Parquet hardwood floor water damage: repair or rip it out?

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I have a property with extensive water damage on parquet hardwood flooring as shown below.  The property is about 1000 sq ft and I have three water damaged spots like the one shown in the pic.  The hardwood is lay on top of concrete slab, and this is a ranch singly family house. 

What I am trying to do is lay vinyl plank flooring. Originally, I was trying to lay on top of parquet hardwood but found this water damaged part. So looks like I can take different paths:

1. Rip out entire parquet hardwood and lay vinyl plank flooring

2. Somehow figure out how to repair the parts that's damaged and lay vinyl plank flooring

3. Somehow figure out how to repair the parts that's damaged, and refinish hardwood flooring

Which option do you recommend?

@Roy C.

That's oil-based poly finished oak parquet. I would repair and refinish, and this is how I would do it.

It looks like the good stuff, 3/4 in thick. The first thing I would is remove any loose wood. Then I would take my 4 x 24 belt sander with an 80-grit belt in to that area and sand slowly until I got down to bare wood.

I would then use my trusty pry bar to rip up any additional pieces that are too heavily damaged to salvage and throw them away.

I would then measure and cut pieces to replace the missing pieces out of 3/4 in. oak boards with fine-cutting blades in my table and miter saw. If the wood is thinner, I would use thinner boards. Do NOT use oak plywood, oak-look whatever, or any other kind of wood. Solid oak, custom-cut to size.

I would glue those pieces in with heavy-duty construction adhesive. Do a bead on the back and spread it out to cover the entire back surface with a chip brush. I would allow the pieces to dry.

Next up is to use wood floor filler to fill in any small gaps between boards and pieces. I use Rust-oleum Parks because it's cheap, available, and matches nicely. It will also fill in the nail holes you'll have left over after you pull those tackless strips.

Then I'd sand the entire floor down with 60-grit belts in my belt sander. No more Mr. Nice Guy.

Then it's three coats of oil-based polyurethane, a 1/2 strength sealer coat and 2 full-strength coats. I use the cheapest oil-based polyurethane I can get, Rust-oleum Park, and a three-inch white natural bristle paintbrush. It will take time but it will be worth it. If this is a property you're selling, use gloss polyurethane. If this is a property you're renting, use semi-gloss. WEAR A RESPIRATOR WITH ORGANIC VAPOR CARTRIDGES.

The new stuff will usually blend well enough into the old stuff to pass muster, especially on a parquet floor with all the variations in shading. If it doesn't, load up the belt sander with 100-grit,  sand the problem area again enough to take off the poly, stain the wood lightly with an oak stain (usually the best stuff for faux-aging oak will be marked "golden oak"), and poly it up again. If it's not dark enough, sand the poly off and stain the wood a bit darker. With enough practice, you'll reliably be able to make replacement strips in strip and parquet floors match closely enough to fool anyone.

I love solid wood floors. I know a lot of people swear by laminate and vinyl floors in rentals, but only tile will match up to polyurethaned-in-place solid wood for durability, versatility, repairability, and pathogen resistance. Of course, if you have to pay a contractor to do it, the costs of this detail-oriented job will be very high and you can be sure he'll never take the time to do it as well as you could.

If you do choose to pay a contractor to do that floor instead of doing it yourself, just break out all the bad pieces, glue in patches of any 3/4 in. wood with the construction adhesive as described, and cover it all with vinyl plank flooring.

You don't need to rip out that entire floor to lay vinyl plank flooring over it.

Good luck to you.