Thank you so much for your kind words, everyone. Houzz never ceases to delight, I am so glad I began this renovation even though it was an incredibly stressful journey at the time!! Here are a few more pics taken over the last 2 years.

There are hundreds of suggestions that can be made on how to update, renovate and re-design a layout to make it functional for you and allow it to respond well to the built environment. Engaging an architect or building designer at this stage may not be something you're willing to do, as spending money for plans on a house you don't own would not be the ideal situation. The issue with this is that the design phase of a project takes a lot of time and consideration. My best advice would be to play around with the plans and create some sketches, whether online or on paper. If you are happy with the possibilities then buy the property. Any house can be transformed, but whether or not you are satisfied with the transformation is a personal choice only you can make.

This is very similar to our floor plan (yet to start building) ... same as you we have our backyard to the north, kitchen to the east, dining table in the middle, lounge to the west. And we had the exact same dilemma where to put the couches. We decided on position 1 but in an L shape with a couch along the west wall and north wall. And we will have two arm chairs or ottomans in your couch position 2. We decided on this because it feels more open and didn’t want the TV to be a main focal point. Don’t necessarily want to see the back of the couch either.

Oklouise, do you mean like doing a self contained granny flat but attaching it to the back of the house and using a deck (indoor/outdoor living) extension on the original house as the roof/ceiling to the granny flat? That is a good idea that I hadn't considered. I think I would have to make the ground higher because I believe the rules have changed regarding minimum habitable ground level since the original house was built. The inside walls of the house are 2.7 metres and so there may be some scope to step up to the deck addition (not sure how this would look though...not ideal). It could end up getting quite expensive doing the extra downstairs room as appealing as it sounds. Most additions that I have seen on Houzz appear to work out at about $3000 per sqm (a lot more than the $1500 per sqm that is often reported generally). I keep thinking of having the planned ensuite just a walk in robe in order to avoid having a deck backing onto a bathroom (and to keep costs down), but I doubt I would save much by not doing the second bathroom given that the plumbing for the second bathroom is largely just an extension of what is happening for the "main" bathroom.