Tankless Water Heaters: Should we install them indoors or outdoors?

Where is the best place to install your water heater?

When purchasing a tankless water heater, there are many things to consider. Many are centred around compatibility, and whether you can actually afford to not just purchase, but also install the heater. With so many options all over the market, reaching a decision can feel like an absolutely impossible task. But not to worry, we’re here to help.

After you’ve reached your difficult decision over which power source you’re going to use – “electric or gas?” – you’ll struggle with deciding where to put your new heater.

If it’s electric, it will obviously need access to electricity, and this can be difficult outdoors, especially where cables exposed to the elements can become a significant health and safety risk. If you don’t actually position it correctly, you can risk your life and the lives of those around you, and everything can end up costing you a lot of money.

Simply installing your heater in the wrong position can drastically decrease its efficiency, as well as it’s lifespan. It can also increase the number of times you’re going to have to service and maintain it during the year.

But when it comes to deciding if you’re going to install your water heater indoors or outdoors, you need to consider a great many things. You’re going to have to consider not only the weather in your area – as during the winter pipes and the like can freeze up, but also if you’re going to have to get construction workers in to move around your gas systems, and possibly even re-wire your circuit breakers. This can all add up, and you need to reach the decision thinking about the long term, and considering the costs in the long run.

Failing to do so can rack up thousands of dollars in expenses. Unless you pay those dollars, you won’t be getting hot water. So, for this reason, we’ve compiled this detailed article to help you decide on where to position your water heater, and what factors you need to take into consideration. This will help you reach an informed decision provided you read carefully and compare your situation to the situations described here, and that way, you will ensure that you reach the correct decision, and ensure that all goes as well as it possibly can.

Factors to consider

Do you live in a cold environment? If so, you’re likely going to be better off installing your tankless water heater indoors, so that you can prevent it from freezing up as best as possible. If, however, you’re looking at living in warm areas all year around, where temperatures rarely ever hit below zero, you’re likely going to be much better off simply sticking it outside.

And what about space? Do you have a lot of space? Do you have ventilation? If you have limited space, it’s best to install your tankless water heater outside. This way, not only will you gain more space inside your own home, possibly saving you a lot of money on the usual third-party storage solutions (such as storage units in big warehouses) but you’ll also be saving yourself the cost of having to install proper ventilation.

Thirdly, are you fortunate enough to have money to spend? If so, you might just be able to get some tweaks done to your home by a construction company or plumber to ensure you get the optimal running of your tankless water heater. There are some examples of homes having one indoor water heater and one outdoor, which helps too.

If you’re going to install it indoors…

If you’re planning on installing your tankless water heater indoors, you’re going to want to consider the following pros and cons. These will give you a solid idea of what you’ll be facing if you install your water heater indoors, along with all of its benefits and bad aspects.


If you’re installing your tankless water heater indoors, you’ll enjoy these pros and these benefits:

Firstly, you’ll rarely ever have to deal with your heater freezing up on you when you really don’t want it to, or can’t afford it to. By simply keeping it indoors, provided you have heating, you’re going to be saving yourself an awful lot of money on insulation and expanded/bust pipe replacements in the winter. The heat from your home will do it’s job, and your tankless water heater will likely require much less maintenance than had you simply let it do it’s job outside.

Secondly, your home’s resale value will absolutely skyrocket. You’re going to benefit from heightened valuation values, and if you’re looking to sell your home, indoor installation of a tankless water heater can tick so many more boxes on an estate agents list, that you simply would not believe it. By simply positioning your tankless water heater indoors, yes, you do compromise on space (covered in the negatives and the cons of indoor installation) but you drastically increase the resale value of your home. If you’re looking to sell your home, install it indoors.


As with any situation where there are great benefits, there also come great negatives – great cons. In this section, we will cover all of those pesky negatives that might arise if you decide to install your water heater indoors.

Firstly, if your tankless water heater is powered by gas and not electricity, you’re likely going to have to install venting, which can be incredibly expensive. This can even mean you’re going to spend more on the installation than on the actual unit itself. However, you always want to keep your family safe, and for this reason, you’re going to also need to get it checked out annually by a professional to ensure you aren’t at risk of a carbon monoxide poisoning.

Secondly, some indoor tankless water heating units are really quite loud, and create a lot of condensation. If you’re a light sleeper, you’re going to struggle to fall asleep when somebody is having a shower, especially if you sleep near the water heater. This may be an issue for some families. You might also find that due to condensation, you might get droplets of water dripping down onto your floor, but not as a result of a leak – only condensation.

And thirdly, there is always a risk of leaks. Whilst it isn’t likely if you’ve installed it correctly or hired a professional to do it for you, there is always a chance of it happening. This can cause huge property damage, especially if you live in an apartment. Be very cautious – it will never harm you to check your heater once everyday in the morning, will it?

If you’re going to install it outdoors…

That’s great. Not everybody can, but there are some considerations you’re going to have to take if you are installing it outdoors. We’ll begin by talking about the pros of installing it outdoors, and then move onto the cons.


There are many benefits to installing your tankless water heater outside, and we’ll begin by discussing those.

Firstly, installation is much easier, even if you’re installing a gas heater. Since you’re already outdoors, there’s no need for installation. This will also save you a lot of money on installing a ventilation system. Therefore, if you’re cash-strapped, you might want to go for the outdoor option, although be aware that things can still break down outside, as they are especially vulnerable to the elements of earth.

Secondly, outdoor installation is far cheaper, and far simpler. That means that you can likely install it yourself, and even if that’s not possible because you’re not very dexterous or you lack tools, you’ll likely pay a lot less for a guy to install it for you. This can, again, be far better for a family that is short or tight on or with cash. However, you also get a lot more freedom with outdoor installation –

Thirdly, choosing where to install a tankless water heater outside is far, far, far easier than choosing where to install it indoors. You have all the space on your property, and can probably even get away with hiding it behind a bush, out of sight and out of mind. However, keep in mind that it will still likely need cleaning and servicing or maintenance every now and then, so you should still make it easily accessible. Consider placing it somewhere on the side of your home – not visible from your front garden, and not visible from your back garden either.


There are also a few negatives to outdoor installation.

Your heater will be exposed to the elements. And that means that it is vulnerable to freezing and the like. You will have to pay extra attention to this.

It will also be vulnerable to theft – unfortunately. This happens often all over the world, as tankless water heaters are expensive bits of kit.

About the author

Steve Bates

Hi, I'm Steve and I currently reside in Chicago, Illinois. Although for most of the last 20 years I was a partner in a HVAC company down in Austin, Texas.

I understand the frustration involved with dealing with water heater repairs and replacing or upgrading to a new, more efficient model.

My aim is offer some basic advice on fixing home hot water systems. And if a repair isn't possible, then to make the process of selecting a new water heater – be it gas or electric - as simple as possible.

So that you can save money and have a safe and reliable hot water system in your home for many years to come.