Tankless water heaters are one of the most efficient methods of obtaining hot water for your home. Unfortunately, if you choose the wrong size of heater, you could be faced with a very inefficient and costly system or not having enough hot water for your family’s needs. Fortunately determining the correct size of system is easy once you have calculated the flow rate and temperature rise needed for your home. 
Determine Your Total Flow Rate:
The total flow rate needed for your new tankless water heater can be determined by adding up the number of devices you would like to run and combine their flow rates. This should be in gallons per minute to compare with the capacity of your new system.
For example, if you anticipate running a hot water faucet together with a shower head, you would need to add the flow rate of the faucet (0.75 gallons per minute) with the shower head (2.6 gallons per minute). This would create a demand of at least 3.26 gallons per minute to satisfy your needs. Remember you will need to include water using appliances such as dishwashers in your calculations. If you are concerned about your flow rates, you could consider installing low-flow fixtures.
Calculate Your Temperature Rise Requirements:
To calculate your required temperature rise, you will need to subtract the temperature of your incoming water from the desired temperature for your water output. Unless you know differently, if you assume that your incoming temperature is 50°F, and you want your heated water at a temperature of 105–115°F, this will be a temperature rise of 55°F. To ensure that your system has sufficient capacity, it is a good idea to use a low incoming temperature figure. This will ensure that you don’t undersize your requirements. If you live in a warmer climate, your incoming temperature will be far higher, so you may need to adjust the calculations.
A Sizing Example:
An average shower uses 2.6 gallons per minute, and an optimum temperature of 104–106°F and your incoming water temperature is 40°F. If you want to produce sufficient hot water to have two showers running simultaneously, your water heater will need to produce 60°F temperature increase for 5.2 gallons per minute.
Average Flow Rates:
Although the specific flow rates can depend on your particular appliances, there are some averages that can provide a good base for your calculations. The average tub has a flow rate of 4.0 GPM, showers between 2.5 and 3.0 GPM, washing machines 2.0 GPM, dishwashers 1.5 GPM and kitchen sink faucets 1.5 GPM. This means that if you would like to run a shower at the same time as a washing machine, you would need a flow rate of 5 gallons per minute.
Gas vs. Electric Heaters:
Another consideration is whether your water heater has a gas or electric source. Gas systems generally have the capacity to produce a greater temperature rise for each gallon per minute compared to electric heaters.