James Wan

Director James Wan, left, and Cary Elwes on the set of "Saw." (Greg Gayne / Lions Gate Films / September 12, 2013)

Although he may not be a household name, director James Wan is suddenly among the hottest filmmakers in town.

His $20-million thriller "The Conjuring," released in July, grossed $260 million worldwide, and on Friday his "Insidious: Chapter 2" hits theaters and looks as if it will open a strong No. 1 at the box office. On top of all that, he started production this week on "Fast & Furious 7," taking over the blockbuster franchise from director Justin Lin.

By almost any measure, that's success. But given where Wan's career was just a few years ago, his current status represents a particularly remarkable change of fortune after back-to-back flops.

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Coming off his hit 2004 directorial debut "Saw," a horror film that had a budget of just $1.2 million, the Australian filmmaker was hired to make two genre films for major studios in 2007: Universal Pictures' "Dead Silence" and 20th Century Fox's "Death Sentence," both of which cost more than $20 million to produce.

The two films combined took in less than "Saw" did all by itself, and both studio efforts were savaged by reviewers. Where other directors might have retreated to some deserted island, Wan instead returned to his independent film roots, giving up money for creative freedom. He restarted his career with "Insidious," specifically designed to be made free from studio shackles.

"I was very mindful of what I could do on a small budget," said the 36-year-old Wan, who has relocated from Los Angeles to Atlanta, where much of "Fast & Furious 7" will be filmed. "And that was to have full creative control and make the movie I wanted to make."

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Shot for just $980,000, "Insidious" was initially rejected by the Toronto International Film Festival in 2010. Bowing to pressure from producer Jason Blum, festival programmers gave the haunted house tale one of the last (and worst) slots in the festival's Midnight Madness section, and the few distributors who were still in Canada greeted the thriller with a collective yawn.

Sony Pictures Worldwide Acquisitions was the only Toronto buyer vaguely interested in the film, starring Patrick Wilson and Rose Byrne as suburban parents who might have picked better real estate.

Sony spent several hundred thousand dollars on reshoots, and when the film was released by its partner studio FilmDistrict in April 2011, it trounced many higher-profile competitors that month, outperforming "Hanna," "Arthur," "Your Highness" and "Soul Surfer." "Insidious" grossed more than $54 million domestically and $97 million worldwide.

"I made 'Insidious' to remind people that I could make an old-school movie that hearkened back to suspenseful storytelling," said Wan, who co-wrote the film with his "Saw" screenwriter, Leigh Whannell.

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Wan said he was more focused on putting distance between himself and the "Saw" franchise than making people forget about "Dead Silence" and "Death Sentence." Wan left the "Saw" series following the first film and didn't direct any of the subsequent movies, which have been criticized as gratuitously grisly. "Insidious" and "Insidious: Chapter 2" are both rated PG-13.

"I like to say I just directed the pilot," Wan said of the "Saw" movies, which, with the seventh installment, 2010's "Saw 3D," finally ran out of gas. "For better or worse, you get what comes with it. If it weren't for 'Saw,' I wouldn't have a career."

Wan said Kevin Bacon, his star in "Death Sentence," gave him career advice that kept him hopeful even after his two box-office duds.

"He told me when I was making 'Death Sentence' that there will be bumps along the way — ups and downs — but always remember what you are capable of," Wan recalled. "He said it in passing, but I really took it to heart."

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In Wan, producer Blum said he saw not damaged goods but a director with great upside: Wan had a few movies behind him, so he wasn't green, yet he was as hungry as a newcomer to prove himself.

"Obviously, he's massively talented, but he was undervalued," said Blum, whose track record in low-budget horror includes "Paranormal Activity" and "The Purge." "He's got great instincts, and he clearly sees the movie in his head before he shoots it, and the scares are all choreographed. He works quickly but is still great with actors."