While I agree that finishing the basement sounds like a great idea, the fact is that when you live in a little house you have to adapt.

Here are a couple of listing pics from a house I recently tried to buy. It's only 750 sf, but the owner loved to entertain and she had the house well-arranged for it. The only dining table is in the kitchen and it seats 4, maybe 5 at a pinch, but look at how she did the living room:

It's a very tiny room (about 10 x 12), but there is seating for seven or eight people there, and every one of them has a place to set down a drink or a plate.

Thank you both!

@eld6161, yes! The ceilings are high enough. We had a contractor check it out and he said it would be a really simple basement to work in; it's laid out just right and there is no plumbing or anything to work around in the ceiling on the side we'd be finishing.

@writersblock, great point about needing to adapt. It's true, and is partly why we bought the house. We wanted to pick a house that wouldn't consume our budget, but that we could enjoy and use creatively. The ONLY regret is the lack of dining space, especially since my Italian wife likes to entertain and cook. We knew what we were in for when we bought it, but moving the living room downstairs to allow for a larger dining room seems to be a solution. And, I'm sorry that house got away from you! It looks beautiful!

Okay, so that answers one thing I was wondering about. If this is to accommodate extended family, how nimble are they all? Is putting the living room downstairs going to create mobility difficulties for grandma or anyone?

BTW, always jealous of basements. I live in FL so it makes me crazy when you northern folks talk about houses as being small. Try taking away the basement and attic and you'll see what small really is! :) As a friend of mine says, it's like getting double the space that we do.

Good point, @writersblock! Thankfully no, there would be no issues accommodating family with mobility issues. In fact, it would just mean we could hold MORE family members. Haha!

And I hear you! We have family in Florida, so I know I shouldn't take my basement for granted. :) It's nice to not just be on a slab! And, we're particularly grateful that ours is dry. No signs of water when we bought the place, and we haven't seen a drop over the last year we've been here.

It's funny how folks have different perceptions of the size home that they need. We're totally comfortable here (minus the dining space) but have a few family members and friends who look at us like we're crazy. I certainly don't regret maxing out our budget, tho! I prefer to live a little more simply.

I would definitely do the basement, then. You've lived there long enough to have a good idea of what would work for your family.

And as a basement-coveter, an unfinished basement always seems so wasteful to me, unless it's got a river in it every time it rains.

I currently live in 1100 sf, and I'm actually looking to downsize. It sounds like you've made a lot of good decisions so far.

Thanks so much, @writersblock! I appreciate that. And, good luck with your future house hunt!

Another thought: for entertaining in some seasons, make a big patio and got outside.

Basement refinish sounds good.

Moving the dining room to the living room sounds good. Is it big enough to leave the leaves out of the table most of the time, and have a small sitting area? And I'm sure the current dining room is just the right size for a den, nice for you everyday, and for guests who can't or don't want to take the stairs.

Good thought, @lazy_gardens! The only issue there is that we live in New England, so a patio space isn't useable for half the year. We DO still want to make one eventually, but we wouldn't be able to rely on it.

@bpathome, thanks! You're thinking what we're thinking. :) The living room now would make a nice, large dining space with plenty of room. It's open concept and runs right into our little, existing dining area, which we are thinking could then be turned into a little office nook. We have no space for that now, so it would be a nice spot to keep bills, our laptop, etc...

Basically, by finishing the basement we would gain a large dining room, office area, and a larger living room downstairs and second bathroom. The more I mull it over with you Houzzers, the more I'm thinking it's a good idea.

Adam I am thinking you are on the right track on this. Many times in our smaller houses we need to be creative with space and use it a little differently than originally intended. All is good if it works for you. Try not to be locked into what is expected. I have a couch/love seat in my dinning room as seating for one side of my table. People rarely come to visit but I use this couch often to sit on when I need my table for a larger work space for my art. It is more comfortable than the plain wood chairs at the table.

Love that idea, @shades_of-idaho!

And yes, I think half the fun of a smaller house is needing to always rethink, evaluate, and be creative. It also necessitates more purposeful purchases, filling a need rather than just a void.

Right Adam I am guilty of filling the voids too so now I try not to make them. The couch/love seat because I have had both at times on the one side of the table has worked out really well and it does give a nice sitting area for company while I am cooking and want them out of my way. It is also a nice spot for morning coffee.

And always keep your mind open to making changes as your life style changes. When my hubby was sick I moved a table and chair into our bedroom so I could be in there with him but not in bed. I left it in there because I find I use it for morning coffee , my first cup, when I do have company so I do not have to face them before I am ready. LOL I did consider taking it out of there now hubby is gone and putting a nicer chair in there and I might just do that too. I honestly love to change things up. Shop my house to make it look different and new and fresh to me with out spending any money.