Informational Guide

Indoor Vs Outdoor Tankless Water Heater

by Andrew

Tankless water heaters offer many benefits to homeowners. They are becoming the most popular solution to hot water production for many different applications due to the superiority of this hot water heating solution.  

These units are compact, energy-efficient, and produce hot water on demand. The indoor version is installed inside the home to provide hot water as needed, while the outdoor version of this unit is made to be outside and can withstand the elements and extremes of temperature.  

This indoor vs. outdoor tankless water heaters guide will help you find the right tankless water heater for your needs. 

Indoor tankless water heaters are made for use in places where the climate is quite cold. These units will not freeze up in the cold because they are inside the home and benefit from the climate-controlled conditions in your home.  

Indoor tankless water heaters are also a perfect choice if you live in a place with ocean exposure and lots of ocean spray and salty air. Indoor heaters do not take up much space, and they can fit into many sizes of homes with ease, taking up just a fraction of the space that a standard water heater would. 

water running sink

Pros & Cons of Indoor Units 

The Good  
  • Great for cold weather 
  • Easy to add to new construction 
  • Great for resale value 
  • Provides hot water on demand 
  • Does not need much maintenance 
The Bad 
  • Must have proper ventilation to operate safely 
  • They can cause condensation when in use 

Outdoor Tankless Water Heaters Explained 

Outdoor tankless heaters are made for places that have mild weather.

They are also a great choice if you have an older home that cannot be modified to fit an indoor unit.

You will also get the benefit of not needing to install a drainage system or venting when you use this tankless heater style, and they are already outside.

These are some of the most commonly used tankless heaters in new construction. 

outdoor tankless water heater

Pros & Cons of Outdoor Units 

The Good  
  • Affordable to install 
  • Does not need venting or drainage 
  • Long lifespan 
  • Fits in many places 
  • Great for older homes 
The Bad 
  • Must be weatherproofed 
  • Can be expensive 

Indoor Vs Outdoor Tankless Water Heater: Which Is Better? 

Climate In Your Location 

If you live anywhere in the US with longer periods of freezing temperatures and ice, you would definitely want to choose an indoor tankless water heater. You will not be able to take advantage of this kind of water heater in older homes in most cases, however, due to the venting requirements. On the other hand, outdoor tankless heaters are perfect for more mild climates, and they are usually cheaper to install overall than indoor heaters. 

Venting Requirements 

Indoor tankless heaters need a lot of venting and drainage to be built into the installation process. You will not have to do any of this with an outdoor tankless heater. You will find that this is the key difference between the two kinds of tankless heaters. Venting can be the reason that indoor tankless heaters do not work out in many home applications, as they must be installed on a wall that meets the outdoors. Many people would likely prefer the indoor heater solution over an outdoor one, but venting and installation can cause difficulties that cannot be surmounted. 

Space Requirements 

Both kinds of heaters are quite space-efficient, but the indoor style is often much more so. This makes sense so that your indoor tankless heater can fit into your home with ease. However, both indoor and outdoor models will only take up a fraction of the space as traditional water heaters. Indoor heaters can fit into a closet, under a sink in a cupboard, or even in a small storage space. Besides the outside of your home, outdoor tankless heaters can also be installed in a garage or an attic to help save space and avoid building a cover of some kind of shelter for the unit alongside your home. The overall space that your home offers for this kind of addition can impact how much space you will have access to for the installation of each type of unit. 

Ease Of Installation  

The outdoor hot water heater is the easiest to install because it does not need venting and other kinds of plumbing solutions for the installation process. Indoor heaters will need more venting and drainage solutions than outdoor tankless heaters in every instance. Installation of outdoor heaters in the garage or the attic can help to make it easy to install these heaters if you do not want to build a structure for your water heater. Indoor heaters require more specific installation processes, but they are often more efficient overall, and if the venting can be placed readily, they are quite easy to install. 

Ease Of Maintenance 

Both of these units require limited maintenance, but the indoor unit will need the least care since it is inside. You will always have to check on the outdoor heater more frequently since it is exposed to the elements more than hot water heaters usually would be. 

Cost and Difficulty of the Installation 

The cost and difficulty of installation are usually more for outdoor tankless heaters. This is because you need to be able to weatherproof and insulate the heater unless you live in a really moderate climate. On the other hand, if you are installing a tankless heater in an older home, you will probably have a lot of expensive work to ensure that the venting and drainage solutions you need are in place. Outdoor tankless heaters can be more affordable to install when you have room in your garage or your attic or shop for the heater to be installed. This can help save difficulties and costs for building a shelter around the heater to protect it from cold and wetness.  

Purchase Price 

Indoor units are less expensive than outdoor units in most cases. These units are smaller and do not need as much support to be safe and secure since they are inside. Outdoor units have more components that come with them, and they will need to be protected more carefully than indoor heaters. The purchase price can vary somewhat based on brand, and there might be congruence between the typical costs of both indoor and outdoor heaters. Overall, the installation is where a lot of the price comes into play, but overall, outdoor units are often more expensive than indoor units. 

Comparing Tankless Water Heater Brands 

Rinnai Indoor Vs. Outdoor Units 

Rinnai makes commercial-grade indoor tankless water heaters, and they are made to deliver a lot of really hot water on demand with ease. Their lineup for indoor and outdoor water heaters includes both gas and electric options. They take up limited space and can be installed in many different places in your home, often having extras like WiFi compatibility. Rinnai products often come with rebates, too, making it a lot easier to afford to install them. Outdoor units are often more expensive than indoor heaters by Rinnai, and they need more support to be protected from the weather. You will get better results from the Rinnai unit overall, but it's a premium brand that may come with a premium price tag. 

