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Problem Solver
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I am going to install a tankless water heater on my small 2 bedroom, 1 bathroom Southern California house, and need to choose a good spot. I'll be using an outdoor one, and will attach it to the exterior wall. In many reviews for Rinnai and other heaters on Lowe's and Home Depot, customers say the heater takes a while to deliver hot water. I suspect this is due to long runs of pipe. I have an opportunity to mount it right outside the bathroom on the side of the house, which works well because the gas meter is also right there, about 3 feet away.
The only concern is that I plan to enclose the garage at some point (on the opposite side of the house) and turn it into a third bedroom with plumbing. If I do, the tankless heater will be all the way on the other side so the hot water will probably take a long while to get over there. Considering that, it may be better to install it in the back of the house by the kitchen, at the midway point. The existing water heater is inside, and is roughly centrally-located. Fortunately, the house is small and with a crawlspace, reconfiguring the plumbing isn't too difficult. Are there any other considerations I should be aware of?
 

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Naildriver
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I would choose a midpoint in your situation. The length of time for hot water to get to the furthest faucet is because with a normal water heater, you have a plug of warm water convecting upward through the pipes to a degree. With a tankless the pipes are stone cold when the water starts to move. A recirculation pump would solve long run problems, but you would have to choose which type to use. Temperature controlled, button controlled, WiFi controlled....it can get complicated.
 
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