Paradise found

The footprint of the 800-square-foot original structure remains largely the same. The kitchen and bathroom traded places, and the roof at the back of the house was raised to 12 feet. A wall was added between the den and living room to form an office.

A mudroom connects the original house with a two-story front addition. Upstairs is a 440-square-foot master suite; downstairs is the space they call the "lanai," where a wall of sliding doors yawns open to embrace the entire front garden. "I created several entrances and windows, so you can come and go lots of ways and always have a view of the garden from inside," Joe says.

For much of the construction, the couple lived in the unfinished front addition, with a hot plate for cooking and a tub for washing dishes. Within two weeks of moving in, Kalli became pregnant with Ocelli, and Joe took work on other job sites until their loans came through. Sharing downtime with Kalli and the new baby was rare. "I missed so many of Ocelli's firsts," Joe confesses.

But the results were worth the hardships. The home perfectly expresses Joe and Kalli's design philosophy: Find creative ways to make the most of what you have. The couple's proudest moment came during a neighborhood garden tour, when their resurrected shack was featured next to much more grandiose homes. "People's mouths dropped to the ground," Joe says. "This is what you can do when you don't have $2 million."

Next: Lessons learned