Water Heater

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Yes, I think it is safest outside, especially if it won't freeze. Because the thing is a big reservoir of heat, I wouldn't think that would be a problem in a mild climate, even if the temperature dips once in a while. If there is an enclosure for it, that should protect it pretty well, I'd think.

Once it wears out, if it ever does, you'll have to think about it some more, but if the thing has been there working that long, we should all come and admire it.