Size your tankless water heater based on the maximum required output for your home, which requires calculating how much water runs through your home's faucets, shower heads and appliances and how often you'll use more than one water source at once. High-efficiency fixtures can reduce the necessary flow rate and allow you to purchase a smaller on-demand water heater while older fixtures tend to increase the required flow rate.
According to the U.S. Department of Energy, most tankless water heaters produce hot water at a rate of 2 to 5 gallons per minute. Electric heaters tend to have lower output than gas heaters and are less appropriate for large households. Even the biggest tankless heater may have trouble providing enough hot water for multiple simultaneous tasks in a large household, however. Install two or more heaters to prevent problems.
On-demand water heaters are best for small to mid-size households that use water efficiently. The U.S. Department of Energy states that these heaters are 24 to 34 percent more efficient than tank heaters if your home uses 41 gallons of water per day or less. Most top-loading washing machines use that much water for a single load, however. Homes that use closer to 85 gallons per day usually get an energy savings of about 8 to 14 percent.
The desired final water temperature, plus the original temperature of the water, can affect which tankless heater is right for you. In homes with an average groundwater temperature of 50 degrees Fahrenheit and a desired hot water temperature of 120 degrees, choose a heater with a temperature rise rating of 70 degrees. Some tasks require hotter water. If the groundwater is unusually cold in your home, or you need 140-degree hot water for an older dishwasher or other task, choose a heater with a greater rise.