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When the property next door to their home went up for sale, Martha Dayton and Tom Nelson snapped it up.

“We knew it had potential,” said Dayton. “But we weren’t sure what we wanted to do with it.”

The couple had lived in their 1890s stucco house, designed by renowned architect Harry Wild Jones, since 1997, and were committed to staying in Minneapolis’ Kenwood neighborhood, which they loved.

But their home’s small compartmentalized rooms didn’t provide enough space or flexibility — indoors or out — for entertaining large groups and for their two teenagers to hang out with friends.

The couple, who also enjoyed regular visits from out-of-town family members, wished for more inviting private guest quarters, as well as additional garage stalls and more storage space.

But the first step was tearing down the older cottage-style home on their newly purchased lot.

“It was in poor condition, and we wanted to start fresh,” said Nelson, a real estate developer.

While waiting out the yearlong process of getting a permit to demolish a structure on Kenwood Parkway, the couple explored creative building possibilities with architect Mark Larson of Rehkamp Larson Architects.

Dayton, an interior designer and owner of Martha Dayton Design, had collaborated with Larson on some of her clients’ past remodeling and new-home projects.

“At first, we were thinking about a funky little garage with some living space that we could use for about five years,” she said. Later, they might build a full-scale “dream home.”

Designed to blend in

But the couple were sure about three requirements: The new structure would be modestly scaled as to not overwhelm the site, it would complement the adjacent main home’s original architecture, and it would fit in among the older Tudors, Victorians and foursquares in their Kenwood neighborhood. “We didn’t want it to look brand-new,” said Dayton.

After many iterations, the design evolved into a modern-day, multifunctional “carriage house,” completed in 2014.

“It harks back to the idea of a Kenwood carriage house,” said Larson, noting that the neighborhood is still home to many original carriage house structures. “They are charming, but useful and flexible buildings.”

The Dayton-Nelson two-story version is set back on the lot behind a row of arborvitae for privacy from the street.

Its 1,500 square feet of space includes one bedroom, two bathrooms and an attached garage on the back.

The front entry has a classic wraparound porch with a beadboard ceiling and columns, as well as a crossing gable, all of which match the main house.

The main floor is tailored for entertaining teens and adults, with a kitchenette and massive sliding doors so they can spill out to an al fresco dining area during summer parties.

The upstairs houses the guest quarters with a combo dining and living room, full kitchen and a computer desk nook.

Mirror on a track

In the subway-tiled bathroom, Dayton asked for both a window and mirror above the sink. The solution was a mirror that slides across an iron track.

The well-designed bedroom suite is also well used. “We’ve had guests three times in 10 days,” said Dayton.

The vaulted ceiling in the upstairs guest quarters also “gives it the open and airy feeling of an urban loft,” said Larson.

For Nelson, the carriage house also serves as a quiet home office, a place to hold business retreats — and is “great for watching the Stanley Cup,” he said.

Finally, multiple outdoor living spaces bordering a lush lawn were designed to seamlessly flow together, linking the new carriage house to the main house.

“The way the two homes connect makes it a very unique property for the city of Minneapolis,” said Larson.

Black and white

Larson and architect Ryan Lawinger designed the cedar shake exterior to “echo the shape of the main house,” said Larson, “but the detailing is cleaner, tighter and more modern.” The interiors are fresher and more playful, he added.

Dayton was the creative vision behind the furnishings, finishes, materials and black-white-gray color palette. The look is “clean contemporary — with some warmth,” she said.

The touches of warmth are in the leather knobs on cabinets, textural area rugs and furniture, and tactile wallpaper above the computer desk. Mohair pillows are tossed across a tweedy wool sofa. A gray finish covers warm white oak floors.

Shades of gray are all the rage now, but to make it work, you need to inject texture and bursts of color, advised Dayton.

“Everything else pops against a soft gray palette,” she said. “It makes art and lighting look rich.”

Both levels of the carriage house boast a modern graphic quality, thanks to black-framed double-hung windows. The main living room’s 10-foot-tall black exposed-beam ceiling gives it an industrial loft vibe.

“It’s a robust space,” said Larson. “The materials will wear well for a bunch of kids — and look good as it ages.”

Smart revisions were also made to the main house. Larson devised a revamped kitchen eating area and mudroom. New windows face the carriage house, and there’s easy access to the shared bluestone patio.

“We made some modifications to make the two properties work well together,” said Larson.

The modern-day carriage house and its inviting patio are flexible for everything from a tranquil spot to do yoga to throwing big parties.

The couple have hosted up to 250 people at their daughter’s graduation party and at fundraisers.

“It’s easy to invite girls and parents after a tennis match,” said Dayton. “This space is always ready.”

ABOUT THIS PROJECT

What: A Minneapolis couple built a new house for overnight guests and to entertain large and small

groups next door to their main house.

Size: 1,500 square feet, including one bedroom and two bathrooms.

Design team: Architects Mark Larson and Ryan Lawinger, Rehkamp Larson Architects, 612-285-7275, rehkamplarson.com.

Builder: Dovetail Renovation, Mpls.

Interior design: Martha Dayton Design, Mpls.

Landscape design: Colberg Tews Landscape Architecture, Mpls.