Houston Home Inspection - Tankless Water Heater

New Rheem tankless water heater made by Paloma

In this article we will cover the process, parts, materials and tools needed to install a tankless (a.k.a. on-demand) water heater. In this case, we will be replacing an older 50-gallon electric tank type water heater with a new, high efficiency, gas fired, tankless unit.

A Word to the Wise: Disclaimer

A few words of caution are in order: this is not a project for the beginning Do-It-Yourselfer. The conversion we are doing involves routing and connecting electrical, water and gas lines as well as cutting through the roof for the intake and exhaust systems. Unless you are thoroughly familiar and competent with these and know the applicable building code and inspection requirements for your area, this project is best left to professional service personnel or the advanced DIYer. However, this article should be useful to you even if you hire out to professionals, as it will provide a somewhat detailed understanding of what is involved and how it should be done. Unfortunately, as an inspector, I see plenty of professional work that is poorly executed and even dangerous. The more you know about what should be done, the better position you will be in to evaluate contractors in order to get the best quality installation. Beware of the lowest cost bidder, as they often have the lowest bid, because they are omitting things that should be done. Lastly, should you choose to perform such an installation yourself, you will be responsible for your own actions, we will not accept responsibility for any DIY projects gone bad. You should know that working with gas and electricity can be hazardous and if not done properly can lead to loss of property, injury or death. Also, be sure to check with your local permitting office and comply with all permit and inspection requirements.

Economics 101

As of this writing, tankless systems have come down in price, but are still substantially more expensive than tank type units. In addition, there are more ancillary parts needed and the installation is much more involved (i.e., much more costly) than replacing the old unit with the same type system. A new 50-gallon electric water heater can be purchased for as little as $400-500 and installed in under 2 hours because all of the connections needed are already there. A tankless unit, on the other hand, will cost approximately $1000, may require several hundred dollars in additional components and much more time/effort to install properly. In our case, even with our best Internet shopping, we spent approximately $1,600 in parts and materials (2009). Be prepared to make a substantial up-front investment to make the transition to tankless. Much, if not all of this will be recovered over time in terms of decreased operating costs and longer typical lifespan of tankless over tank type units (the estimated annual operating cost of the tankless unit is $223 vs. $503 for a 50-gallon tank unit). There may also be some tax credits available to help offset the additional cost of the new higher efficiency system.

Feasibility and Requirements Assessment

Houston Home Inspection - Leaking Water Heater

Out with the old leaking inefficient unit (note the water in the safety pan)

The first thing that you will need to do is determine the feasibility of converting from a tank type to a tankless water heating system. Not every system can be readily converted to tankless, as the demands are different, even when converting from an existing gas system.

As in most things, proper planning is essential to achieving a good outcome from your conversion project. Converting from a tank type water heater to a tankless is a lot more complex than simply removing the old unit and slapping a tankless one in its place.

Sizing the Unit

One of the key items you will need to consider is what sized unit or units you will need to install. This will be determined by the size of your house, the number of bathrooms, and your usage patterns. Tankless water heaters are often advertised as providing an endless supply of hot water; no matter how long a shower you take, you will not run out of hot water. However, that doesn’t mean that there are no capacity limitations that you must consider and plan for. Tankless water heaters are rated by how much they can raise the temperature of a given volume of water over a specific period of time. For example: a unit rated to produce a 70° F rise at 4.2 gallons per minute can heat incoming water from 50° F to 120° for usage rates of up to 4.2 gallons per minute. So the limiting factor becomes how much hot water is being requested at any given point in time. If someone is filling a bathtub while someone else is taking a shower and washing a load of clothes, the demand can be quite high. If the rate of demand exceeds the capacity of the water heater, the temperature rise will not be as high for all users, until the demand drops back down within the unit’s capacity to heat the water to the target temperature. So it’s important to consider what your usage patterns are when sizing your system. Most manufacturers provide guidance to help you determine which systems will best fit your needs.

