To create holes, use a brace and bit to drill through the flooring, and then a keyhole saw to widen the entrance. Make sure that the holes are not exactly above a floor joist when you drill them. In fact, the joists & studying must be spared as much as possible while installing the water heater equipment.
Having a house with a good interior and exterior decoration is something to brag about. Most people usually value one over the other, making the balance between to two, actually rare to meet.