Consider The First Hour Rating(FHR) - Although it is possible that you could figure in the size of the water tank into your decision, this is not as important as the FHR. The FHR measures how much hot water the heater can produce in one hour.

Determine Daily Water Consumption – This is important and should be based on your busiest day of the week. Things such as laundry, dishwashers, showers, etc. – calculate how much time you need hot water for each. Add these figures up, comparing your total to the FHR on the yellow energy label. If it is equal to or better than your number, then all is good.

Get a Water Heater With A Long Warranty. Water Heaters with a longer warranty perform best, and will cover you for up to 12 years – the least is 6. The water heaters with the longest warranties are the best performing. Also, the price difference between the two does not warrant opting for the lower warranty. It should be noted that testing found that hot water heaters with the longer warranties were better constructed. Having the longest warranty is also important, because most warranties only cover the unit itself, not the cost of replacing it. If you are using water softeners, then a longer warranty is highly recommended.

Get The Dimensions Beforehand. Measure the area you will be putting the hot water heater before you buy. Because federal regulations call for 5%-10% increased efficiency(electric and gas heaters), the insulation used has made the actual size – so, tight spots could be a problem.

Gas May Be Your Best Option. Although gas hot water heaters typically cost more than their electric counterparts, they are more economical in the long run – paying for themselves in a year. If you do not already have a gas line feeding into your home, consider the cost of getting one. It would wise to insulate the hot water pipe on the heater, as well as the cold water exhaust pipe.

Tankless Water Heaters May Not Be Worth The Hype – These heaters are designed to heat the water as it is drawn. While they claim that they are more efficient, test have shown that they are not much more efficient than their conventional counterparts. Many factors determine the energy used by the water heater.

Install Smoke Detectors and Carbon Monoxide Detectors – While the higher capacity water heaters have a safeguard built in to keep from catching flammable vapors on fire, it's better to err on the side of caution just in case.

Check Your Venting – hot water heaters share the same exhaust as a furnace. If you must change the chimneys for one of these, it is best to change the other one as well.