Feeding the Unit: Gas

Just because tankless units are typically more economical to operate than tank type units, don’t be fooled into thinking that they sip fuel. On the contrary, because tankless units must heat the water “on-the-fly,” their energy demands when in use are much higher than conventional units. To illustrate; a conventional 50-gallon gas fired water heater may have a 40,000 BTU/hr burner, while it’s tankless counterpart may use 200,000 BTU/hr. That’s up to 5 times the energy demand of the conventional unit! What this means is that the skinny little ½ inch gas line that supplies the tank type water heater, will need to be increased to ¾ inch to meet the demands of the new tankless unit and the existing flexible gas appliance connector will have to be replaced with a high-BTU unit. If you or your contractor fail to address this increased gas demand requirement, the new system will never perform up to its design potential. Depending on how much gas pipe might need to be replaced and how accessible it is (e.g., if it’s buried inside of a finished wall), this can be a significant cost/feasibility factor. Find out, before you buy your unit.

Powering the Unit: Electrical

Tankless units have electronic controllers and igniters and need 120-volt current (usually just an outlet), whereas conventional gas fired units do not use electricity and conventional electric units will have 240-volt supplies. Unless you are fortunate to have an available outlet located near where your heater is to be installed, you will need to run electricity to it.


Indoor mounted units will require exhaust vents. Many of these units are direct vented (i.e., the combustion air intake is enclosed in the same pipe as the exhaust) and use specialized concentric vent pipes. All high-efficiency units tend to form moisture condensation in the exhaust vent which must be drained to a suitable location. These units require specially designed vents, which are larger and made of stainless steel to withstand the acidic condensate, so you cannot reuse the existing vent from your conventional water heater. There are special installation requirements and length limitations for these vents, so it’s important to verify that you can satisfy the requirements, prior to ordering your unit. Also, note that tankless units do not come with the vent kits. These vent kits are specially designed for use with specific systems and must be purchased separately from the water heater. Make sure that you purchase the correct vent kit and vent piping. The vent kit alone can cost more than a conventional water heater.

Water Supply and Drains

You will also need to reroute the water lines and pressure relief valve discharge line for the tankless unit, as the connections will be on the bottom of the unit. If the unit will be installed in an attic or other location where a leak can cause damage, a safety pan and drain (the drain must be separate from the pressure relief discharge line) needs to be included in your design.

All Systems Go

Once you’ve determined that a tankless water heater fits your budget and your water usage requirements and that your home can reasonably accommodate the requirements of a tankless unit, you’re ready to move onto detailed planning and to order your components. The next chapter will discuss the specific planning for our installation.

Details… Details… Details…

As we mentioned earlier, the water heater that we will be replacing is a 50 gallon electric unit that happens to serve two full baths (a separate water heater serves the kitchen, laundry, and other bathrooms) and is located in a walk-in attic. We opted for a Rheem RTG-66, direct vent, natural gas fired unit. This unit is designed to support homes with 2-3 bathrooms, so it should have no problem meeting the needs of two frequent use bathrooms. This unit is actually made by Paloma and has a variable BTU rating up to 180,000 BTU. Because the unit will be placed in an attic, we will be venting it directly through the roof, so we ordered the appropriate vertical vent kit and a single length of vent pipe (the vent pipe does not come with the kit). Because the existing electric unit has no vent, we will be cutting a new hole through the roof.

Houston Home Inspection - New Rheem Tankless Water Heater

New water heater and vent kit

Houston Home Inspection - Tankless Water Heater Vent Kit

New stainless steel vent kit

Houston Home Inspection - Water Heater Gas and water fittings

Service valve kit, flex connectors and new ball valve.

