Rusty water has an aftertaste and is anything but aesthetic. It is not harmful to health if the water contains small traces of iron. However, it is possible that other, less harmless heavy metals besides iron may dissolve and enter the drinking water.
In any case, you should make sure that no long-standing water is used to prepare drinks or food. This means: if possible, do not use hot water, as it may have been a long time in the water heater, and let cold water drain a little before taking it out.
In the drinking water installation, however, rusty water can cause fatal damage. In corroded pipes, rust particles often come off and are flushed with the drinking water. The consequences are clogged fittings or malfunctions in technical equipment – including pipe breakes. And that can quickly become expensive. In addition, rusted pipes with their irregular inner surfaces are a breeding ground for bacteria. Hygiene problems are imminent.