How do you know how high to place an outboard engine?

On the lower leg of the motor, just where the gearcase bolts on, you will notice the anti-ventilation plate. Just above this plate, (the "plate" resembles a flat, horizontal fin), many motors have a second plate. You'll want to hang the engine where the bottom of the boat falls between these two plates. You can go a little lower than this, but not where the boat bottom falls below the bottom plate. This will likely cause cavitation and or engine overheat.