We also ordered an optional service valve kit for the unit. The service valve kit is a high-quality set of connectors which includes ball type isolation valves, service ports, and the required pressure relief valve. The valve kit is not required but is a worthwhile investment for a clean, professional installation. You can skip the service valves and make up the connections directly, but you will still need to purchase a pressure relief valve and fabricate an adapter for it (the pressure relief valve is a critical safety device and must be properly installed). The home where this unit is being installed is fed by a domestic water well. The service valves will facilitate periodic descaling of the water heater unit.

The existing water lines are copper and will need only minor reconfiguration to connect with the new water heater. Because we have experience sweating copper pipe, we will be using soldered fittings to make up our water lines. There are non-solder connection options available for those who do not want to have to sweat copper joints. The original installation had a gate type cold water supply shut off valve. Gate valves are notoriously unreliable, so we decided to replace the existing shut off valve with a high-quality ball type shut off valve. These valves are easy to operate, are much more reliable than gate valves, and have the added benefit that you can determine visually whether the valve is open or closed by the position of the handle. This is an optional but very worthwhile upgrade. We also opted to use high quality, high flow rate braided stainless flex connectors for the final water line connection to the unit.

Houston Home Inspection - Water Heater Gas pipe fittings

Black iron gas piping and fittings.

Although the existing unit was electric, there was a nearby 1-inch gas service line which could easily meet the needs of the new water heater. Unfortunately, the line was only fitted with a single ½ inch “T”, so we would have to cut into the existing gas line and install a larger “T” fitting that we could run our branch line from. We planned for and ordered the appropriate fittings and nipples to install stubs for two ¾ inch branch lines. One for the water heater and another to supply a future gas fired furnace nearby.

Houston Home Inspection - Water Heater Connections

Electrical components and copper plumbing which we will use to connect the unit.

The existing water heater was powered by a 240 volt, 30 amp branch line with a #10AWG conductor, which is typical for an electric tank type water heater. The new tankless water heater, however, needs a 120-volt branch line. We could replace the breaker in the electrical distribution panel with a 120-volt breaker and use the same conductor. The 10 AWG conductor size is larger than necessary, but can be used safely for a 15 or 20 amp circuit (you can use larger conductors than required for a given circuit, but not smaller conductors). However, we had an existing 120-volt outlet in the vicinity, so we elected to just terminate the 240-volt circuit in a box and pull our new circuit from the existing outlet. The tankless water heater only requires 3 amps to run, so it can easily be accommodated off of the existing circuit.

Putting it All Together

Once we had all of the necessary parts and components gathered together, we began the process of removing the old water heater and installing the new unit. First, we tackled those things that would require us to turn off utilities to the house (i.e., gas and water).

Running the Gas Line

Houston Home Inspection - Gas LinesThe first step was to extend a branch gas line over to the approximate location of the new water heater. This required cutting into the existing gas line (disclaimer: Natural gas is hazardous and explosive. Any work involving gas lines should be left to professionals.). We started by shutting off the gas at the meter, opening a line outside the house, and carefully purging the gas from the lines. Next, we used a reciprocating saw to cut through the existing gas line and remove the undersized fitting. We installed a new “T” with two branch lines and an approved gas shutoff valve close to where the water heater would be located. We then reconnected the original gas line using a union and temporarily capped the branch line. Next, we reconnected the pipe outside and turned the gas back on at the meter, checked all of the connections using a soapy water mix (soapy water will show bubbles in the event of a leak at a connection), then purged the air from the system. The last bit of piping (downstream of the valve) would be done after the water heater was in place.

Water Supply

Houston Home Inspection - Water ConnectionsNext up was the supply side plumbing connections. However, before we could do this, we had to drain, disconnect, and remove the old water heater. Prior to turning off the water to an electric water heater, it is essential to turn the power off at the service disconnect or the circuit breaker if no service disconnect is present, as was our case. We turned off the water to the house and opened first floor faucets to allow water to drain out of the lines. Normally, we could just turn off the cold water supply valve at the water heater and not disturb water flow to the rest of the house. However because we were replacing the old gate valve with a more reliable ball valve, we needed to shut off the water to the whole house. We drained the water tank (this can be sped up by opening the temperature and pressure relief valve to allow air to displace the water in the tank). Next, we cut down the cold water supply to the approximate height needed for the water heater and reconfigured the supply line to the new shutoff valve (note: the vertical stub that projects up from the supply line traps an air pocket and helps reduce the water hammer effect, which occurs when a valve is closed quickly). Once the valve was installed, we were able to turn the water service back on to the house.

