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Robert Neville

wrote:

Might be "code compliant" but still a very foolish installation.

No, it isn't. "Code compliant" is another way of saying energy efficient.

Engineering a good house isn't just applying a few rules of thumb and calling it
a day. In the case of a hot water heater, you need to look at the degree days
for the location and decide if it makes sense to have the water heater located
inside or outside of the thermal envelope.

In this case, we see far more "warm days" than we do "cold days", even with the
extremes of temperatures. Given the price of electricity (used for cooling) and
the price of propane (used for heating), it makes much more sense to have the
heater located in the garage. Any ancillary heat loss serves to keep the
insulated garage warmer in the winter and isn't fighting with the a/c in the
summer.

The insulated tank itself isn't going to freeze - it's heated! The lines,
correctly insulated and routed to the nearest insulated wall are likewise not
going to freeze.