A tankless water heater gives you hot water on demand, saves energy, and lasts twice as long as a traditional tank. Most homeowners see energy savings of 24% to 34% after switching. The upfront cost is higher, but the long-term math works in your favor: lower bills, no standby heat loss, and 20+ years of reliable use.
If you want to know how to install tankless water heater the right way, this guide covers everything. Gas and electricity. Tools, costs, step-by-step process, and the mistakes that will void your warranty.
What Is a Tankless Water Heater?
A tankless water heater heats water only when you turn on a faucet. There is no storage tank sitting full of hot water all day. When water flows through the unit, a sensor fires the burner (gas) or activates heating elements (electric). The water reaches your set temperature in seconds.
Key benefits over traditional tanks:
- No standby heat loss you only pay to heat water you use
- Lifespan of 20+ years vs. 8–12 years for tank heaters
- Wall-mounted, compact design saves floor space
- Unlimited hot water up to the unit’s flow rate (GPM)
- Some models can be installed outdoors, which simplifies gas venting
According to Energy.gov, homes that use around 41 gallons per day can see 24%–34% more efficiency. Heavy users still save 8%–14%.
What Should You Consider For The Installation Process?
Gas vs. Electric: Pick the Right Type First
This is the first decision and it affects everything else.
Factor | Gas Tankless | Electric Tankless |
Flow rate (GPM) | Higher better for large homes | Lower better for small homes |
Installation cost | Higher | Lower |
Fuel requirement | Natural gas or propane | 240V electrical supply |
Venting required | Yes | No |
Panel upgrade needed | Rarely | Often |
Emissions | NOx (check local codes) | None |
Propane vs. natural gas: Propane delivers more heat per BTU, but natural gas usually costs less. Some units are fuel-specific before buying.
Condensing vs. Non-Condensing
- Non-condensing units exhaust at 300°F+. They require Category III stainless steel vent pipes.
- Condensing units use a second heat exchanger to extract more heat. Exhaust temps drop low enough for PVC or CPVC vent pipe. They cost more upfront but save more over time.
How to Size Your Unit Correctly
Undersizing is the most common installation mistake. Here is how to get it right:
- List every hot water fixture you might run at the same time
- Add their GPM: shower (~2.0 GPM), kitchen faucet (~1.0 GPM), dishwasher (~1.5 GPM)
- Know your incoming groundwater temperature (Southern California averages 65–70°F; northern states can drop to 35–45°F in winter)
- Calculate the temperature rise needed: target temp (120°F) minus incoming temp
- Find a unit rated for your GPM at that temperature rise not just peak GPM
Always size up slightly. A unit with extra capacity performs far better than one that maxes out every morning.
UEF Rating
The Uniform Energy Factor (UEF) measures efficiency. Higher is better. Match your unit to your daily usage:
Usage Level | Daily Gallons | Required GPM (Tankless) |
Very Small | 10 | Less than 1.7 |
Low | 38 | 1.7 to 2.8 |
Medium | 55 | 2.8 to 4.0 |
High | 84 | 4.0 or more |
Gas Line and Electrical Panel Requirements
- Gas models: Tankless burners need 90,000–200,000 BTU/hr far more than a tank heater’s 30,000–40,000 BTU/hr. In most homes, this means jumping up two pipe sizes from 1/2 inch to 1 inch from the gas meter. Gas line work must be done by a licensed contractor per ANSI Z223.1/NFPA 54.
- Electric models: These draw 51–133 amps depending on size. Most older homes need a panel upgrade. You will need one or two dedicated double-pole breakers ranging from 40 to 70 amps.
ENERGY STAR and NOx Compliance
ENERGY STAR certified gas tankless units hit at least 90% thermal efficiency and use roughly 50% less energy than standard tank heaters. In several states, you qualify for a utility rebate — check before you buy.
If you are in California or certain Northeast air quality districts, your unit must meet low NOx or ultra-low NOx standards. Confirm compliance before purchasing or you risk failing inspection.
Permits
Most cities require a permit for tankless hot water heater installation. Skipping it creates problems when you sell your home or file an insurance claim. Call your local building department first.