Out with the Old

Next we finished disconnecting the existing water heater from its source of power (after double checking that the power to the unit was off), the hot water supply connection, and the temperature & pressure relief valve discharge line (which would be reused). We then removed the old leaky water heater and drained the remaining water from the safety pan. Because the pan was not rusted and still in good condition, we would reuse it, but because it would need to be relocated slightly, we cut the drain line and set the pan aside.

In with the New

The next step is to determine the location of the water heater and install a plywood mounting board. When determining the location of the unit, it is important to determine where the vent will penetrate the roof and position the height of the unit so that the vent will penetrate the roof by the proper length. Also, pay close attention to any clearance requirements and where all of your connections will need to be made to the unit. Once we carefully made our measurements, we securely mounted the board and temporarily hung the new water heater. We then double checked all of our connections to ensure that they would be accessible and that we could route our lines to them. Once we were confident in our placement, we leveled and secured the water heater to the mounting board.


Houston Home Inspection - New Water Heater

Vent temporarily installed after cutting roof opening.

Next up is the placement of the vent. We held a plumb-bob to the underside of the roof to align the center of our opening exactly above the water heater vent connection. We then drilled a hole through our center mark and pushed a wire through so that we could easily locate it from the upper surface of the roof. We then traced our cut out on the roof surface and cut the opening with a saber saw (be sure to cover the top of the water heater to prevent sawdust and debris from falling into the vent opening of the water heater). Remember the adage “measure twice and cut once” when cutting a hole through the roof. We then checked our alignment and opening size using a length of vent pipe, making minor adjustments to the opening as needed. We slipped the vent adapter onto the top of the unit being careful to align the condensate drain in the appropriate position for us to route the drain later.

To install the roof jack, it is necessary to pry some of the shingles loose from the roof decking. Do this carefully, as you do not want to damage the shingles. The roof jack must be interleaved into the shingles (i.e., the upper portion of the flange should be under the shingles and the lower portion of the flange on top of the singles). This is critical to achieving a weather tight roof penetration. Once the position is checked, remove the roof jack and apply high-quality silicone caulk to the felt paper and lower portion of the shingles which will be in contact with the flange. Place the roof jack into position and nail it in place. You will need to separate each row of shingles that overlap the flange from the layer below in order to re-nail the shingles that you pried loose. These new nails will penetrate both the shingle and the roof jack flange, securing it in place as part of the roof system. Once you are done, the only nails that should be exposed are those along the bottom edge of the flange. When you separate the layers of shingles, you break the sealant bond between them. This bond is important and helps the shingles resist wind lift. You must reestablish the bond by applying high-quality roof/flashing caulk where the original bond was broken. You must also bond the row of shingles that directly contacts the roof jack flange to the flange in the same manner. Lastly, apply a dab of caulk to the exposed nail heads along the bottom edge of the flange. Now install the vertical length of vent pipe through the roof jack and insert it into the vent adapter at the top of the water heater. Slip the vent cap onto the top of the vent then check everything for placement and clearance requirements (our vent system had a zero clearance requirement so it was OK for it to contact the roof decking where it penetrated). Once you have confirmed alignment, secure the sections with the proper screws. The last step in the vent installation is to install the storm collar. The storm collar protects the gap where the vent pipe passes through the roof jack so that water cannot penetrate. The storm collar should be made as tight as possible on the vent pipe and then slid as far down as possible, until it contacts the top of the roof jack. Apply a fillet of roof/flashing caulk where the upper edge of the roof jack contacts the vent pipe to seal it. You should now have a weather-tight, professional looking vent penetration.

