What is the downside of a tankless water heater?

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Tankless water heaters are one of the newer tools for creating a more energy efficient home.  Tankless heaters generate water warm instantly with high-powered gas burners or electric coils. According to Consumer Reports, which studied these appliances extensively, gas-powered tankless water heaters are approximately 22% more efficient when compared to traditional water heaters. Is there a catch?

What are the pros and cons of tankless water heaters?