These tend to work fine down to -25° C or so ambient temperature (you lose some efficiency below -5° C or so), so should always be outside. Obviously you need an alternate source of water heating if you live somewhere where it routinely gets below that, but even in a lot of places like that you could set it up to use the heat pump 90-95% of the year and a cheap but far less efficient resistive heater for the very cold days, and still come out far ahead.