Plumbing, Water Heaters

Can Tankless Water Heaters Be Installed Indoors?

tankless water heater

If you’re purchasing a new tankless water heater, one of your concerns will be where it can be installed. One of the advantages of tankless water heaters is that they take up very little space. There are two basic fuel types of tankless water heaters – electric or gas (natural or propane).

Electric tankless water heaters are designed to be installed indoors in the garage, basement, or interior wall. Both natural and propane gas tankless water heaters have indoor and outdoor models. Indoor models can also be installed in the garage, basement, or the exterior wall’s interior side to provide venting.

So, now you know you can install your tankless water heater inside, let’s look at some of the reasons you’d do this. Let’s also go through factors you need to consider when you’re looking at where to install.

Can I Install Any Tankless Water Heater Inside?

The answer to this question is no. To install a tankless water heater indoors, you must choose a model that’s designed for indoor use.

Most manufacturers make models designed either for outdoor or indoor installation. For example, Rinnai has a range that features models of both types. The Rinnai RUR e Series Sensei range is only for outdoor installation. The Rinnai RUR Series Sensei range is for indoor use only. 

There are differences in their design. The primary difference is that you don’t need to vent an outdoor system, whereas you do indoor systems.

Also, an outdoor tankless water heater unit’s design can withstand harsh weather conditions better than an indoor unit.

So, you can’t use an indoor model outside or vice versa. This means it’s crucial to decide whether you want an indoor or outdoor tankless water heater before buying it.

Also, keep in mind, tankless water heater maintenance will be needed -regardless of the model. Make sure you maintain clearance to allow enough workspace to service the unit.

Why Install a Tankless Water Heater Inside?

If you’re short of space in your home, installing a tankless water heater outside seems like an ideal solution. But, there are some reasons why it’s wise not to choose an outdoor model.


The main reason is the weather conditions where you live. If your location is prone to freezing, an outdoor tankless water heater will be exposed to the risk of damage.

Outdoor tankless systems have freeze protection built-in. But, the problem is with how the protection works.

The freeze protection mechanism relies on electricity to power it. So, if your power goes out in freezing conditions, the freeze protection can’t operate.

That’s a significant problem because those conditions can damage your system. There are measures you can adopt to get around this, but there may be a cost involved.

An Outdoor Unit May Affect the Aesthetics of Your Property

You usually install outdoor units on the exterior wall of your house. Ideally, you should place it in a discrete outdoor location. Otherwise, installing it elsewhere may impact your property’s curb appeal.

Even if you have such a location, it may not be suitable for installing your unit.

You’d need to meet national code requirements set by the American National Standards Institute and the National Fuel Gas Code. Your user manual should give details of these as all manufacturers have to follow national codes. There may also be requirements laid down by local building departments.

For example, there may be restrictions on how close to doors and window openings you can install

Where Is the Best Indoor Location for a Tankless Water Heater?

How to Vent a Tankless Water Heater lg

Tankless water heaters are compact, often no larger than a small suitcase. So, you’ll find you have several options when choosing the location. But, if you’re replacing an existing heating system, it’s sensible to use the same spot for your new tankless system.

Otherwise, here are some things to consider:

Clearance Requirements

You’ll need to meet any clearance requirements the manufacturer might specify. So, check your user manual. 

Install On or Close to an Exterior Wall

You can use internal walls for your tankless water heater. But, fixing it to an exterior wall is a better option because of the venting requirements. We’ll come to those later, but it’s often easier to vent these systems through a wall than through a roof.

If you can’t attach your unit to an exterior wall, an exterior wall’s interior side is an option. But check your user manual to ensure that you don’t exceed the manufacturer’s maximum lengths for vent pipes.

An electric tankless water heater will likely require new wiring runs to the electrical panel box or a dedicated subpanel. Depending on the electric tankless water heater’s size, you may need up to three 220 volt circuits to power the unit.

An indoor gas tankless water heater will need to be vented to the exterior, typically through an exterior wall. However, it can be vented through a roof in some instances. Consult with your plumbing contractor for more details.

Put It Close to Gas and Water Inlets and Power Source

The ideal location for your tankless water heater will be close to existing gas and water inlets. It’ll also need to be close to a power supply.

That will help reduce the costs of installation as you won’t need to extend pipework and cabling. The costs of that can mount up. There’s also the disruption if the work involves going through internal walls.

Proximity to Hot Water Appliances

For your tankless water heater to run efficiently, you’ll need to locate it as close as possible to the appliances that use hot water.

Doing so will minimize heat loss through the pipes as the hot water doesn’t have as far to travel to its destination.


If you’re running your water heater on natural gas or propane, you’ll need to vent your tankless system.

Venting has two vital functions. Firstly, it provides air for the combustion process, which heats the water. Secondly, it removes the dangerous waste gases.

When you choose an indoor gas-powered tankless water heater, you’ll have two choices for venting. That is power-vent and direct-vent.


A power-vented system uses air from indoors for combustion. It eliminates the need for an air-intake vent.

Sounds great, but you’d still need to vent exhaust gases to the outside.

You’d also have to put the unit in a vented room where there’s enough internal air to use for combustion. So, not so great after all if your space is limited.


Where space is more restricted, a direct-vent model is the best option.

Direct-vent models draw in combustion air from the outdoors. So, you don’t need a large space for direct-vent units.

Again, you have to vent the exhaust gases through an external opening.

Although we’re talking about two vents, one for air and one for exhaust gases, you don’t necessarily need two pipes.

You can use concentric pipes. They have a stainless steel inner for the exhaust gases and a UPVC outer for the air. It’s not only more pleasing to look at, but it also means you only need a single hole for the venting. That’ll save some money.

You can usually vent tankless water heaters vertically or horizontally. But be aware that with some, it’s either one or the other.

Horizontal venting through an outside wall is likely to be less disruptive unless you’re putting your tankless system in an attic.

For Increased Flexibility, Consider Electric

If all this venting talk puts you off, consider going for an electric tankless water heater. Electric models don’t need venting. That’s because there’s no combustion process for heating the water.

So, you can put an electric tankless water heater almost anywhere in your house. 

It’s worth checking out this option if an electric model can meet your hot water needs.


So, now you know, you can install your tankless water heater inside if you buy one designed for indoor use.

There are several requirements you need to consider when deciding exactly where to install it. But it’s not as scary as it sounds. Taking time to get the installation right will ensure you get the most out of your system.


Hubert Miles | Licensed Home Inspector, CMI, CPI

Hubert Miles is a licensed home inspector (RBI# 2556) with more than two decades of experience in inspection and construction. Since 2008, he has been serving South Carolina through his company, Patriot Home Inspections LLC. As a Certified Master Inspector, Hubert is dedicated to providing his expertise in home inspections, repairs, maintenance, and DIY projects.