Depending on where the closet is in relation to an outside wall, it might be really hard to provide the required inlet and exhaust pipes. Note that the location of the exhaust and intake must have certain clearances to other openings, both above and below it to work properly, too. THen, as Terry mentioned, you need a way for the condensate from the unit to drain. The amount of that can be significant, depending on how much water is used. Many places will not have the required gas supply line to allow a tankless system to work reliably without upgrading the piping, which can be a major issue, especially if it is very far from the source.
If you do not do the maintenance on one, it can crease to work properly. A typical tank will work for years until it fails and needs to be replaced, but can be made to work better and probably longer, if you do treat it well. Not all servicemen are up on how to service, diagnose, and repair a tankless system, so your choice of service man may be limited, and when it does need parts, they are not common like those used in a tank-type heater, so you might be without hot water for a few days while a part is sent out...hopefully, the actual one needed!
In many parts of PA, the incoming water in the winter can be quite frigid...this will decrease the ability of a tankless system to output hot water if you need any significant flow. Probably work for a shower, but might not for filling a tub. Would work fine in the summer when the incoming water is warmer. If you have a deep well, you could have frigid water all year! While not generally noisy, they do make some sounds, and if it is near a bedroom, it may or may not be an issue. Probably not if you're mostly the sole occupant, since it would only be using water while you're not in bed! Use a delay feature on say a dishwasher, and it could come on in the middle of the night. There's essentially no buffer, so any hot water demand means it must turn on.
