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This is an on demand water heater, often called an instantaneous hot water heater. If you are losing water from the delivery (faucet) side, the boiler should be alight. Wherever the leak is from, you must be able to see it, unless you are on a water meter and observing the loss there. In which case you have a broken service pipe between the meter and the house.
Sounds like water leak.
For example, broken pipe... or water running out of TP valve.
That would explain variable hot-and-cold water at tap.
Turn off all taps, and observe if water meter is registering water usage.
Sounds like the heater core is blocked and not circulating hot water. Uncover the heater core under the dash, little radiator. Get the vehicle to running temperature, turn the heater on and feel if the little radiator gets hot. If not then something is blocking the water circulation. Either the heater core is broken or the lines are plugged coming in or going out from it. Typically it is the core that is broken.
2) Low temperature setting, extremely cold incoming water, Water leak or broken pipe running hot out of tank, crossover caused by bad faucet cartridge or bad recircirculation check valve,, bad gas control valve thermostat.
Any exhaust air coming from the gas water heater is potentionally life threating. I would get it fixed. Do you have a CO2 meter close by the water heater? If it is leaking air back into the house that has CO2, after a certain amount the alarm will go off. If you dont have one get one. A must have with gas appliances.
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