Depending on your type of water heater, your hot water might be stored in a particular place or not stored at all. With a tank water heater, cold water is fed into the heater and then stored in the hot water tank until it is needed. Tankless water heaters don’t store hot water; when you turn on a hot tap, cold water is fed into the heater and heated almost instantly before it reaches the outlet. This means tankless heaters occupy far less space than tank heaters.