Tools and Materials Needed
For all installations:
- Pipe wrenches and adjustable pliers
- Teflon tape (pipe thread tape)
- Pipe cutter and deburring tool
- Level
- Drill and masonry bits
- Bucket and garden hose
- Voltage tester
- Isolation valve kit (cold inlet + hot outlet) not optional
For gas installations:
- Gas leak detector or dish soap for bubble testing
- Category III stainless steel vent pipe (non-condensing) or PVC/CPVC (condensing)
- Gas shutoff valve
- Sediment trap / dirt leg
- Pressure test gauge for gas line
- Expansion tank (if recirculation or closed system)
For electric installations:
- Double-pole circuit breakers (correct amperage per your manual)
- 6-gauge copper wire (or 8-gauge on approved models)
- Voltage tester
- Sanding cloth and deburring tool for copper connections
Step-by-Step Guide: How to Install Tankless Water Heater
Part 1: Remove the Old Unit
Step 1 — Shut everything off
Turn off the main water supply. For gas units, close the main gas shutoff. For electric units, flip the circuit breaker. Open a hot water faucet to release pressure. Let it drip until the flow stops completely.
Step 2 — Drain and disconnect
Connect a garden hose to the drain valve. Open a faucet upstairs to prevent a vacuum lock. Drain the tank fully. Disconnecting the cold water inlet and hot water outlet capture remaining water in a bucket. For gas: disconnect at the union fitting. For electric: cap wires after confirming power is off. Remove the vent pipe. Dispose of the old unit at a recycling center or scrapyard.
Part 2: Install a Gas Tankless Water Heater
Step 3 — Plan the vent system first
Do not reuse old vent lines. Tankless gas units need new venting. You have three options:
- Direct vent (sealed combustion): Two concentric pipes one pulls combustion air from outside, one exhausts to outside. Condensate traps required. This is the most common choice for basements, attics, and garages.
- Power vent: A fan pushes exhaust out through a single pipe.
- Atmospheric vent: Natural draft less common in modern units.
Keep vent runs as short as possible. Follow minimum clearances from your manual. Never exhaust near windows, doors, or air intake devices. Horizontal sidewall and vertical roof terminations are both permitted.
Step 4 — Upgrade the gas line
This step is critical. A 150,000–200,000 BTU tankless burner needs a significantly larger gas supply than a 40,000 BTU tank heater. In most homes you will need to jump from a 1/2-inch line to a 1-inch line from the gas meter. Gas line sizing depends on BTU rating and distance from the manifold. Have a licensed contractor handle this.
Step 5 — Mount the unit
Choose a location close to the point of use. Check required clearances from your manual. Build a sturdy mounting box out of 2×4 lumber and 3/4-inch plywood if your wall surface is not solid enough to hold the unit’s weight. Fasten the unit to wall studs using the supplied mounting hardware. Confirm it is level.
Step 6 — Connect the gas line
Install a gas shutoff valve directly on the supply line. Install a sediment trap (dirt leg) to keep debris out of the burner this is a code requirement in most jurisdictions. Connect the gas line using thread sealant designed specifically for gas. Start at the tee and assemble connections toward the heater using two wrenches.
Step 7 — Connect water lines
Install the isolation valve kit on both the cold inlet and hot outlet. These are mandatory. Without them, you cannot flush the heat exchanger annually. Mineral buildup will destroy the unit in a few years.
Install a manual shutoff on the cold water line. Briefly flush the cold water line before connecting it to clear debris. If home water pressure exceeds 80 PSI, install a pressure-reducing valve. Use copper pipe or PEX-B per your local code. Wrap all threaded connections with Teflon tape. Snug tight — do not over-torque.
If your home has a closed plumbing system (a check valve or backflow preventer on the main line), install a small expansion tank on the cold water line. Without it, thermal expansion will spike pressure and damage the unit.
Step 8 — Install the pressure relief valve
A pressure relief valve (PRV) rated at 150 PSI is required by code. Install it directly on the hot water outlet. Run discharge piping from the PRV to a floor drain. Never cap or remove this valve.