Rheem Indoor Vs. Outdoor Units 

Both the Indoor and Outdoor Rheem water heaters can be powered either by natural gas or propane. It's up to you which type of fuel you'll want to use in order for your Rheem tankless water heater to run on. As always, pay attention to the price tags here as the outdoor tanks will cost slightly more than the indoor units (with the exception of the 9.5 gallon/min tanks, which will run at the same price (both natural gas and propane types). The outdoor tank is designed to withstand severely cold temperatures of up to -30 degrees (F). It can also work at altitudes up to 9840 feet above sea level (as does the Rheem indoor unit). The indoor unit can provide hot water for up to three bathrooms all at once.  

Rheem water heater range

Eccotemp Indoor Vs. Outdoor Units 

Eccotemp is a brand that could be the best option for you should you want to stay within a specific budget. These water heaters can be powered by natural gas, propane, or electricity. What makes Eccotemp water heaters special is that they operate with the help of Amazon's Alexa or Hey Google. One of those tanks is the Eccotemp ESH-2.5 SMARTHOME Mini-Tank Water Heater.  

With the sound of your voice, you can get the warm water you want at exactly the right temperature. If that isn't the smartest kind of water heater in existence, what is? For the price, these units are going for with all these cool features, talk about a steal of a deal. 

Unfortunately, the outdoor tanks may not have that luxury. But if you're not crazy about smart devices, there are always outdoor tankless water heaters like the Eccotemp 20H 6 GPM. This unit is rated at 6 gallons per minute and is the perfect choice for any small house with a maximum of two bathrooms. 

Takagi Indoor Vs. Outdoor Units 

Takagi has been around for well over 70 years. It's also one of the other brands that will offer cost-effective options on both their indoor and outdoor units. If you are looking for the closest thing to a professional plumber recommended unit, these might be it. The outdoor units are built to sustain all kinds of weather, including subzero temperatures and high heat. No matter the climate, your outdoor unit is fully protected.  

Meanwhile, the indoor units will provide you with plenty of hot water without sucking up a lot of energy. It's powered by condensing gas, so the water can heat up much faster compared to competing brands. At prices you can afford, how can you ever possibly pass that up?   

Camplux Indoor Vs. Outdoor Units 

Believe it or not, you can have tankless water heaters for your camper or RV. Hence the name, Camplux. Of course, these units range in prices all the way up to $700. Camplux does have units for your home as well. One of them is the Camplux Tankless Propane Water Heater. The indoor unit can provide your whole house with plenty of warm water. The outdoor unit worth checking out is the Camplux 10L 2.64 GPM Portable Propane Water Heater. This is perfect for the RV or camper. Who says it’s impossible to have hot water whenever you are on the road? This unit uses 2 ‘D’ cell batteries and delivers up to 2.64 gallons per minute. 

Noritz Indoor Vs. Outdoor Units 

Noritz is among one of the more energy-efficient brands on the market. Plus, they are one of the most long-lasting, with a lifespan of approximately 20 years. So you get excellent energy efficiency and long-lasting reliability in any of their units. You have units that are so large, they can even provide hot water for up to 5 bathrooms at the same time. 

The NC380 Indoor unit can produce up to 380,000 BTUs with a thermal efficiency of 80 percent. And it can produce up to 13.2 gallons per minute. For a good outdoor unit, the NR83 OD does not disappoint. It produces 180,000 BTUs and gives you up to 8.3 gallons per minute. 

Navien Indoor Vs. Outdoor Units 

Navien is a brand that offers both indoor and outdoor units at premium prices. If you have a bit of extra cash in your pocket, this brand might be a good one to consider. It's also another energy-efficient brand for those looking to save money on their power bill. You can choose between condensing or non-condensing. If you opt for condensing units, there's the NPE-A2 series. Both indoor and outdoor units have durable heat exchangers and use software to allow for easy navigation and control. Non-condensing units like the NPN-Universal are the only units on the market that can be used both inside and outside. No other brand out there does this.  

GE Indoor Vs. Outdoor Units 

GE Indoor units are well-made and well-designed and will offer you lots of great features and functions that many other heaters cannot. This is also going to be a better choice than most outdoor heaters will be because of the cost savings and the improved features and functions that the GE Indoor heater offers. In addition, you will always get the right support and guidance when you install a GE unit that guarantees the right results for your installation. The ease of installation alone makes GE a better choice overall. 

People Also Ask (FAQs)

Do outdoor tankless water heaters need an enclosure? 

In almost any application of outdoor water heaters, you will find that you have to enclose them to protect them from weather and cold. This is really important to the performance of this kind of outdoor water heater.  

Can an outdoor tankless water heater be installed in a garage? 

You can do this if you have access to the right piping and drainage for the tank. This can be a good compromise for keeping the outdoor heater safe and secure from the elements without having to build a shelter for the heater.  

Can a tankless water heater go in a closet? 

These kinds of heaters can be installed in a closet if they will fit. These heaters are actually made to be installed in small spaces like this, which is why they are so flexible and easy to install in homes. These closets can even go under sinks, pantries, and other storage areas. 

Can an outdoor tankless water heater be installed in an attic? 

So long as there is enough combustion air in the space that you have chosen for your tankless heater that is meant to be used outdoor, the heater can be installed in this location. Attics are fine for this use, although there are risks in some cases due to heat generated by the unit and a lack of air circulation for the unit to operate optimally. 


This guide should have shown you all of your various options for tankless hot water heaters. You will find that these are some of the best solutions for hot water access around, and being freed from a traditional hot water heater is really beneficial to most homeowners. Tankless heaters perform well and provide on-demand hot water as needed without running out of water when it counts most.