Going tankless? Awesome! Tankless water heating systems can shave 10 to 20 percent off your water-heating bill compared to traditional hot-water tanks. But while you're using less propane, you might be wasting more water. Surprisingly, the location of your tankless heater in your home plays the biggest role in how much water you use.
Traditional water heaters keep a several-dozen-gallon supply of always-hot water in their tank, ready for you to use any time. Even when you're at work. Or on vacation. Needless to say a lot of wasted heat energy goes into operation here.
Tankless systems, in contrast, heat water on demand. Good for your heating bill, bad for the water bill. Since there isn't warm water waiting for you, there's a lag time between the moment you turn the shower on and when you start to feel warm water. That whole time, you're letting perfectly good (but very cold) water wash down the drain.
Location, Location, Location
Is there any way to make your tankless water heater more efficient with its liquid resources? According to one expert quoted in an article, Tankless Water Heaters Explained, on New York Times' website, yes there is:
"'Distance plays a very large role in how fast hot water gets to the outlet,' says Joe Wiehagen, a senior research engineer at the National Association of Home Builders’ Research Center. The farther away your system is from your faucet (in my case on the other side of the house and on another floor) the more piping filled with cold water needs to empty before new, heated water can make its way to you."
So if you want to make sure your new tankless water heater is as thrifty with water as it is with heat power, make sure you have it installed nearest to where you'll be using it most.
Good thing those tankless units are tiny, right?
(Images: Flickr member JohnE777 licensed for use under Creative Commons, Flickr member tom.arthur licensed for use under Creative Commons)

White Enamel Flatwa...
Isn't this also true with a traditional water heater? We have a lag time before getting hot water at all of our faucets, and I thought that was the water that was sitting in the hot water pipes that had cooled down being run out. I heard you could get some sort of devide to attach to your furthest faucet that circulated the water somehow, but I've never had any luck researching that.
There are such things as instant-hot-water assemblies that you can put at your taps, so if you *really* don't want to wait, you could just put those at each sink.
When I lived in italy, I had one of these in my apartment - and it was directly above the kitchen sink (along the wall that was shared with the bathroom). Not the prettiest, but perfect location.
@kmk1112 - yes this is also true of a regular water heater. You can insulate those hot water lines between the tank and your faucets to reduce the heating loss. A recirculating system keeps hot water flowing through your plumbing, whether you use it at the tap or not, which is very wasteful. These tankless systems really are a better solution to your problem, but as the article says, only if you locate them properly.