What to do with the "spare room"?

My spare room "before" (painting and installing new floors):

Although I bought a 2 bedroom cottage, I only really NEED 1 bedroom. I'm very mindful of the fact that if I leave this room as a "spare room" it will turn in to a junk yard - I've seen this happen in many homes. So considering that my kitchen/dining area is so small, I have decided to turn this room into my living room - my living room in turn will serve as my dining room.

What I have to work with...

I was very lucky to have purchased a "delightful row cottage" close to the CBD. It's not my dream house by any means, as it's a bit too small, but it's the perfectly sized property for my first project.

Here are the plans:


This property ticked *almost* all of my "want" boxes when looking to buy my first house. I didn't hesitate when putting in my offer.

It features:
• character (the main part of the house was built in 1900);
• two bedrooms;
• a little courtyard;
• off-street parking for two cars (one under cover!);
• air conditioning (be it evaporative); and
• high ceilings.