For the lower level, in my opinion, a one bedroom with lots of room for living, is more attractive to a tenant than a very squashed two bedroom with no living space. The current living can be utilised with a sofa bed when required. What is your objective. Is this for family or a investment to be tenanted.?

as dreamer already suggested a more spacious one bedroom downstairs with small kitchen plus laundry would be more attractive for a couple than two small bedrooms and almost no living space but also depends on if you are aiming for overnight or long term tenants

and space leftover from stair well could be useful for enlarging the kitchen with a pantry and upstairs laundry and new entry allows for a study space and master bedrooms suite but you will need to confirm that the old carport is suitable for updating to living quarters but please explain where you think there is space for an extra lounge room apart from downstairs?

Amalia, can you go into your profile and delete all the other posts which ask the same question. Just helps with keeping the comments onto one thread. Thanks.