There are different types of water heaters. Tank water heaters store water in a tank which can range from 30 to 100 gallons for the typical home. Usually, tank water heaters are less expensive to purchase and install. Tankless water heaters heat water on demand. While the upfront costs associated with tankless water heaters are higher, they are also more energy-efficient over time. In the past, tank water heaters were considered a better option for larger homes, but innovations in tankless water heaters have made them an excellent choice for most homes.