Hello! I am requesting home renovation/design advice!

Last year we purchased a 3/2 two story 80s ranch house. It is built into side of hill so 1st floor is considered a basement. I believe it is called a walk out basement. It has numerous windows, an exterior door and an extension of the foundation concrete making a 1st floor "sitting area" outside. The 2nd story porch covers this sitting area.

We are in need of another bedroom. Currently the master suite is upstairs (as is kitchen/living/dining combo) but I would like to use this as a guest suite/office while converting the bonus room downstairs into a master suite. Due to lack of storage space I think we will have to enclose the outdoor sitting area for closets and possibly master bath.

My dilemma is this: Basement renovations will not appraise at full value (below grade versus above grade) so I need input... Is this a bad idea? At this point, I think it has pros (family bedrooms on same floor as laundry so not trips up and down the stairs with baskets and no longer using master bath as guest bath when entertaining) and cons (only one small bathroom downstairs which also needs renovation and losing bonus/play room).

Thoughts? Suggestions?