What does your local zoning board say about a secondary living structure being allowed on the property? What bank is going to finance this? What utility company will hook up to this?

It's horse, cart, not cart, horse.

It's allowed and I'm financing it. I live in an area where it is cheap to build. I don't need financing. I've got the money for all the fundamental stuff and getting a bathroom put in. Then I'll finish things out on the inside over time. Building secondary structures is easy to get away with here with the zoning. I've seen lots of people build a shop to live in until they can build a house. Both here and other places. Pretty common practice. (Sounds like maybe this is a foreign concept to you.) It is allowed I checked. It'd be like a tiny apartment.

As far as your horse cart idiom, I've got things in order. I'm asking about what I'm asking about.

There's a beautiful home on the way into town...and they lived over their shop, while they built the home.

They are in an area with VERY nice homes (on small acreage...maybe 5 or less) and even their shop is fancy! :)

Now that the home is done, we all speculate that the living area above the shop is probably a party room. Great place for football games! And what a view.....looking over a creek and a steep hill with pine trees.

I got lucky. I finally found a useable lot. It has a pretty good slope to it and needs a lot of work but there are no restrctions where it is plus I can get a high speed internet line put in. People hear the word shop and think some little shante of a shed. Shops can be nice!

Will there eventually be a single family house on this property? If so, and you will you have a septic system you might want to check into how the sizing of the system works in your area. My brother was considering a small place to begin with and then a larger house and found out it would complicate the sizing on the septic system. It was not as simple as a 1 bedroom now plus a 3 bedroom later equals a 4 bedroom size septic.

For the layout of the living area, have you tried searching for house plans in the dimensions you are considering?

Thanks, I'm actually going to check on the septic. I was wondering how big it was and if it would suit me later.

We considered something like dekeoboe described at one point. In our case, the distinction was whether or not the original "shop" included a kitchen, because that made it a standalone dwelling, so a second "real house" would have been doubling the housing density allowed by code, or something like that. But if you are somewhere the restrictions are looser, that might not be a problem for you. Even so, I think we would just have to have decommissioned the kitchen somehow. Good luck with your project, it sounds like a cool idea to me!

How about using this idea as a basis for the layout? It is basically the same as you described, but I like the stairs. Of course, the landing has to be changed as those drawn would not meet code. You could just make a flat landing and expand the stairs into the living area by one step. I would think you would want the loft over the kitchen and bathroom rather than over the living area.

It's too small to see and way too complicated.

I think you misunderstood. I only posted that to show a proposed layout of the bathroom in the back left corner, kitchen in the back right corner, and L shaped stairs against the kitchen in the main room. Ignore the upper floor layout and just have a loft over the kitchen bathroom. You could have the second entrance to the living area either in the kitchen as shown or in the main room.