I guess I'm in line for a commendation! Read it, understand it, probably can't advise you on ROI. Personally, I would NOT combine a laundry and Powder Room into a single space - especially with the tight fit you describe. If you want a Powder Room, consider relocating the laundry to the basement. I suspect an additional bath and private master bath would be more appealing to potential buyers whenever you sell. Finish the basement in the future as needs/funds permit. I'd suggest speaking with a local realtor. Just draw a couple sketches and stop at an office. They'll get a future lead and you'll get some market advise to aid in your decision. Good luck.

I agree, if you say that within that space you will have to turn sideways to move about... I think I would come up with another option. That's going to get old fast with moving laundry in and out and sorting clothes. I agree that finishing the basement sounds like a win win and if you complete that space you could send the bulk of your guest down to use that bathroom. I have seen washer and dryers placed inside the MB bathroom or closet maybe that is an option. Maybe you could put the W/D down in basement but I would want a laundry shoot and a way to easily move it back upstairs.

I agree with Palimpsest's suggestion of making it a 3/4 bath (i.e. a full bath with a shower instead of a tub). That would let you shrink it so it doesn't eat into the LR, and create more separation, but it will still list as a 2BR/2ba on any real estate listing. (I've never seen "1.75 bath" in a listing--a full bath is a place where you can wash yourself, and whether that's a shower or a tub it's still a full bath; AFAIK people just call it a 3/4 bath to be more precise, but a realtor's still going to call it 2 bath). I think the 3/4 bath idea will accomplish both of the things you want to accomplish here. It will let you shrink the space and give it more separation and privacy, but it will still keep your house technically as a 2BR/2ba, so when you're trying to sell it, potential buyers won't automatically cross you off the list as soon as they read "1.5 bath" in your listing. Also, maybe this is a stupid question, but not seeing your layout I can't be sure. So here goes: Is there any way things can be reoriented in that bathroom so that it doesn't open directly into the living room? What are the other walls adjacent to, and what's nearby, and where is it at least theoretically possible to move the door to? Could it possibly open into a hallway?

Could you move the laundry room down to the basement and thus allow more space for the 1/2 bath upstairs(and for the laundry room downstairs)? Or spend your money adding the 2 half baths and moving the laundry room, and just semi-finish the basement. i.e., paint the cinder block/concrete walls, lay industrial carpet, intall a drop ceiling, and partition with furniture instead of walls. I had a realtor tell me once that the best ROI for finishing basements was to semi-finish them, as above. He said the fully finished ones didn't pull in as high a % of the investment. But you should verify that with a realtor in your local area.