The first time I drove up the winding driveway of my potential clients' home, I was struck by how the quaint 100-year-old cottage nestled perfectly in its beautiful setting at the top of the hill. It's nice to see a house that's in harmony with its surroundings, so I was pleased that the owners had already decided that any renovations they did would not alter the exterior (1).

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Their goals were clear: create a master bedroom, a child's bedroom, and a bathroom, all on the second floor. It sounded simple, but looking at the small unheated area upstairs, with its uninsulated 2x4 rafters, old drafty windows, and narrow knee-wall spaces (2), I knew I had a design challenge in front of me.

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Replacing the windows would be easy, and I knew I could add new roof framing members to address any structural issues and make room for adequate insulation. Removing an old, unused chimney would reclaim a few square feet and also provide a chase for bringing heating ducts up from below. But fitting the bath was going to be tricky. Using a corner tub-shower unit helped, but it wasn't enough. Stealing space from the already-small bedrooms wasn't an option, though I knew I could build over the first-floor landing of the existing stairwell, which was open all the way to the second-story ceiling (3).

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Then it hit me: By stepping up the ceiling over the stairs to mirror the treads below (4), I could provide the headroom needed for the stairs and gain another couple of feet inside the bathroom (5). I used these "steps" to bring in the plumbing for the sink (6), then hid them inside the vanity cabinet (7, 8). The homeowners were delighted with the end result - a small but functional bathroom, with custom tile and floor heat.

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We also pushed out the knee walls a few feet (9). While this doesn't provide additional walking space, it makes the rooms feel larger (10) and helped with closet space (11). The homeowners are still discussing how to use the nook at the top of the stairs (12); with its new windows overlooking the front yard, it will be a cozy setting for reading or a small office.

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The remodel cost $30,000, with the homeowner doing most of the demolition.

Stan Yoder and his son Luke operate Yoder Construction in Angola, Ind.