Return on Investment – Blog 3 – Tank vs. Tankless Water Heater

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tank vs. tankless

So, you need a new water heater. The question becomes, do you replace it with another tank? A bigger tank?  Or do you go for the efficiency and luxury of an on-demand system (just what you’ve always wanted). It’s a classic case of tank vs. tankless. Which is worth it?

One of the most common questions we get asked by shrewd shoppers considering the higher efficiency of an on-demand water heater is what will the pay-back period be in terms of years and energy savings.  The truth is, a long time! Yes, the on-demand water heater is more energy efficient. However, it is also more expensive to install, making the payback period longer.

The advantage of only using what you need and having that water there when you need it is what draws most shoppers to the other side. But what if you’re installing it and you don’t plan on staying in the home long enough to realize the return from energy savings. Will you ever get it back in sales value when you put the home on the market?

We interviewed top North Shore Realtor Lance Phillips for his experience on buyer reactions to homes with on-demand water heaters.

 Does a tankless water heater add value?  

Lance acknowledges that it “absolutely has appeal” when listing houses. “You point that out to give you (your sellers) the edge. It gives the feeling of a luxury item which improves the overall status of a house.”.  Even though the potential repair costs associated with an on-demand system are typically higher, the optics and perceptions are that it’s a desirable luxury upgrade.

Do buyers look at efficiency when selecting between two homes?  If so, does it ever make the difference?

 The short answer is, “No”. Buyers are much more  responsive to emotional stuff, the look and feel of a space. There is a reason that realtors (and restaurant menu writers) use descriptors such as “Spa-like” to evoke certain feelings. The efficiency takes a back seat and often does not come into play – especially when it comes to luxury market homes.

What about an oversize tank?

 Yes, you can achieve the same results with an oversize tank which is also considered a luxury item to prospective buyers.

Provided you have the room, oversized tanks are becoming more common. This seems to be the case despite the lower volume fixtures and clothes washers. Those spa-like bathrooms may have an oversized tub that will need to be filled! The disadvantage of any tank is that the inspector will be want it to be fairly new when the home goes on the market.

For this mother, when I do finally get my turn in the shower after I’ve bathed the kids and done the laundry and, and, and – there had better be hot water for me! But for you, if you’re selling soon anyway, you may want to save your money here. Buyers just aren’t demanding on-demand.

See part 2 of the ROI series called Repair or Replace.

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