There is really not much functional difference either way. It mostly comes down to cost and cosmetics. Personally, I don't like looking at exposed infrastructure, unless this is a utility room or garage. So, I'd pay a little extra to have it hidden inside the walls. But if this is an area that is not normally visible, you could just as well keep it outside.

If the plumber does their job correctly, you shouldn't have any issues either way. Penetrating the walls is fine, if properly water proofed. Running gas right next to or crossing over electric wires is a non-issue. And drilling through studs is not a problem as long as the contractor follows building codes about sizes and positions of holes.

I'd strongly encourage you to do all this work with building permits and having it inspected. It doesn't guarantee perfect work, but it encourages the contractors to not needlessly cut any corners.

Outside and stub it out through the wall inside since there is no crawl space or basement.

I agree with M. above. It's not THAT big of an issue either way here. It's a short distance and there are other utilities right there. First choice would be running it through a basement or crawlspace.

I'm not a fan of outside water heaters. Texas found out why that's not a great idea. Put the heater inside if you can. If you are in an area warm enough to consider an exterior water heater, consider a hybrid electric instead. They have the lowest cost to operate, and have fewer issues with wait time, etc.

Tankless heaters can work, if you have really short runs from the heater to the point of use. You also want to keep pipe diameters no larger than they absolutely have to be.

We had a tankless heater in our house for a while, and we switched to a boiler and small'ish indirect tank when we upgraded to hydronic heating. It made a huge difference. No more waiting for two to three minutes for the shower to get warm. But that depends so much on what your house looks like; the experience can be very different in a house with different pre-existing plumbing.

If by "hybrid electric", you mean electric heat-pump, yes, those water heaters do have a good number of advantages in moderate climates.

Wall studs provide support in compression, so the entire section of the stud is in use. While generally over-designed for the actual load that will be seen (excluding earthquakes, tornadoes, and some hurricanes, I would not want an entire wall so cored out. Also, a long pipe cannot be inserted into drilled studs except from the outside in the plane of the studs, so the series of holes would have to start at a house corner unless pieces shorter than the stud gap were used. (I hope the plan wasn't to inlay the entire pipe across the wall.) In any case, you would want to access the pipe in case of leaks; there is at least one Tee in the design.

Given this particular case, if this were my circumstance, I'd want to keep the pipe outside as much as possible. Chainsaw twirling practice in that area should be avoided.

Thanks for all the great responses. It seems a 50-50 divide. Then it depends on the plumber's preference.

A word about the tankless. A plumber said if I install it inside, I need to provide circulation intake from the crawl space and exhaust through the roof (the available space is not on an exterior wall). So I decided to go with the outdoor unit. Two questions here:

1) Do I need a recirculation? Someone said it's good to have recirc b/c 1) it prevents the pipe from freezing in the winter and 2) it provides instant hot water. Is he correct?

2) 4 out 5 people I asked said even for a tankless water heater designed for outdoor, it still needs a roof to protect it from the elements, and a small shed should be built to protect the the water pipe from freezing in the winter. Only one plumber said it's not needed. Any opinion on this?

BTW my location is the Pacific NW. The winter here doesn't get super cold but the temperature drops below freezing on a few nights. And it rains a lot in the winter.

Recirculation makes a huge difference no matter whether you have a tankless system or a tank. It was absolutely one of the better things we ever installed. Is it necessary? Not at all. Is it a luxury I don't want to live without? Yes, absolutely. Also, it saves quite a lot of water.

From my admittedly limited experience, it in principle is more important for tankless systems as they tend to take a little longer to bring the pipes up to temperature. Tanks are less energy efficient, but that comes with some upsides too.

Unfortunately, when we still had the tankless water heater, ours was incompatible with recirculation. The plumber would have happily installed it; and I am virtually certain it would have worked, as recirculation isn't exactly rocket science. But Takagi was unambiguous in telling us that it would void the warranty of the expensive tankless heater. So, we only installed recirculation when we switched to the indirect tank that is paired with our boiler.

As for the risk of freezing, that's something you should take up with the manufacturer. Call their customer service and ask. Personally, I wouldn't install any exposed pipes in a part of the country that goes below freezing. All pipes should enter the house buried into the ground and then stay within the conditioned envelope of the house. For faucets that have to be on the outside, I'd invest in freeze resistant versions.

But I can't tell you whether that is necessary where you live. You would know your climate better than me. I'd just be paranoid about coming home from a ski trip to burst pipes.

After I wrote my last comment I watched a bunch of YouTube videos and looked up some products. It seems a combination of measures can be taken to protect the pipes during sub-zero temperature:

1) Buy a water heater pipe cover that covers up the pipes below the heater. Rinnai has their dedicated covers.

2) During the freezing months attach heat tape to the pipes and wrap them with insulation

3) Recirculate if possible

4) Drain the pipes if not using the heater for days

I notice a pattern in the products that you are describing. They (almost) all require electricity. Of course, extended power outages are more likely to happen during winter storms -- exactly when you need this type of protection the most.

M is correct, the problem is when the power goes out - which is generally during storms.

We seem to have more storms, more freaky weather, etc. I wouldn't put a heater outside.

I don't want to rely on heat tape that often goes bad. Design it to avoid problems in the first place.

I've installed tankless water heaters in the last two houses. I've located them near the point of use and used small supply lines. If I had it to do over again, I'd install an electric hybrid tank heater.

My tankless have all side vented - not through the roof.

I like @dan1888's approach; minimize the gas pipe's external exposure to hazard, drop down from the "attic" as required. No studs need to be cut, and just the upper plate supporting the studs needs to be drilled where it is subjected to minimal structural tension. You still have some threaded connections, but they may be more accessible. I don't think we have sufficient insight into the overall design details to refine this very well.

There is no attic as the ceiling is vaulted. Going through the crawl space seems excessive since the range and tankless are already on the same wall. If stud integrity is a concern, then going on the outside would be the best solution. If cold weather is the concern, building a small enclosure sounds like a good idea. This my summarized thoughts after reading everyone’s comment. Thanks to all!

Hi all, I got a follow-up question. Currently the electrical conduit from the meter to the panel is already installed. The gas plumber proposed to run the gas pipe on the outside wall as shown in the diagram below: it will go high and then come below the electrical conduit on the right hand side (the red line). Then it will connect to the water heater using a yellow soft pipe (the yellow line. Example in the second image). My electrician thinks this is fine and safe. Any thoughts on it? Thanks.

Is the dirt area going to be grass or driveway? Will children have access? I would want the risk of any part of the gas system being damaged to be made as minimal as feasible, and this includes anything a vehicle is likely to do by mistake, or children will do for any reason (or for no apparent reason at all).

My concern here is the proximity of gas pipe to the electrical. That's why I was asking this question. I am not concerned w/ children or the type of the ground.

Gas tends to stay inside pipes, and electricity tends to stay inside wires. As long as that's the case, it doesn't really matter much how close they are you each other.

On the other hand, if it doesn't stay inside, then all bets are off and proximity doesn't honestly make it much worse.

So, your priority should be you minimize the risk of either one escaping, and definitely not both at the same time. Thinking about possible types of accidents is a great start; and both vehicles and kids are prone to cause accidents

Not accessible to vehicle, and my kid knows better than messing with pipes.