Energy recovery from a low temperature heat source using heat pump technology is becoming a popular application. The domestic hot water demand has the characteristic of being very irregular along the day, with periods in which the demand is very intensive and long periods in which it is quite small. In order to use heat pumps for this kind of applications efficiently, the proper sizing and design of the water storage tank is critical. In this work, the optimal sizing of the two possible tank alternatives, closed stratified tank and variable-water-volume tank, is presented, and their respective performance compared, for domestic hot water production based on low temperature energy recovery in two potential applications (grey water and ultra-low temperature district heating). The results show that the efficiency of these kind of systems is very high and that variable-water-volume tanks allow a better use of the energy source, with an 8% higher exergy efficiency and around 3% better seasonal performance factor (SPF), being able to provide similar comfort levels with a smaller system size.