Is it a forced air system? How does the heat get distrubuted? If it's forced air I can tell you what we spent in our rental house while our new home was geing built. That house was about 3300 square feet on 3 levels. It was a fairly new home but I believe it was poorly insulated. We filled up the tank 4 times over a 16 month period that covered the end of 1 winter and 1 full winter (the tank had a 500 gallon capacity, but they only fill it about 80% to allow for expansion). Bottom line - very expensive. I could not wait to het out of there AND we kept the tsat at 65!!! You have less square footage, so you could scale from my numbers to get a ball park. I have a geothermal system in my new home which is 2.5 times bigger than the rental. My annual energy bills TOTAL (heat + AC + electric + propane) are about 3200 per year. I do have a propane tank for cooking, fireplaces and gas dryer. If you love the place that much and do buy it, I suggest living with the HVAC system you have for 1 winter season. If you don't like the bills, change out the system.

lisa you might want to get some additional quotes on the Rinnai's - that price seems a bit high. I have a dual tankless Rinnai system. I don't know the exact price I paid just that the delta cost was an additional $1200 above what a large single propane water tank option would have cost. ANd there is a tax credit if you put one in - I think we got $250 but the tax credits have gotten better. The key point on the tankless decision for a family is that you won't run out of hot water (unless you forget to fill the propane tank up) which if you read on the forums is quite common with families. Kids seem to always drain the tanks and the recovery time is hours. With tankless you can run them until you run out of propane. We put in the tankless units mainly because it is just my wife and I and we don't need a lot of water unless we have guests. The delta upgrade cost was relatively low and we got a tax credit - so it seemed to make sense. The way ours works is that only one takless unit fires up if the demand is below 4.5 gallons per minute. ABove that - which is rare - the second unit fires up. I really like that feature. The one thing you must understand about tankless is that the way you use the system will have a great impact on the cost to operate it. Everytime you turn on the hot water tap - the gas units fire up. There is a realtively short time for the tanless units to get the water hot and then you have to wait for the hot water to push cold (or warm) water out of the hot water line pipe unitl the hot water reaches the tap. So you really don't want to short cycle the tankless system by turning hot water on/off rapidly. I think you must consider the placement of these units very carefully to make sure you don't have to run the taps for minutes to get hot water out. But that is one advantage of the tankless units - you could put multiple units close to the point of use. Tanked system have the same issue with water delays but you won't short cycle them is you turn the tap on and off - and you don't have the same flexibility for locating the tank as toy do with the tankless. I found the need to install a small hot water recirculating system to service our kitchen, utility room, and butler pantry sinks because the Rinnai's are located 88 feet away from these sinks and that was taking 5 minutes to get hot water at those taps. We placed the Rinnai units in the basement directly below the master suite so we get near instant hot water at those taps. We could not locate Rinnai's on the other end of the house due to venting restrictions which is also something you will need to work out. I would have prefered to have 1 Rinnai service the master suite, 1 Rinnai service the kitchen/UR/BP sinks , and 1 Rinnai to service the second floor guest bedrooms. That would have been the ideal solution for us but we could not do it that way. We live in a rural area too and so there is an extra benefit for either a gas tankless - or gas tank - and that is you can easily backup the hot water system with a reasonably sized generator. If you can't do better on the price of the Rinnai's, I suggest going for a propane tank system and spend the money on a backup generator which will come in handy in the sticks. The dual fuel option on the heat pump is a great idea. I have Geothermal heat - so when we lose power I lose heat. Our Auxiliary heat is electric - the dual fuel option wasn't presented to us as an option. Our solution was to install really good wood burning & gas fireplace inserts that are rated as heaters (we have 3 on the main floor - 1 wood, 2 gas). These units need a little electricity to run the fans and controls - and I have those on my backup generator. If I could do it all over again I would have gone dual fuel on the GT system with propane as the Auxiliary source. I have seen lots of calculations for and against tankless. In the end maybe they save us a little money but that wasn't the reason we selected them. I can't stress enough to think out the entire hot water flow thing before you plumb. It is very easy to calculate for a given diameter and length of hot water feeder pipe how many gallon sof water are in the pipe. Then realize that a tap on full might run at 1.5 gallons per minute and then you can figure out the delays. It was a huge issue for use which I had to fix after the fact just before we moved in because DW hated waiting for hot water. Good luck with your build.

