Cut out the drywall above the damaged or rotted area of the plywood subflooring using a drywall saw. Measure up 1 to 1 1/2 feet from the floor and cut the drywall section. Extend the section if necessary to ensure there's a stud behind the cutout piece. Remove the drywall cutout and set it aside.
Cut through the nails on the wall's base plate with a reciprocating saw. Cut through the base plate on both sides of the damaged subfloor.
Slide the grooved section of a nail puller under a nail that holds the cut base plate to the subfloor. Gently pound the groove to set it under the nail head, then pull it out. Repeat this process to remove the remaining nails in the section of the base plate. Once free, carefully slide this cut section of the base plate away from the wall.
Use the hammer and nail puller to remove the nails that join the rotted subfloor to the floor trusses. These nails are typically inserted every 6 to 8 inches along the truss.
Cut out the rotted subfloor section using a circular saw adjusted to 3/4-inch depth. Use the subfloor’s nail holes as a cutting guide.
Use a pry bar to loosen and lift the rotted subfloor section from the trusses, and set it on a 3/4-inch plywood sheet. Use a pencil to trace its outline on the plywood, then carefully cut along the lines using a circular saw.
Spread adhesive over the top of each floor truss with a caulking gun. Place the cut plywood on the floor trusses, pressing it so the glue adheres to the surface.
Use an electrical drill to drive a 1 1/2-inch deck screw every 8 inches along the plywood to secure it to the trusses.
Slide the section of the base plate you removed previously into its location under the wall studs. Drive a 3-inch deck screw to secure the plate to the plywood subfloor. Also, drive 1 1/2-inch deck screws to attach the studs to the base plate.
Replace the drywall section you removed in Step 1. Use the cutout drywall section if it's not damaged, or cut a new piece that matches the dimensions of the piece you removed. Set the drywall cutout over the hole, and drive a pair of 1 1/4-inch screws through its sides into the studs.
Spread a 1/8-inch-thick layer of drywall compound over the joints with a drywall knife, then lay a drywall mesh tape over it. Cover the tape with compound and leave it to dry. Spread another thin layer of compound over the sides, extending it several inches beyond the edges. Leave it to dry before you smooth any rough edges with sandpaper and cover the repaired patch with touch-up paint.