A combined heat and power system includes a liquid-cooled internal combustion engine, an air-cooled alternator, an air-to-water heat exchanger, and a coolant-to water heat exchanger. The liquid-cooled internal combustion engine includes a liquid cooling system configured to cool the engine with coolant thereby heating the coolant. The air-cooled alternator is configured to be driven by the internal combustion engine to produce electricity. The alternator includes an air cooling system configured to cool the alternator thereby heating air. The air-to-water heat exchanger is configured to receive heated air and water in a heat exchange relationship to preheat the water and cool the air. The coolant-to-water heat exchanger is configured to place heated coolant and preheated water from the air-to-water heat exchanger in a heat exchange relationship to further heat the water and cool the coolant. The coolant-to-water heat exchanger provides heated water to the housing water outlet.