Water heaters are an integral part of the plumbing systems in residential homes and commercial buildings. Increasingly, consumers are turning to tankless water heaters for their many benefits. Tankless water heaters heat only the water you use, rather than heating and storing water continuously. There are two basic ways you can use one. Some models, known as single point units, install close to the water source and are fairly inexpensive to purchase and install. Whole house units are more costly, but will heat all the water in your home at once. 

The average cost for an electric, single point unit is around $1,500 installed while the cost for a gas whole house unit is around $3,500 installed.

Whole house vs single point water heater

There are essentially two types of heaters – single point and whole house. Single point tankless units can be installed on the interior or exterior of the building near the water use point and no more than 50 ft. from an adjacent power source (typically requiring 220 volts) if using an electric heater. This means that you will need a tankless heater for every water source. For example, if you have two bathrooms and a dishwasher, you will need three units, unless all three locations are fairly close to one another.

Whole house tankless heaters are installed near an exterior wall in order to reach the vent for gas units, but have some flexibility in placement. One unit in this case can handle multiple bathrooms and a dishwasher, even if used at the same time. The key is to purchase a unit that can handle the amount of use your particular home needs.

It’s important to keep in mind the amount of water that can be heated via a tankless system (.5 to 2 gallons per minute for a single point heater and 5 – 10 gallons per minute for a whole house unit). This is important when considering which system might be right for a building. For example, in a home with multiple people bathing, a washing machine running and perhaps a dishwasher running, all of these items cannot be used together off one unit. You must either install multiple units, or run one water source at a time. 

For most single family homes, a whole house water heater will be sufficient, allowing you to have multiple bathers or a washing machine and dishwasher running at once. In some small apartments, however, a single point heater may be sufficient. Both options should be considered to determine which is right for your needs.

Another important aspect to factor in is the expected lifespan of the unit. While traditional water heaters will typically have a lifespan of anywhere between ten and fifteen years, most tankless units can be expected to be in use for over twenty years.

Type

While there are two main types of water heaters, as we’ve discussed, there are also varying methods for fueling them. The following table lists the costs for each type:

Fuel Type	Pros/Cons	Cost
Electric	Widely available Annual cost of $185	$455
Oil	Not available everywhere Annual cost of $163	$1,043
Natural Gas	Widely available Annual cost of $163	$429
Propane 1	Widely available Annual cost of $163	$500
Solar	Available in sunny areas Cost of initial installation and maintenance	$970

Labor

Once the type of unit and fuel have been selected, the plumber remove the old system, if existing. The site of the installation will be chosen and prepped. This may include opening some walls or a ceiling, depending on where in your home the pipes run, and where you unit will be located. If using a single point unit, you want the unit fairly close to where the hot water will be used in order to deliver the water in a timely way. Whole house units have more flexibility. Depending on the unit, a gas line may need to be run to the installation point, or you may need an electrician to upgrade a panel or wire the unit into place. In some cases, new plumbing may be required to accommodate the unit. This can mean that the time range for installation can be from 2 hours for an electric unit to up to 7 or 8 hours for a gas unit that requires a new line and updated plumbing. 

The average hourly rate for a plumber to complete the installation process is $45-$150 per hour with an average rate of $85, with installation running two to three hours for an electric heater for a total of $90 to $450 for labor alone. A gas heater may take more time, with labor costing up to $1,200 plus the addition of the gas line for $500. Additional costs include other materials needed for installation (heat pumps, water pumps, pipes, etc.) and the costs associated with permitting. These may add $250 to $500 to the final cost.

If walls need to be opened, you may need to also include the costs of drywall 4 and finishing to the job, as much as $200. Most traditional water heaters sit in a closet for easy access; tankless models may need to have an access door added nearby in case of future issues to allow quick repair. This may need to be installed by a carpenter at a rate of $70 per hour, or a handyman at a rate of $100 to $300 for the project.

Enhancement and improvement costs

Enery efficient tankless water heater

According to the Department of Energy, energy efficient tankless water heaters, while having a higher initial cost, $200 to $300 more in many cases, will save money in the long run in terms of operation/maintenance and power costs. 

Additional considerations and costs

• Maintenance: periodic water heater maintenance is recommended by the Department of Energy and will vary greatly based on the manufacturer’s recommendations, but expect to pay standard hourly plumber fees of $45-$65 an hour for water heater maintenance, with most maintenance taking 1 to 2 hours for a yearly total of $45 to $130.
• Additional materials: some of the tankless systems will also be incompatible with the location and setup of older storage tank models. This may require reconfiguration and additional materials such as insulation and piping, which retails for around $10 per foot.
• Configuration of water heater: some electrical systems and configurations may need to be updated to accommodate the voltage requirements of the new electric tankless system. While not always required, this is a potential cost that must factor in cost of materials plus that of an electrician ($65-$85 per hour).
• Removal of current system: another issue to consider is that the removal and disposal costs of your current water heater, which can be upwards of $500 dollars, based on your area.
• DIY: there are many reasons the installation of a tankless hot water heater is not considered a do-it-yourself project for the average homeowner. For example, the high voltage of the unit (240 volts), possibility of gas lines for propane ¹ powered systems and the required permitting in some jurisdictions will all require the expertise of a licensed and insured professional.
• Permitting: all jurisdictions are different. Considering the code regulations for different cities, towns, counties and municipalities, permits may be required to start this project. Many jurisdictions consider new water heater installation and replacement water heater installation a different type of job (i.e., a permit may be required for one, but not the other). This should be taken into consideration to ensure the project remains above board.
• Energy and costs savings: according to the Chicago Tribune, the average annual cost savings of a tankless water heater compared to a traditional tank storage is roughly $116 a year. Tankless water heaters are also objectively more energy efficient than traditional storage water heater units.