Indoor vs Outdoor Tankless Water Heater Installation

Tankless water heaters provide homeowners with numerous advantages. Not only do they take up less space than a traditional storage tank, it is possible to receive a limitless, energy efficient access to hot water in the home.

When you check reviews and product descriptions available today, you’ll find that there are three basic types of water heaters manufactured today.

  • Indoor tankless water heaters.
  • Outdoor tankless water heaters.
  • Hybrid tankless water heaters.

Hybrid models are capable of being installed indoors or outdoors because of their features and flexible design.

Does an indoor installation or an outdoor installation best suit the needs of your home? Here are some of the concerns you’ll need to address before finalizing your purchase.

Why Choose an Indoor Tankless Water Heater? 

Indoor tankless systems are installed in the same way that a tank-based system would be. The only exception is the lack of a storage tank. These systems are usually mounted, then placed along a wall, at a location which allows for proper venting of the system.

If you live in a geographic location that experiences freezing temperatures on a regular basis during the winter months, an indoor water heater can help you to avoid the risks of freezing damage. 

Tankless water heaters can create heavy levels of condensation during operation. When there is proper drainage available to the unit, an indoor installation reduces the risk of water damage to the home as well.

Newly constructed homes tend to be the best option for indoor tankless systems. That is because the venting protocols can be established during the design phase of the home instead of being incorporated into it afterward.

Indoor systems also avoid the risks of severe weather, including high wind events, which could create impact damage to outdoor systems. 

Why Choose an Outdoor Tankless Water Heater?

Some homes do not have good locations for venting to be installed for the water heater. If the system is mounted outside of the home, then the costs of ventilation piping, venting, and altering the structure are avoided.

Homeowners without a good drainage point should also consider an outdoor tankless model before an indoor model in most instances.

If you’re upgrading your current system and it is a tank-based water heater, then an outdoor installation point may be easier to complete. You’ll require fewer changes to your home, while being able to supply the unit with the water and oxygen access it requires to operate properly.

When to Choose a Hybrid Tankless System

Hybrid tankless systems provide more flexibility for homeowners who are unsure of where the installation of the water heater should be. This is the option to choose if you want to evaluate your options with the unit in your possession.

Hybrid systems do allow for an indoor or an outdoor installation. These systems may cost more than the water heaters which are designed specifically for indoor or outdoor use, so it may be financially better to decide on the installation point now.

Key Facts to Consider When Choosing an Indoor Installation

  • Indoor tankless systems require less physical space, while requiring more open space. You cannot place a tankless system in the traditional closets that a tank-based system usually occupies.
  • Venting access must occur for indoor systems. Operating one without proper venting can be life-threatening. If venting is not currently installed, a building permit may be required to complete the process.
  • Indoor installations may still require insulation or wrap to be placed on plumbing close to the exterior of the home in cold climates.

Key Facts to Consider When Choosing an Outdoor Installation

  • Outdoor tankless systems should incorporate some type of freeze protection. This should be built into the unit to keep it warm during colder temperatures. Freeze protection systems may require a separate power source than the water heater.
  • Venting can be problematic for some homes, which means an outdoor system makes sense. Because these systems usually attach to the exterior of the home, there may be building codes to follow. Some jurisdictions may require property inspections as well before the unit will be approved.
  • Gas-powered models are available with all three system types. Most jurisdictions will require you to contact the local utility to connect your new tankless system to a new or existing gas line, whether it is natural gas or propane.
  • Some tankless water heaters can be somewhat noisy. If you’re sensitive to sounds, then an outdoor unit makes more sense to use.

Tankless water heaters can increase convenience and save you money simultaneously. Just make sure you choose the correct installation option before finalizing your purchase. For more helpful tips on maintaining your tankless water heater click here.

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  1. Sam Li

    November 12, 2018 at 9:40 pm

    I appreciate what you mentioned about tankless water heaters creating heavy levels of condensation during operation. I think that hiring a plumber that knows the benefits of both kinds of water heaters is a great idea. If I were to need a new water heater installed, I would do some research to contact the best service in my community.


  2. Adrian Jones

    March 22, 2019 at 7:25 am

    One of the reasons why you should get a tankless water heater is that your place might not have enough space for one–or it’s too cramped or the house is too old and the air duct system can’t be replaced without having to demolish the entire house, then getting an outdoor tankless water heater is a possibility. While it’s a little smaller, you should be sure to protect it from the elements–since it’s going to be outside the house after all, and what part of the house is always exposed to the sun, to the rain, snow, or hail? While the heater at home hasn’t malfunctioned yet, it’s good to know that there are options for tankless water heaters available and I’ll be looking into that in the near future.


    • Gregory

      May 11, 2020 at 5:12 am

      Great point, Adrian!


  3. robert

    June 20, 2019 at 1:46 pm

    can you install an outside unit inside?


    • Gregory

      May 11, 2020 at 5:11 am

      Generally not – the outside units need to be kept outside to allow them to vent safely.


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Greg Mattson

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