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Alright folks, here is the damage:
Sander Rental: $100
Used Sandpaper: $ 80
Polyurethane: $ 60
Tools: $ 20
Total: $260
Not too bad for a project that will probably add a couple thousand to the resale of my home.
I decided in our case not to stain the floors. I wanted the wood to stay lighter and the sun will allow it to darken a little over time. I went straight to the finishing. If you are going to stain, make sure you let it dry and then finish sand in between staining and finishing. Also, odors are a big concern, check out the lines of water-based stains, the odors are kept to a minimum and they still do the job. You will still need good ventilation though. On to the finishing. Follow the directions, don't shake finish, it will create air bubbles that are hell to sand out once it dries. I like to use a paint roller for the first 2 coats. Go for a small nap or even better a foam roller. The floor will soak the stain up so expect to go through quite a bit. I bought 2 gallons for a small bedroom. I used Minwax semi-gloss and it worked very well. If it is in your budget, spring for something that is made for floors. Again, Minwax makes a great water-based polyurethane for floors. You want to make sure all the dust is up by wiping the floor with a tack cloth and some mineral spirits. Then you start rolling the finish onto the floor. Maintain a wet edge. After each coat sand and then remove the dust. For the last coat I like to use a nice lamswool applicator. It will flow the finish on smoothly giving great results.

Sanding is the most important part. I was trained as a furniture builder and finisher in a high-end furniture shop and I can tell you that from my experience you CANNOT get a good finish without a good sanding job. This means you will have to be patient. Follow the directions, always work with the grain, and start with a higher grit sandpaper than you think you need. For really bad floors I would start with 80 grit, if they just need a light going over you are best to start with 150 and up. Don't be afraid to go to higher grit at first, you want to get comfortable with the machine and the way it moves before you start taking layers off.
Don't stay in one spot too long. It is tempting to try to grind out the trouble sopts, don't do it. You might not see it now, but when you lay the finish down you will have a nice divot that isn't as smooth as the rest of the floor. Keep the machine moving, use a light touch, and always go with the grain. You will see some sites that tell you to start at a 45 degree angle to the grain for the first pass. DON'T DO IT, you most likely do not need to take off as much as you think.
I start with the 80 grit, move up to the 150 grit, and then hit the whole thing on my hands and knees with a hand orbital sander at 220 grit. This may seem excessive but trust me it works wonders for the finished product. I go as far as to hand sand with the grain after the orbital, this takes out the little spirals. Trust me, that is extremely anal, you don't have to go that far.
Another beneficial piece of equipment is the edger, also made by Silver Line. This baby works just as well as the drum sander. Both of these should be available for rent somewhere near you. Check the link for information on the SL-7 Edger.

Here is a picture of the floor sander we rented after the first pass. It is a Silver Line SL-8 drum sander, constant 1800 RPM with a soft drum to keep it from gouging. I'll tell you this is one sweet machine, and easy to use too. My wife (again all 100 pounds of her) had no problem man-handling this 115 pound beast. Check the link to get the manual and presentation.
http://www.essex-silver-line.com/sl8.html
Here I have posted a picture of the floor one the carpet and plywood was pulled up. We have not started sanding yet, so you can regard this as the before picture. Here you can see that the old floor has a nice tone to it but there is some kind of white splatter all over it. I am not too worried about that as it will sand out probably with the first pass.

If you are lucky, you already have hardwood floors showing and you can simply clear the room and go to work. If not, you have some demolition work to do. Now don't get too discouraged, demolition is the fun part, so much fun in fact that I like to sit back with a beer and the camera and let my little 100-pound wife loose on it with a crowbar. Let me tell you, letting her take out some aggression on a part of the house is not only fun to watch, but quite good for a marriage.
In this picture you can see my wife putting the smack down on the plywood subfloor (after already ripping the carpet to pieces and heaving it out the window into my truck). You can also see the "nice" hardwood floor that was hidden beneath it.

The first project that many DIYers often want to take on is the refinishing of hardwood floors. This at first can seem like a daunting task but honestly is not that bad. I have done it in 2 of my 3 bedrooms and can assure you it is very easy.
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