I would get the best warranty and most efficient unit you can afford.

I would also consider going electric for one reason. The Marathon hot water heater. It is made by Rheem/Ruud and has a poly (plastic) tank and LIFETIME warranty on the tank and anything that has to replaced can be replaced without much difficulty. How bout the peace of mind of never having a tank rust out and flood the house or basement. These are also very insulated. I will be installing one after the holidays and will never lug another tank up the basement stairs EVER again!

Here is a link that might be useful: Marathon water heater

I would recommend you check out the Rinnai tankless waterheater if you have 2 bathrooms and no issues with lime deposits. The R75LSI is a wall hung unit that uses outdoor air for combustion and direct vents oudoors without need for an expensive chimney. The efficiency is in the 90% range and modulates the burner using only what you need based on use. I can run both a bath and shower at the same time. Does not run during night like a tank style. Only small drawback, if your sink is far from the heater, you have to wait a minute to displace the cold water in the pipes. Saving paid for itself in first 2 years. The heat exchanger warranty is 12 years, parts 5 yr, labor 1 year.
I have used this for over 10 years now with no issues. Check out the website at www.Rinnai.us

Sure go electric, it only costs about 3 times as much to heat the water. Countryboymo - what are you thinking? This is assuming the fuel is natural gas.

With a 80% efficient unit, you are probably spending $200 a year on hot water. A 90% will save about $20 a year.

Tankless saves a bit more - on the order of $50 a year using NG as your fuel. I don't know what moonwandrr is thinking for payback in 2 years. Typically tankless is about $1200 and a tank unit is about $500. So I would guess a payback of 14 years. The install on a tankless can be considerable if you currently have a tank system.

People really need to check #'s before making claims. NG is so cheap on a btu basis that more efficient options are not cost effective and switching fuels is CRAZY!

Tankless propane vs tank style propane heater.
the newer propane and natural gas tank waterheaters are required to be equipped with safety components which has driven the price of gas-fired tank style heaters up in the past couple of years. List prices around $800 for a 40 gallon good for a family of 2-3. Tankless already have the safeties in place and list for $1200 for the unit.
If an "average" family of 3 uses 30 gallons of gas a month thru a 70% efficient tank style , the tankless at 84% efficiency would use 24.9 gallon of gas per month. At $2.50 per gallon of LP the savings per month would be $9.75. In 41 months the savings has paid the difference. The warranty for the tank is 6 years, the tankless exchanger is 12 years. The savings over an electric tank is vastly greater.
If you burn Natural Gas, the cost to operate is even less. I hope all this helps.
I have installed Rinnai, Bosch/Aquastar, Tagaki, Thermar, Saunier-Duval, Paloma tankless and Bradford-White, State, Rheem/Ruud, American, Master Mechanic, Sears tank style waterheaters for over 20 years. Rinnai excels over all the others. The vent is simple and the only caution is against a high mineral/lime content in the water. And the factory support is the best in the industry.

Thank you all for your feedback! I apologize for not being able to respond before but I did read through all of the feedback. We decided to keep our existing setup with a chimney as changing that was too expensive. We upgraded to 85% efficiency boiler and a 50 gallon water wank as tankless also turned out to be too expensive to pay for itself in reasonable amount of time.