If your end goal is to sell this home for a profit, I would not eliminate a bedroom. Keep it a 3 bedroom, remove the wall between the kitchen and living room (you'll have space for a dining area), and enlarge the bathroom.

If you really want to "do it right" get an architect and his structural engineer out to look at your place. (Ask for a consult for a flat fee.) I believe the space can be reworked much better than you have pictured here. When your home is very small you need to be able to open it up to the exterior.

Shirlpp: interesting idea. That could work. I will definitely think of this

Smitrovich thank you for confirming my suspicion. Losing a bedroom is not the best idea. It's too bad this layout is not easy to facilitate door out to the back

Chifflipper: I imagine an architect would be quite expensive but that may be a smart idea

Option 2 would be a one bedroom. When you eliminate a closet, it then doesn't qualify as bedroom. Cutting out one bedroom really drops your resale value. Removing wall is good idea, but you will need an engineer (structural) to determine if that wall is "load bearing" wall. (Wall holding roof up!). Plus you don't know what mechanicals are inside that wall. What did your pre-purchase inspector tell you?

Flo mangan: Good points. I forgot to add that we will build a new closet in bedroom 3. The wall between kitchen and living room is not load bearing. Ceiling joists are running parallel with this wall. There is one plug in this wall which we will lose but are OK with.

How fun! I love old bungalows. What is between B1 and the kitchen? Could you expand into it? Also is there a laundry room?

Snowbunny: Yes we are pretty excited about it! The stairwell to the side landing and basement is between the kitchen and bedroom 1. It could possibly be expanded into. Although we would have to have a bannister around the stairs.

There is no laundry room currently. The washeor and dryer are in the basement, which is not developed. Yet. We will be adding a second bath, entertainment room, and a bedroom down there as well as a finished laundry room

Fantastic! If you're planning to add a bedroom downstairs eventually, I think you could justify turning B2 into dining and opening to outdoor space. Otherwise I would also worry about the resale value.

Sounds like you have done your homework, so have fun! Lot of work. One more suggestion. If you do finish basement, make sure comps in your area will support that level of investment. Might consider just doing a finished area for nice laundry/craft area. Good luck!

Snowbunny, yes that is good point. With a bedroom downstairs I would not be going from a 3 bedroom to 2, but rather a 4 bedroom to a three. Albeit one in the basement. Maybe I should have included that in my original post!

Flo, yes it will be a lot of work! I'very been working in construction about ten years now so it's nice to be able to finally work on a house that is mine. It doesn't feel so much like work then

Pick one the bedrooms to be your master and put a single French door to the backyard in it.

Definitely check to see if eliminating a bedroom but adding one in basement would not de-value your home. I would not buy a home that I'd have to put one of my kids in the basement in. This sounds like a first time homebuyer neighborhood, so be very careful.

Yes, designers and architects cost money, but they save you money, too.

Personally, I would not want a bedroom in a basement. Could you expand your footprint to add onto back of home? Would neighborhood support that in terms of resale comps? Since your are actually "flipping" all these cost factors need to be considered carefully. With your background you are ahead of the game. Just hard to keep "appetite control" when you are doing this type project. BTW, factor in having some work done by subs, because you will be working night and day otherwise!

Yes, the fun part of working on your own home does not last forever. The work does, though.

Kris: I can certainly see having a bedroom upstairs vs downstairs being better with kids. And yes it is in an area probably attractive to first time buyers with young families. Good point. And yes at some point work is work lol

Flo, basements in this city are commonly developed, and generally valuable, although not as valuable as above gound living space. It was difficult to find comparable homes in this area without a developed basement in fact, but similar houses with basements developed were generally about 35% more. But you are right I will have to look into it carefully to make sure it is worth it. An addition is a possibility as well. I'm too cheap to hire out subs, but I will be calling in favors from friends I guarantee you haha

I think you will have a very successful project and ultimate financial winner!

I hope so! Thank you