Water Heaters For Investment Properties: Should You Go Tank or Tankless?

Water Heaters For Investment Properties: Should You Go Tank or Tankless?

Choosing a water heater for your investment property can be confusing because there are many different types of water heaters to choose from!  When it comes to water heaters, perhaps the most popular question from our clients is whether to buy a storage tank or a tankless model. So we sat down with, James Memije, owner of AccuServ Heating and Air Conditioning, to help us clear things up.

What is a tankless water heater?

In short, a tankless water heater, also called an “on-demand” or “instantaneous” water heater, replaces the existing tank type of water heater you’re used to seeing in your mechanical room or basement.

While a storage tank model will heat, store and keep water hot whether it is being used or not, a tankless water heater only starts heating water the moment a hot water tap is turned on. The water in tankless machines is heated as it travels through a pipe and into the heating unit, creating a constant supply of hot water only when needed.

What are the benefits of a tankless water heater?

  • They are space-saving. This makes them ideal for smaller investment properties in Toronto since they can be mounted on a wall and take up a lot less room than a traditional water tank. Plus, you will never run out of hot water!
  • They are more eco-friendly and long-lasting. Besides reducing the use of non-renewable fuel sources, their parts are also easier to replace and rarely develop leaks. So, instead of having to replace the entire machine when something breaks down, your replacement frequency tends to be less with tankless options. Tankless machines typically last longer than storage tanks, sometimes lasting 20 years or more.
  • They are cost-efficient in the long run. Water is only heated when it’s needed. So even if energy costs go up, you won’t be hit as hard. Plus, lower replacement frequency means more long-term cost savings.

Tankless water heaters have a few disadvantages when used in single-family rental homes. 

  • Tankless water heaters can cost as much as three times more than storage tank water heaters. Also, tankless water heaters often require new venting and gas lines as part of the installation.
  • A tankless water heater is more efficient, but its output is also more limited, which is why it may make sense to install more than one in your home. There are a variety of models to fit your needs and lifestyle, as well as a recirculating unit that can reduce your water usage.
  • Without property maintenance, they may shut down, so it is very important flush out the system on an annual basis to prevent buildup and improve efficiency. Remember, both types of water heaters should be serviced yearly!

A Quick Comparison CHART

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When do tankless water heaters make sense from an investment standpoint?

Your tenant profile and rental property type may play a factor into your decision:

  • Tankless options are great if you have tenants who are away from their homes a lot. If nobody is using the water, you won’t be paying to fill that water tank up.
  • If your rental property is short on space, choosing a tankless water tank may mean freeing up extra rentable square footage. More living space can mean more rent.
  • From a liability standpoint, tankless options reduce water damage since they don’t store 40-60 gallons of water, which can cause a lot big problems for your basement when it ruptures.

Ultimately, it comes down to a break-even analysis when you’re looking from an investment lens. Even though upfront costs are higher for a new tankless water heater, you may benefit more from higher rents and operating cost savings in the long run.

So, if you play on keeping the property for 10+ years, then it may be a good option to change to a tankless open when your current storage tank needs to be replaced!

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