There are two types of conventional water heaters, gas and electric. An electric water heater can be used almost anywhere. A gas water heater is most likely to be installed in a home that already uses gas for another appliance such as a furnace or stove. Building codes may dictate the placement of gas water heaters, restricting them to areas outside of normal home activity.

It is likely that if you are replacing a water heater, you'll simply replace it with the same type of unit that was already there. There may be exceptions to this rule, for a variety of reasons. In any case, if you choose to replace an electric unit for a gas unit—or vice versa—bring in a professional to do the job. Installing or removing gas lines is not a project for the do-it-yourselfer.

Even when replacing a unit of the same type, there are upgrade possibilities that should be considered. For example: if space allows, you may choose to increase the unit's holding capacity to accommodate your growing family. Another important consideration is the unit's energy efficiency. Replacement time is the perfect time to lower your energy bill by choosing a water heater that is more efficient than the one it will replace.

When looking for a water heater, consider these features:

• Gallon capacity (40 gallon and 50 gallon heaters are most common.)
  
  
• Recovery rate (the number of gallons the heater will heat in an hour.)
  
  
• Dimensions (width and height—will the heater fit in the space you have for it? Physical space may limit your ability to upgrade your unit's capacity.)
  
  
• The energy efficiency rating (a sticker on the side should list the estimated annual cost of operation for the unit.)