Small Water Heater leak, exploring replacement options.

Noticed a pool of water in my water heater "safety spill pan", it's 12 yrs old so I figure I'm due for a new one. Not leaking real bad right now so not an immediate fix required. As a family of 4 we go through quite a bit of hot water. I've been reading about the instant water heaters that are supposed to be more efficient than the 50gal standard tank model we have now.

1: Are the Tankless models that much more efficient than standard gas water heaters? Is the payback time reasonable?

2: Are they much more difficult to install than standard water heaters? From reading online it looks like a 3/4" gas line upgrade and replacing the flue with a 5" model would be required.

3: Which brand/type offers the best bang for the $$$? Are the condensing models worth the extra cost?

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Bob, we have a gas tankless water heater, and although we have been mostly satisfied with it, I would only recommend one for three reasons: 1) space savings, 2) need for lots of hot water (i.e. large bathtub), and 3) rarely use hot water (i.e. vacation house). I don't think they are more efficient than regular gas tank heaters, unless you take standby loss into account, and with 4 people you probably don't have that much standby time. You probably need a 3/4" gas line and you may have to install a new flue. The main drawback we've experienced is the cold water slug you get every time you turn it off and on, such as when washing and rinsing dishes. You are switching a machine on and off, not just opening a tap. It takes a couple of seconds for the unit to fire, then a couple more for it to get up to temperature, so you are purging more cold water to get hot.

The real benefit for us has been the small size. I put ours in the attic and freed up a bunch of space in the pantry where the old tank used to be. Having endless hot water is good when people take showers one after another. Our unit has a remote with temperature options, so I can turn it up to 167 degrees and fill a pot for cooking pasta, which is much quicker than heating it on the cooktop. Some people like to wash whites or bedclothes in hot water. 

But... unless you need to get that tank out of the house, I would stick with it and just get a new one. 

If you do get one, I would go with a condensing unit, so you can use plastic flue. The 75% models use stainless flue that costs too much.

The price difference between a conventional 50 gallon and a tankless water heater is less than I thought. $500 buys a tank type, $600 buys a Takagi 19,000 to 140,000 BTU power vented tankless model. When did tank type water heaters go through the roof in price? last time I bought one in 2003 (different house) they were under $200. Tankless at that time was $800 or so, I didn't even consider them.

I've considered the reventing costs, but my existing tank water heater needs to be revented anyways because it shares a flue with an induced draft furnace (don't know how it passed inspection 1st time around). The category 3 venting (very expensive, but won't need much of it) and upsizing the gas line are my major cost considerations. Fortunately the water heater is only about 15' from the gas distribution unit and both are easy to access. Currently the house uses "yellow hose" flex type gas lines

Takagi recommends an indoor installation in climates with potential freezing conditions, not sure if a closet between the garage and house qualifies. Space in unconditioned, connected to attic, furnace shares the space with current water heater. I could put the unit in the laundry room, but I'm not crazy about having combustion appliances in conditioned space even if they are power vented. Moving the WH into the laundry room would put it next to the pex manifold therefore reducing piping looses.

We do have a HUGE jetted tub and the current 50gal runs out just about the time the tub fills up. We don't use it often, but like it to be hot when we want to use it. I could turn it up to get more water out of it, but with small children in the home I want the water heater set low as possible. The precision outlet temperature is a nice feature of a tankless model, provided it's accurate. Our current tank water heater can vary from 100 to 120 depending on the last time it cycled.

Just found out ONG (our local gas co) is offering a $250 rebate on tankless water heaters, but they must be installed by a licensed contractor. Perhaps it's time to call some plumbers and see how much install costs..

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