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An instant hot water heater heats water on demand. This means that as soon as you need hot water, the cold water travels into the instant hot water heater, is heated up, and then delivered as hot water through the pipe. Like a traditional hot water heater, an instant hot water heater has a cold in and hot water out outlet. The hot water is released through a flow switch or valve. Therefore, when it comes to choosing an instant hot water heater, you will need to pay close attention to the flow rate as it is measured in gallons per minute, as this will determine how much hot water your unit will produce.