I'm going to add one to the mix... 

The bathroom would be an add-on to the home and not a conversion of existing space.

I would like to add one other concern, and that is zoning.

@Dan Guenther said most of it, but I would add one additional piece and work backward from there which is: on a bigger picture level, what do you want your life to look like in 2, or 5, or 10 years? 

And to add on to Joe's point, an umbrella policy is ALSO necessary.

Los Angeles has unpermitted add-ons everywhere and they're all being lived in and rented.   

That said, you have a unique situation if you can double your units (not just add one)....the economy of scale with  adding 3-5 units could make this a bona fide small apartment and may be worth it provided the costs are not exorbitant, you have the zoning, parking, permits, etc...

It's a pretty involved process to take the roof off and add another floor, stairs etc.I've seen bunches of quirky little add ons like you describe.

I put an add on Craig's List with just the specifics and a note to see the website for additional details.

I will add one thing.