Sub Panel requirement

[Russell]

I am helping my sister convert her garage to a living room. She has a total electric house with a 200 Amp service. She currently has a 42 gallon electric water heater (leaking) and is wanting to swith to a tankless electric (instructions state needs three 40Amp circuits 26.85 Kw). I was thinking about adding a sub-panel in the addition (approx 50ft run) to supply power to the water heater and all other circuits in the new addition for lighting and recepts (probably three 20 amp circuits). What Amp rating sub panel do I need and what wire do I run?

Thanks for all the help. :)