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My hot water is ice cold in winter and I have to let it run (over 2 gallons waste) to get hot water. The Water heater is outside on the patio in a wooden closet.
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Have you insulated either the closet or the water heater itself?
Have you considered insulating the closet or maybe consider going with an on demand hot water system.
The farther your tank is from the faucet, the longer the time to come to temperature. The problem may be exascerbated in cold weather. If insulation is not viable, you'll need to opt for "on demand"/tankless, which can be costly.
Is it has or electric? All you can do is insulate the closet but need to be aware,of what might be restrictions if gas. It could help some. We all suffer from cold water in winter while waiting hot.
save the water in buckets instead of letting it go down drain use it for other stuff around house/mop bucket,dog bowl.plants etc. insulating?? https://energyfreakshow.com/2013/01/27/dont-insulate-your-hot-water-pipes/
First, get a water heater blanket, then get foam pipe insulation and cover the pipes with it. This will help reduce energy costs and reduce water waste year round.
Laura Cooper, you beat me to it!!
The water in the lines will be cold no matter what unless hot water is running thru them,insulating the pipes doesn't really keep the lines hot it only keeps them from loosing heat as the water is flowing thru them, it will still be cold when she turns it on because the water has been sitting in them. Even if she installs tankless the water still has to get to the faucet which means cold water will flow out first unless she moves it closer. Tankless ones heat the water as it enters system just because it says "hot water on demand" doesn't mean it will be hot directly out of faucet unless it's located really close to faucet. Insulating the hot water heater itself also only keeps the tank warmer longer so it won't need to turn on as much to keep it hot won't have any affect on the cold water in pipes that has to be cleared out before hot water comes. Tanks are insulated some better than others insulating tank will cut down on utility costs by keeping it from turning on more often to keep the water at whatever temp. has been choosen.
You need a recirculating pump, which is designed specifically for this purpose. They are not cheap, but you can install it yourself.