Erika and Greg Tansey couldn't afford the house they really wanted in Lake Oswego, an upscale suburb of Portland, Oregon, so they opted for Plan B: buying an outdated, dilapidated Cape and remodeling it.

"The bathroom was so small that your knees hit the tub when you used the toilet. The hallways were narrow and dark. And the garage was basically falling over," says Erika.

What the house lacked in charm it made up for in location and a terrific school district.

"Originally, we didn't think it'd be that big a project," says Erika. "We ended up gutting the house."

Erika and Greg started demolition in September 2005, with more significant plans than they'd first imagined: raising the roof, putting in an addition, doubling the square footage and reconfiguring the floor plan. Erika, 34, a freelance marketing consultant, and Greg, 35, a venture capitalist, budgeted $200,000 for their extreme home makeover.

But the project took six months longer than expected, cost $80,000 more than planned and finished just as the bubble began deflating. By the time they finished this past August, they were exhausted but eager to share the lessons they'd learned.