The heat is already gas, so adding a gas hot water tank may be the best choice. You can price those from Sea rs, Lo wes, Home de pot, and from local plumbers. A forced hot air heating system may be more hastle to fit for a tankless than it is worth. There are some pretty good hot water on demand systems that you can research, too.
Flood Insurance may not be required on this property. You can see a FEMA map if you go to their site and search by address. It appears to be in a Zone X.