Alicia and Victor Grasso stared at their dream home for years. Literally.

"We'd sit outside and drink wine and imagine what we'd do to the house" if the owners ever sold, says Alicia Grasso, 33, marketing director for the Cape May Stage theater company.

Before they married, they rented a beach bungalow across the street from the house they hoped one day to make their own. (They live in North Cape May year-round.)

Both dwellings were one-story beach cottages built in the 1950s. Both were just a few blocks from the beach. But in that house across the street they saw more potential.

"It's hard to find places in South Jersey that have trees near the water," says Victor, 32, an artist who works on commissioned projects and shows his paintings in New York and Miami. The lot also had a bigger yard, and a detached garage he could turn into his work studio.

So when the house went up for sale in 2008, they jumped to buy it, even though their families thought they were nuts. But the Grassos saw what the place could become, although what they bought was far from perfect.

The house had two tiny bedrooms, an ancient kitchen, and wood paneling everywhere. The backyard was all dead grass, except for a makeshift chicken coop that was home to a half-dozen stray cats.

Over eight months, the couple - who grew up in the area and were high school sweethearts - turned the house into what Victor calls "an inner-city urban loft with a beach-cottage feel," all without compromising the original footprint.

They started with demolition - and an omen.

Victor was worried about the timetable: They had a month to work on their new home while still renting across the street, so he started tearing out drywall immediately.

That first day, while working late into the night - and wearing flip-flops - he swung too hard and put a pickax through one of his toes, necessitating a trip to the emergency room and a dozen stitches.

Once he was cleared to walk and had bought a pair of work boots, he and his wife got back to the job at hand, with the help of friends and family, including his father, a heating and air-conditioning contractor.

They tore out everything but the studs and a few windows that had been replaced just before the sale of the house. Then they hired a contractor to replace the roof. Victor put his painting on hold to work exclusively on the house, which he credits with their being able to finish in less than a year.

He formulated the plans, too. The main portion of the house, which had two bedrooms and a living room, became one great room with living room, kitchen, dining room, and small desk area.

The screened porch became the master bedroom, and the former kitchen was transformed into a guest room and second bathroom. Everything except the bathrooms got new hardwood floors.

"We finally can have guests and use the bathrooms at the same time," Alicia jokes.

Because the master bedroom used to be a porch, it has windows on two sides and is slightly lower than the rest of the house.

"I like stepping down," Alicia says. "It feels like its own part of the house."

As construction progressed, some of the plans changed, of course.

Originally, the couple wanted their renovated home to have an attic - as it did before renovation. But once Victor saw the great room without an attic - opened up to the roof, with exposed support beams - he asked the contractor to leave it that way.

That high ceiling gives the space its urban-loft feel, which is matched by the peaked roof of the master bedroom.

Though it's open and urban, the house retains a beach-cottage feel, with cool shades of blue on the walls, shore-theme decor, and ceiling fans in every room. The back deck is made of boardwalk wood, and the garage, now a painting studio, has an outdoor shower.

The walls change as Victor's work changes. Right now, over their desk in the living room, he's hung prints from his show "Up from the Wreckage," set for the SOMA NewArt Gallery in Cape May Aug. 7 to Sept. 7. They'll be replaced with something else if they sell.

Some of his works decorate the higher walls of the great room, too. And hanging in the master bedroom is a screen print of a painting featuring Alicia that her husband did for a cover of Exit Zero magazine, a local publication.

The Grassos insist their dream home isn't complete yet. They want to extend the boardwalk porch and add a shed so they can get stuff out of the garage that's now a work space. Plus, Victor wants to turn part of that studio into a music room.

The chicken coop is long gone, but they'd like to work on the rest of the lawn - if they're not too busy walking the few blocks to the beach, that is.

And they'll be doing one more renovation by the end of the year: Alicia is four months' pregnant with their first child, so the guest room will become a nursery.

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