Step 9 — Install a thermostatic mixing valve (recommended)
A thermostatic mixing valve blends cold water into your hot supply. It prevents scalding and lets the heater run at a higher temp for better efficiency. Most professional installers include one.
Step 10 — Check for leaks
Turn the water supply on and inspect every connection. Fix any drips. Then open the gas supply slowly. Use a gas leak detector or apply soapy water to all gas connections. Bubbles mean a leak — turn the gas off immediately and fix it before proceeding. Test the line with a pressure gauge before turning on the gas.
Step 11 — Install the vent system
Apply heat-resistant silicone sealant to the vent shaft. Install the exhaust vent and the inlet air vent for indoor applications. For direct-vent units, you may need to drill through the rim joist or wall. Outline a circle using the vent thimble, bore a 1-inch pilot hole, then cut the full opening with a reciprocating saw. Insert the flange, seal with silicone caulk, and secure with screws. Install interior flange and connect vent sections with retaining tabs. Attach the vent hood on the outside and replace any removed siding or shingles.
Step 12 — Purge air from water lines
Turn the water supply fully on. Open all hot water faucets connected to the unit and let them run until flow is smooth and air-free.
Step 13 — Start up the unit
With water flowing, open the gas and flip the circuit breaker to power the unit. Adjust DIP switch settings per your manual to calibrate for your installation. Press the on/off button. Turn on a hot water faucet and test for normal operation. Set the thermostat to 120°F (49°C) the standard safe temperature for most households.
Part 3: Install an Electric Tankless Water Heater
Follow Steps 1–2 for removal, then Steps 5 and 7–9 for mounting and water connections. The electrical work is different:
Step E1 — Remove the front panel
Take the unit out of packaging. Remove the front cover. Disconnect the user interface display before pulling the cover there is a ribbon cable that must be handled carefully.
Step E2 — Verify electrical capacity
Check your breaker panel. A 12.2 kW unit draws 51 amps on 240V. The largest 32 kW units draw 133 amps. Most whole-home electric tankless models need two dedicated double-pole breakers. If your panel cannot handle the load, upgrade it first.
Step E3 — Install breakers and wiring
Switch off the main supply to the breaker box. Install the double-pole breakers. Run 6-gauge copper wire (or 8-gauge if permitted by your specific model) from the panel to the heater. Connect wiring to the heater terminals per the diagram in your manual. Confirm a proper ground connection. Clean copper pipe ends with sanding cloth, deburr cut sections, apply flux, and solder connections using a propane torch. Work must comply with NFPA 70 (National Electrical Code).
Step E4 — Reattach and start up
Reconnect the user interface display. Insert the ribbon cable correctly, do not force it. Reattach the front panel. Check all water and electrical connections. Turn on the water supply. Flip the circuit breaker on. Set the thermostat to 120°F.
Important: Never energize an electric tankless unit until all air is purged and water flows freely through the heat exchanger. Running heating elements dry burns them out instantly.
You can read about: How Much to Install Tankless Water Heater
How Much Does It Cost to Install a Tankless Water Heater?
Here is a realistic breakdown for 2026:
Item | Cost Range |
Electric tankless unit | $300 – $800 |
Gas tankless unit | $500 – $2,000+ |
Professional labor (electric) | $300 – $700 |
Professional labor (gas) | $700 – $1,500 |
Gas line upgrade | $250 – $1,200 |
Electrical panel upgrade | $300 – $2,000 |
Vent system materials | $150 – $500 |
Permits | $50 – $250 |
Total (electric, basic) | $600 – $1,500 |
Total (gas, full conversion) | $1,500 – $5,000+ |
The tankless installation costs more upfront than a tank replacement. But the 20-year lifespan, lower energy bills, and potential ENERGY STAR rebates ($100–$800 depending on your state) make the numbers work. Factor in rebates before you finalize your budget.
Common Installation Mistakes to Avoid
- Skipping the isolation valve kit This is the most expensive mistake. Without isolation valves on both the inlet and outlet, you cannot flush the heat exchanger annually. Mineral buildup will destroy the unit within a few years.
- Undersizing the unit Do not buy based on peak GPM alone. Calculate your required temperature rise first, then find the GPM at that rise in the spec sheet. A unit rated at 9 GPM at a 35°F rise may only deliver 5 GPM at a 70°F rise.