Full disclosure - I own a Tankless gas water heater and love it. I had a 50gal tanked gas water heater before. Due to space constraints, it could not be replaced. It was in the doorway of the utility room. Here is what I learned when looking at Tankless water heaters. Just like when you want to go solar, you have to get more efficient with your appliances. The things I did to change my plumbing fixtures were intrinsic. All these things below were done as part of replacing aging fixtures and were not related to the tankless decision but made the decision and experience with tankless flawless. Replaced all but one bathroom shower valve with a Thermostatic valve. The last one will be replaced this winter. Replace all shower heads with units that used no more than 2.5gal/min Replaced all bathroom and kitchen faucets with units that used less than 2.5gal/min My dishwashers and washers already heated their own water and all but one of my Washers can use all cold water as input. The dishwasher and washers were energy efficient and used small amounts of water. There is a large bathtub in the house and the tankless water heater is wonderful for this. We take a bath maybe twice a week. I am getting a separate temperature controller for the tub bathroom so that the filling can happen without interfering with other activities. Currently, showers take priority. My house hold has 3 adults in it and we always seem to be in the shower at the same time (3 full bathrooms). With the tankless water heater, this is no longer an issue. I like in Maryland where we get really cold in the winter:-). I have a recirculator with my tankless water heater and that is on a timer. It runs for a few hours in the morning and a few hours in the evening. When the recirculator is not running, it takes about 1minute to get hot water to the farthest location in the house. I may add the point of use tankless heater to the bathroom faucets just because it wastes time to wait for hot water. This issue with hot water at the farthest location was always a problem. I purchased the largest residential tankless water heater which with a 30degree rise, will get you 9.6gpms. This would theoretically allow me to run 3 showers and a faucet at the same time. My unit is programmed to 110F degrees and the showers are set to about 105F degrees. The thermostat for the tankless is in an easy to reach location in the hallway and I can easily increase or decrease the water temperature. I originally started at 140F which is the max temp. I changed it the first day when I could barely wash my hands without burning them. My temperature rise in the summer is about 35F degrees and 50F degrees in the winter. When I went with tankless, I had heard all the horror stories of cold water sandwiches, huge volume drops due to cold incoming water and flow rate to get started at the sink. I have not experienced any of this. I think the thermostatic valves in the shower contribute to this quite a bit. I am able to get hot water at the sink in under 10 seconds except for the farthest unit. When the recirculator is running, the water is hot within 2 seconds. Just enough time to flush the water from the steel part of the faucet. Propane would be my choice in your situation. Electric tanked or tankless water heaters would leave you in a lurch when the power went out. Propane tankless water heaters don't perform as efficiently as the natural gas units but that is true of all propane appliances. I have my tankless water heater hooked up to an uninterruptable power supply in the event of a power failure which we have quite often. I also have a small gasoline back up generator and the tankless unit works fine when connected. I have a Rinnai RUR98i. This unit has a built in recirculator pump. You can also purchase a separate recirculator with the tankless or tanked unit of your choice. I purchased it from build.com and my plumber installed it. I also installed the scale water filter before the unit and this keeps the unit operational without a lot of build up. The unit is just over a year old and I performed a maintenance in the summer. There was very little build up. I am also installing a whole house filter for sediment and chlorine due to some work the water company is doing in my neighborhood for the next year. I have not selected a solution yet for the whole house filter. Good luck with your decision.

@Elmer J Fudd You are correct. The furnace provides the only blower function. A coil is required if either for an AC or heat pump condenser. @Tim Cleary What you say is true for a new build where nothing exists. I always think in terms of equipment replacement where a gas piping and electrical wiring are in place and can be reused. The original question was about the benefit of a dual fuel system using propane and a heat pump. The original author will need to provide details of what exists today in order to have a meaningful discussion of the incremental cost compared to a single fuel system.