I'm considering replacing my 40-gallon gas water heater with a tankless system in my Southern California home.
Tankless is a great option. Gas was, and for the most part, still is one of my first choices for domestic hot water. You'll need a plumber for both gas and water connection and installation.
I just recently discovered a "game changer" for the electric option. A new technology, called "Quartz Far Infrared" that boasts ultra-high efficiency. One of the byproducts of this technology is water softening. See their products at http://supergreentechnologies.com/