Hi, I think adding a sliding panel to divide this large area would be good so you can some privacy when needed.

Do you want a bed, a murphy bed or a sleep sofa?

Probably a bed, sofa or day bed. Since there is a lot of space, I don't think we need to hide the bed with a murphy bed. We're not 100% sure....completely open at this point.

I typically have issues uploading from my computer, so let's see if this works...

let's try that again...

second try...

Ah ha! It worked! There is hope for me yet :) I have a second layout for you too but have to run right now, hopefully you can understand this one.

wow thank you, can't wait to see the next one too :)

I like the way Mackenzie gave you some closets. Here's another way to do it, using a queen size bed, but alas, no closets.

very cool

Here's the other layout I did. The benefit of this one is no construction and the sofa/bed as well as desk are orientated to what I assume is the backyard? The dresser in this option also serves as a reading table and in both layouts I am suggesting a mirror on the wall next to the door (for guest's use and to reflect the natural light coming in from the window). Of the two, my personal preference is for the one with the closets. Guests don't need much hanging space (just a bit and a place for their suitcase) and the other would come in very handy for files and other misc. office supplies, printer, etc. In both options I think the family would get use out of the space when there are no guests staying over.
Nice to have an "extra" room that is so large!

Hi Mackenzie, thank you so much for both options, both are really great. We are on a budget (aren't we all?) so perhaps the 2nd (with no construction) will suit us better. Both are wonderful!
ps - the room is only "extra" as it is just my husband and I for now, and this is our first house :)

Forgot to mention...if you wanted a TV in the space: in either option I would suggest wall-mounted above the desk (could do double-duty as a computer monitor). In option 1 it would be hinged so that it could be comfortably viewed from the sofa.

Congrats on your first house! To make Option 1 more budget-friendly...IKEA! Buy wardrobes (from anywhere, doesn't have to be IKEA) and put them in yourself :)