric units may need an upgrade to your home’s electrical system.
  3. Installation Location: The location of your tankless water heater can affect its efficiency and longevity. It should be installed in a place where it’s protected from freezing temperatures and has access to the necessary utilities.
  4. Professional Installation: While some handy homeowners may be tempted to install a tankless water heater themselves, it’s often best to hire a professional. Proper installation is key to ensuring safety, efficiency, and compliance with local building codes.

The Installation Process

The installation of a tankless water heater typically involves the following steps:

  1. Removal of Old Water Heater: If you’re replacing an existing water heater, the first step is to disconnect and remove the old unit. This involves turning off the water supply and power source, draining the tank, and disconnecting the plumbing and electrical connections.
  2. Preparing the Installation Site: The next step is to prepare the site for the new tankless water heater. This may involve installing new water and gas lines, upgrading the electrical system, and setting up venting if you’re installing a gas unit. The site should be equipped with the necessary connections and comply with local building codes.
  3. Mounting the Unit: Tankless water heaters are typically mounted on a wall. The unit should be installed at the manufacturer-recommended height and secured properly to ensure stability.
  4. Connecting Water Lines: The cold water supply line is connected to the inlet of the unit, and the hot water line is connected to the outlet. It’s important to use the correct fittings and ensure all connections are tight to prevent leaks.
  5. Connecting Gas or Electrical Lines: For gas-powered units, a gas line is connected to the heater, and proper venting is installed to exhaust combustion gases. For electric units, the heater is connected to the electrical system, which may require the installation of a new circuit breaker.
  6. Testing the System: Once all connections are made, the system is tested to ensure everything is functioning correctly. This includes checking for leaks, verifying proper venting, and ensuring the unit is heating water to the desired temperature.

Cost of Tankless Water Heater Installation

Before you plan to install a tankless water heater, you should be aware of the average tankless water heater installation cost. However, it depends on several factors, including the type of unit, the complexity of the installation, and local labor rates. Here’s a breakdown of the potential costs:

  1. Unit Cost: Tankless water heaters can range from $500 to $2,500 or more, depending on the size and features. Gas units tend to be more expensive than electric ones.
  2. Installation Costs: Professional installation can add another $1,000 to $3,000 to the total cost. This includes labor, materials, and any necessary upgrades to your home’s plumbing or electrical systems.
  3. Additional Costs: There may be additional costs for permits, inspections, and modifications to your home. For example, installing a gas unit may require venting and gas line modifications, while an electric unit may require upgrading your home’s electrical panel.
  4. Operating Costs: While tankless water heaters are generally more energy-efficient, it’s important to consider the long-term operating costs. Gas units typically have lower operating costs than electric ones, but this can vary depending on local utility rates.


Investing in a tankless water heater can provide numerous benefits, including energy savings, unlimited hot water, and a more compact design. However, it’s important to carefully consider the sizing, fuel type, installation location, and potential costs before making a decision. By hiring a professional for the installation, you can ensure that your tankless water heater is installed correctly and safely, maximizing its efficiency and lifespan. Whether you’re looking to save on energy bills or upgrade to a more modern and efficient system, a tankless water heater can be a smart choice for your home.


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