- Undersizing the gas line A high-capacity burner on an undersized gas line gives you poor performance, error codes, and a failed inspection. Jump up two pipe sizes from the meter.
- Reusing old vent pipe Old lines are not compatible with tankless systems. Category III stainless steel for non-condensing. PVC or CPVC for condensing. Always install new venting.
- Skipping the sediment trap debris in the gas line damages the burner. A sediment trap is a code requirement in most areas. It takes five minutes to install.
- Ignoring hard water If your area has hard water, install a water softener or whole-house descaler upstream of the unit. Even with soft water, plan for annual flushing with a descaling solution.
- Energizing an electric unit before purging air Never turn on the breaker until water flows freely through the unit. Dry elements burn out instantly and are not covered under warranty.
- Skipping the expansion tank on a closed system If your home has a check valve or backflow preventer on the main line, you have a closed plumbing system. Thermal expansion has nowhere to go. Install an expansion tank or the pressure spikes will damage the unit and your pipes.
When to Call a Professional
DIY tankless water installation is realistic for electric units if you are comfortable with basic plumbing and electrical work. Gas installations are a different story. Hire a licensed plumber or HVAC technician if:
- You need to run a new gas line or upsize an existing one
- Your electrical panel needs an upgrade
- You are converting from tank to tankless (more complex venting and gas work)
- Local code requires permits with licensed inspection
- You are not confident in any step of this process
Gas leaks and faulty wiring are serious hazards. A licensed install also protects your manufacturer warranty; most warranties are void if the unit is not installed by a qualified professional.
Find A Local Water Heater Professionals
If you are in the Los Angeles area, Derks Plumbing specializes in Tankless Water Heater Installation in Eagle Rock and surrounding communities. Our licensed plumbers handle gas line sizing, new venting, code-compliant permits, and full system setup no guesswork. Whether you need a simple swap or a full tank-to-tankless conversion, we get it done right the first time. Contact us to schedule your installation.
Conclusion
Knowing how to install tankless water heater properly comes down to three things: sizing the unit right, upgrading your gas line or electrical panel before you start, and installing isolation valves without exception. Follow the vent requirements for your specific model. Pull a permit. Set the thermostat to 120°F.
Done right, your new on-demand system delivers consistent hot water and lower energy bills for two decades or more. If any part of this process feels uncertain, especially gas lines or electrical work, hire a licensed professional. The cost of a safe install is far lower than the cost of fixing a dangerous one.
FAQs
Can I install my own tankless water heater?
Yes, for electric models if you have basic plumbing and electrical skills. Gas installations are more complex especially gas line upgrades and venting and typically require a licensed professional. Always check your local permit requirements first.
What size tankless water heater do I need?
Add up the GPM of all hot water fixtures you might run at the same time. Then calculate the temperature rise from your incoming groundwater to your target temperature (usually 120°F). Match a unit to both numbers. Always size up slightly.
What is the downside of a tankless water heater?
Higher upfront cost, potential need for gas line or panel upgrades, and a brief cold water sandwich effect between back-to-back uses. Hard water areas also require annual descaling.
Do you need special plumbing for a tankless water heater?
Yes. You need isolation valves on both the inlet and outlet. If water pressure exceeds 80 PSI, add a pressure-reducing valve. Closed plumbing systems need an expansion tank. Gas models need a sediment trap and a properly sized gas supply line.
How long does tankless water heater installation take?
A skilled DIYer needs 4–8 hours for a straightforward replacement. A licensed plumber can often finish in 2–4 hours. Full conversions from tank to tankless, new gas lines, or panel upgrades take longer.
Do I need a permit for tankless water heater installation?
In most cities, yes. A permit ensures the installation is inspected for safety and code compliance. Skipping it can cause problems when you sell your home or file an insurance claim. Contact your local building department before you start.
How often does a tankless water heater need maintenance?
Flush the heat exchanger with a descaling solution once a year more often if your water is hard. If you installed isolation valves, this takes about 45 minutes and does not require cutting any pipes. Clean the inlet filter screen every 6 months.