Houston Home Inspection - Cutting Roof Vent Opening

First we lay out the location for the opening by drilling a small hole through from the inside and tracing it out on the roof

Houston Home Inspection - Fitting the Roof Jack

After cutting, we loosen the shingles and test fit the jack

Houston Home Inspection - Completed Vent Installation

The completed vent assembly. Note how the flange of the roof jack is interleaved with the shingles and all fasteners and seams are sealed with a high-quality roof caulk.

Making Connections

Back at the water heater, it was time to make the utility connections. We extended the branch electrical circuit and added a 120-volt outlet within easy reach of the water heater cord. While we were at it, we installed a junction box so that we could properly terminate the unused 240-volt branch circuit from the old electric water heater properly and covered it with a blank cover. We temporarily installed the service valve assembly at the bottom of the water heater along with the water and gas flexible connectors. We then finished piping the hot and cold water lines so that we could make up the connections. We then removed the temporary cap from the gas line (the appliance valve was still in place and closed) and extended the line to where we could make the final connection with the flex gas connector. We installed a sediment trap at the end of the horizontal run of the pipe. We then secured the gas line in place with a strap. We removed the service valves and flex connectors and then reinstalled them to make our final connections using Teflon tape for threaded water line connections and paste pipe dope for gas connections. We opened the water and gas valves and checked for leaks (we would continue to recheck these joints for leaks over the next couple of days).

Now that the supply connections were all made up, it was time to turn to the drain connections. We positioned the safety pan that we saved from the original installation and connected the drain (the pan should have had a 1 inch diameter drain line, but the original installation was done improperly with ¾ inch pipe which was routed down through the exterior wall of the house, so we stuck with that). We routed the pressure relief valve discharge line around the pan and connected it to the original discharge line. This line is made of CPVC; regular white PVC tubing is not rated for use as a relief valve discharge piping. We also connected the supplied silicon hose to the condensate drain tap on the vent and created a trap by placing a loop in the line according to the installation guide. We routed this drain line to the house waste system, along side the existing A/C condensate drain.


Houston Home Inspection - tankless water heater installation
Houston Home Inspection - tankless water heater connections

Connections to the new water heater

Final Steps

Houston Home Inspection - Tankless Water Heater Controller

The unit comes with an electronic control panel which can be installed in a convenient location

We installed the supplied control panel and control wire in accordance with instructions, placing the control panel in a convenient location. We plugged the water heater into the outlet and set the desired water temperature at the controller (the maximum output temperature for the standard controller was 120° F, which is a good setting; higher temperatures are generally unnecessary and present a scald injury hazard). At this point the system was ready to go. When we turned on the hot water faucet, the system fired up and we had hot water. We stress tested the unit with a tub and shower and two faucets running simultaneously and found that it was still able to produce water that was plenty hot with this heavy demand.

Lastly, we cleaned up the work area, reinsulated the copper water lines, and secured our control wire with staples.

Our total installation time was approximately 8 hours for two people, including removal of the old unit. Keep in mind that our installation involved rerouting gas, water, and electric as well as cutting a new hole through the roof. Your own installation may be more or less involved, but don’t wait to be surprised; plan it out carefully before you start.


Unlike conventional water heaters, tankless units have a motor and fan to provide an induced draft. We did notice that following installation we could hear the unit from within the second-floor bathroom (the unit is mounted on the back side of the bathroom wall). The noise is not loud or intrusive, but it is noticeable, especially when the hot water demand is high. If we were to do it again, we would probably try to better isolate the unit from the wall by installing rubber or neoprene bushings between the mounting board and wall studs and between the water heater bracket and the mounting board. However, the noise is not significant enough to warrant dismounting the unit to install them.

Cover image: By Behrat (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons