Deciding against tankless water heaters for our new home

Sylvia and I are in the process of building a new custom home in SW Austin. This will be our second custom (and new) home. All other homes we’ve owned have been resales. On the first one we built in 2003, we went $50K+ over budget by adding too many upgrades and making too many additions to the home, including an expanded second story. It was our first time building a home and we somewhat lost control over ourselves.

This time we’ve sworn to be more disciplined and to stay within budget, or to go over ONLY on things that are important to us or that add value to the home. We actually have a pre-established “over budget” amount that we’ve put into place mentally.

One of the items that remained undecided up until now, was whether to have tankless water heaters in the home instead of the traditional water heaters. After a lot of research, we decided against the tankless water heaters.

The reasons are:
1) The $3,000 cost of this upgrade will add little or nothing to the reslae value of the home.
2) We probably won’t live in the home long enough (we expect 4 years max) to recoup the cost in energy savings.
3) There were enough spotty reviews about these systems online to give us pause.
4) If we’re going to spend that amount on an upgrade, we’d rather have it be something more tangible that can be seen and/or used daily, like better appliances or upgraded flooring, or better landscaping and trees.

Passing up on the upgrades when building a new home is tougher than one might think, at least for some people, us being those kind of people. I know of buyers leaving a builder’s showroom selection center after adding $20K to $70K onto the cost of their home in one afternoon.

In the case of the tankless water heaters, we may have made a different decision if we were planning to live in the home for the next 20 years. Our builder is in fact putting them in the spec homes he’s building across the street from us, and I suppose they will become more common in coming years. But budget discipline wins the day on this particular decision, at least this time.

16 thoughts on “Deciding against tankless water heaters for our new home”

  1. Is it really $3000 for the upgrade?

    What is costing so much?

    The additional venting requirements?

    just wondering

  2. I guess for a McMansion it’s probably negligible, but for those of us in sensibly-sized homes, simply recapturing the closet space is worth quite a bit.

  3. $3k seems high for a new home, although in existing homes the cost to route larger gas lines and the higher temp exhaust can add up to a lot. Did you factor both the austin energy and federal rebates into the picture? I believe they’re $300 each, which can make a tankless actually cheaper than a normal water heater. Labor though will still be higher on a tankless.

  4. Hi Jim,

    The units alone are about $1200 each,
    plus the additional plumbing to have them mounted on the exterior of the home instead of the locations where the current water heaters were to be, minus the savings from not purchasing the original units. I’m not sure how much cheaper it would have been if planned in from the start.

    Even with the rebates, it wasn’t going to make sense in the short term. It’s a similar equation as deciding on a hybrid vehicle for $3K more.


  5. well, i bought a hybrid car in 2003 and it has paid for itself without a doubt. and better for the environment. can’t you consider it an investment that you can add to the cost when you sell? i guess i personally would like to see more energy saving features in new homes.

  6. Hi Kim,

    > can’t you consider it an investment that you can add to the cost when you sell?

    I wish it worked that way. My “similar to a hybris” comment refers to the fact that sometimes, we spend money on things for reasons other than pure econimic benefit. I’m glad your hybrid has paid for itself. I had heard it would take about 7 years?

  7. Hi Steve,

    I went thru the same dilemma and decided to not to go for Tankless Gas Water Heater. Builder quoted $2500 for each unit installed. For my house, we require 2. So, it too expensive!

    Instead of spending so much one can simply go for water circulation pump installed near the tank which cost $250. Annual approx saving are around $20! See this…

    Did you consider any other things like…

    Ridge and Soffit Venting
    Vinyle windows
    Rainwater harvesting
    Hight Efficiency Toilets (HET Toilets)

  8. I switched to an electric tankless last year and love it, even though it was more expensive. Traditional water heaters are a complete waste of energy and they don’t age very gracefully.


  9. Gee. Be careful posting on the web in Austin about NOT choosing the greenest option for something. I used an electric tankless on a small house and loved the way I didn’t need dimmer switches. I could just crank up the 50 Amp unit and have a nice dinner by candelight 🙂 As for paying $3k for a gas unit, it does sound like a poor economic investment for a 3-5 year house.

  10. I read that if you are going tankless, electric can actually be more energy efficient. Any truth to this? Would an electric be cheaper to install?

  11. Electric would not require venting, but it does require one stinking heavy duty circuit and some big honking wire. I am not sure if it would save over a gas unit in usage costs though. I would truly doubt it. I personally like the tankless units in theory. I think they make a lot of sense. Funny how they have been used in European nations for quite some time (albeit sans the good venting).

  12. Here is some information regarding gas vs. electric:

    I was going to install a gas unit initially, but switched to electric because it has better efficiency – not to mention a less complicated install (I’m a DIYer). Cost efficiency comes down to actual fuel costs though.


    p.s. I have a small house too, and my lights don’t dim when the unit is on (2×60 amp circuit).

  13. The Rennai r94 model is about $1300.00 and you can add about $200.00 for a condensing unit that reclaims the waste heat which includes the valve kit.Where possible use an outdoor mounted unit as there is no venting to deal with and no interior space sacrificed.I always have my clients buy the unit thru my supplier so that they get the best price.additionally it does not cost any more when constructing a new home as opposed to an existing home with a traditional gas tank water heater which requires revisions in the make-up water and gas service.The same is the case when doing a complete renovation on an existing home because all new piping is if you are committed to “greening up” go ahead and have your grey water separated and made forward compatible with future accessibility.This is a practice I provide to my clients at no extra charge when doing new or major renovations.

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