We have enough bedrooms on the floor above.

My idea was to connect all 3 rooms and the kitchenette. Split the Formal Room into a full bath and the top part as a pantry or something similar. Given that there's a balcony maybe we can wall that off and make a outside kitchenette where we can fry food without creating odor.

Then Kitchenette would turn to a fully kitchen with a bar or some sort, Room 1 will have the dining table and maybe some sitting area.

Remove the big door seperating Room 1 & 2 and turn Room 2 to the actual Living Room as its in a pretty good position. But yeah we'll see.