If you get the right size, a conventional "tanked" water heater works jusy fine. Just get one with a good warrenty, easpecally if you have hard water, like my parents house does. (Yes I still live w/ my 'rents. No job = no money to move out!)
Anyway, our water is so hard, even with a softener, it ate though a heater in 7 years (one w/ a 9 -year warrenty!) When dad & I drained it, what came out of the bottom of the tanked looked like chocolate pudding.
Another tip, which my dad did, is install good ball valves (HD 1/4 turn shutoffs) and pipe fittings into the lines going to & from the heater. When you do have to replace it again, it'll make things simpler. Plus, the valve on the outlet (hot water) line will come in handy if you ever have to do any more plumbing around the house.