Where is the house located? When you look at similar comps in the area, what are you seeing in terms of sales price between 3/1 and 3/2? Honestly, I wouldn't consider a finished attic space with low clearance a bedroom, even for a child. Is there an adequate egress window in the attic space? Does the space have a closet? If the answer to either of these questions is no, then in all honesty, you're really comparing a 2/1 to a 2/2.

Is the 7’7” wall deep enough for a closet?

It probably is just a 2 bedroom. And the 7'7" wall coould be a closet but I'm concerned the room would get real narrow and make it hard to do furniture layout

You know yourself best, but I would want a second bathroom, even a small 3-piece, and I'd be willing to give up some closet space for it. Nothing about resale - this would be what I'd want for my time in the house, and any resale benefits would be icing on the cake.

I favour option 2.

First is the attic space even actually deemed living space ? Seeing one space does not tell us the whole layout of the house . Where is the only bathroom in realtion to those spaces ?

If this is an investment, are you planning on renting it out? Have you compared rentals in your area for 2/1 vs. 2/2?

I like a second bathroom. I dont care if it is inside the bedroom. for a small house, even a bath on the first floor is valuable maybe more so.

Have you priced out the cost of a second bathroom. Is the house on a slab foundation? Talk to a good contractor.

Nowadays people practically demand an ensuite bath at every price point, so I think Option 1 is out. Options 3 and 4 have closets with the depth of a reach-in, but doors like a walk-in. It would thus be hard to reach things that were stored in the closet corner furthest from the closet door. I think Option 2 is the best compromise. Best wishes for your project.

If my house were only 1200 sq ft, I would not expect a large bath. I would make it a 3 piece with a 46 x 32 shower, toilet and vanity. Be happy you have an en suite in a modest home! Put a little more emphasis on the closet.

To answer various questions: I may be renting it out for a bit but will be selling in the medium term. Located near Seattle. The attic is not an official bedroom, no closet, but is outfitted to be an optional kid's room. Single story living space with an attic plus a basement. Here is the floor plan of the house.

^^

So.....it is a bedroom with NO windows as all your first renditions? Folks, nobody cares about sq feet, . Only the walls and windows and other "fixed" openings matter, The size of the windows can dictate other issues

Post a fully informed current condition and include the window sizes, width....and placement in the walls.

What is the basement like ? IMO put another bedroom and full bath maybe in the basement . With a nice playroom for kids . You might be able to squeeze in a 1/2 bath for the main bedroom but I would prefer an closet to a 1/2 bath Make the full bath nice

Yes there are windows as you can see in the image I just posted. These layouts are things I mocked up on excel, not detailed architectural drawings so they are to scale but don't include every detail. Does the existence/size/location of windows determine whether or not I should keep the closet or convert to a bathroom?

The basement is unfinished. I am going to finish it into a 2BR/1 Bath with a kitchen and own w/d so that the two floors can exist either as a single family home or separate units. The bedroom may be better off keeping the current configuration, but my mockups would be for a 3/4 bath.

Including every detail is key to getting great advice.

Makes sense. Do you have advice for this project or what extra details would you need?

Looks like the existing bathroom is a decent size. How about splitting it into two where one has access from the hallway and the other from bedroom 2 and make that the master. Then split the bigger bedroom into two bedrooms for a 3 bed/2 bath home. Just need to make sure to have a closet and window in the 3rd bedroom as well.