Most water heaters are sold on the basis of how many gallons they hold. A family of four, for instance, might take several showers, run the dishwasher, and wash a load or two of laundry in an average day, totalling 100 gallons of hot water or more. But that doesn’t mean they need a 100 gallon storage tank. It’s more important to consider the first-hour rating (FHR) for storage-tank water heaters and the gallons-per-minute rating (GPM) for tankless water heaters because that’s what tells you how much hot water the heater can deliver over a set period of time, i.e., the first hour. After that, depending on how quickly you're using up hot water, it could either become less hot or actually cool. It would then take a certain amount of time (variable by model and capacity) to return to its full FHR. A pro can help you calculate how much capacity you'll need. .