I am buying a home, it is a remodeled ranch home with the present hot water heater in the storage area by the carport. There is plenty of room and it currently has a natural gas tank unit.

I have not measured the GPM but it appears to have good water flow.

I am looking at it for the cost savings in fuel costs ( long term).

Can I get recommendations for specific brands, things to look for and of course reasons this could be a bad idea??

Tankless can be gas, propane and electric which will you use? Sounds like it does freeze in his climate so you can do an exterior install and save about $250 on the through the wall vent kit. You can buy a Rheem that will make 7.4 gallons of water a minute with intake at 45 degrees for $750. Rinnai is rated a bit higher but I am well satisfied with the RheeM. Pro, will will save a great deal on fuel. Con, Rinnai requires a pro install which can be $300 plus the unit cost double, triple over a standard heater. Is this an investment property or for your residence?

It is going to be my own residence, found a foreclosure I could not turn down. Large home in nice subdivision with large yard.

Since there is already a natural gas unit there, I was assuming to use natural gas

I am assuming these work very similar to the pressure washer units I used to work with.
The pressure washers ( steam cleaners) that was built in, used natural gas, but had very large burners and coils, they heat to about 280 degree at 3000 lbs pressure. So mentally they seem like the same thing, just on a smaller scale. The current unit is already vented so a vent is not a issue.

Current vent will not necessarily work with the tankless. Some tankless employ a double wall pipe which pumps out hot exhaust and draws in cool air for the combustion chamber. I have bought from these folks Rheem at PlumberSurplus.com Got to do your home work and use their tank selector to get the right unit for your needs. I selected the worst case scenario, what do I need if all showers were used at the same time, wernt with 7.4 g/m

From my experiece, 7.4 gln units are not adequate to service whole house. You will save couple of hundred dollars on purchase - but few months later, you will regret it. If you require more hot water , like in winter, you will get little volume.

Since this is your own house, I would suggest to go with higher gln/m unit. With Rinnai, I would suggest the R94LSi or R98 units. ( 9.4 and 9.8 gln/m respectively ).

The problem with any tankless unit you may have is gas. These units have variable BTU demand and range from about 20,000 BTU to up to 237,000 for the R98 model. In most cases, it requires dedicated gas line ran directly from the gas meter.

See Rinnai web site: Browse Tankless Products - Rinnai. Yes, start up cost is high but once installed, that's when you start seeing the benefits.

There is Noritz brand too. Its top residential unit produces over 13 gls/m. Check it out here: http://www.noritzheaters.com/product...FQ9JagodqmMTAg

Another unit on market is Takagi.

There is also a new tankless heater company that just start selling tankless heaters. They are called Navien and claim to be super energy efficient. Their heaters have circulation pump built in - which is a big Plus in fast hot water delivery. See it here: -:- Navien America -:-

I would suggest to go with Japanese model tankless heater. Japanese are using tankless for over 80 years and have quite a track record established. Units like Rheem and Bradford White are only a copies of the Japanese models.

In any case, tankless heaters are way to go. More and more people are installing them. You will be happy having one.. We had 2 installed in our house in 02 and don't even know we have water heater. The are compact units, are not a thumb-sore and our gas bills are as low as they never been before.

And the biggest advantage of them all: endless steaming hot showers !