One of the biggest misconceptions about tankless water heaters is that you will have an endless supply of hot water. While it is true that you will never actually run out of hot water, you may experience a significant drop in the flow rate at which the water is delivered.
Most tankless water heaters have a rating that is measured in Gallons Per Minute (GPM). What you may not realize is that the GPM of each unit is going to vary with the temperature of the incoming water as well as the desired temperature for delivery. Here in Kansas City, our water lines are buried 36" below the surface to prevent them from freezing in the winter time. This also keeps the incoming water cold during summer months. The average water temperature is going to be about 65 degrees, while the average desired delivery temperature is about 125 degrees. The tankless unit needs to be able to increase the water temperature by 60 degrees to meet the family needs. This is known as temperature rise. Problem is that most of the ratings for tankless water heaters assume only a 40 degree rise. As the temperature rise requirement increases, GPM will decrease.
Most people take for granite just how reliable a traditional atmospheric gas water heater really is. For many people they will never have an issue with their water heater. When a traditional unit has a problem they also have the luxury of calling almost any plumber in town and can feel confidant that they will be able to make the repair. In most cases it's the thermocouple or gas valve, it cost a few hundred dollars and you're back up and running that day.
Tankless water heater are far more technical than a standard unit. There are more moving parts, more electronics, and they can be more difficult to troubleshoot. In most cases a tankless water heater repair will require a special technician that will often be part of a large company. You may also have to wait several days on shipping since these parts can be expensive and unique to the model.
Cost of Ownership
One of the biggest incentives for homeowners to consider switching to tankless has been the energy savings that can result from a lower utility bill. The average tankless unit has a yearly operating cost of around $194 per year while the average atmospheric unit has a yearly cost of $282. The initial cost of a gas water heater is anywhere from $800-$900 going with a quality tank installed by KC Water Heater. The average tankless installation will be anywhere from $2600-$3200 depending on the model selected and the installation requirements. This would suggest that a tankless unit would have a 20 year payback, assuming the unit doesn't ever need repairs.
The thing that most people forget regarding costs is the maintenance required for a tankless unit. If you don't perform a yearly flush on a tankless unit the performance will drop significantly and eventually will stop working all together. The cost to perform the yearly flush is about $150-$200 per year.