Exterior units where it could freeze, need a unit with freeze protection built-in. Personally, I don't see it as a good situation where it could freeze to have a WH of any type in a location where it could freeze...I'd put in in conditioned space.
That being said, while an on-demand system can work for some people, it has it's issues. It is very dependent on the volume you need and the incoming water temperature. Their specs are for 50-degree inlet water. In the winter, mine is closer to freezing (measured at 33-degrees after a cold spell), so that degrades their performance considerably. They also have a minimum flow rate and a delay before they provide hot water unless you get one with a built-in storage tank which sort of defeats some of the efficiency goals. If your supply gas pipe is sufficient to properly power one, it won't cost a bunch to upgrade your service before you can install one. Be prepared to do annual servicing to remove any mineral deposits, or the thing will eventually decrease the amount of hot water it can provide. Unless you have qualified people around, when the thing does need service, be prepared to wait for parts. A tank can be replaced by almost any plumber any time...fixing a tankless system takes skills and parts not every plumber has.
