Good for you Barganista you found your bargin?

Consider the demographic of the eventual purchaser. Couple, two large rooms. Couple with one child 2 large rooms bring in a second child especailly differernt sex and you need three rooms. But in reality that is when lots of people move so. I'd go two nice rooms and nice bath for you in your neighborhood.
Be sure to work with an architect and don't ruin the details of the building.

I would seriously consider the demographic of buyers in your neighborhood. Also, 1400 square feet is a little small for a 3 bedroom, as Monique already stated. If it were my personal residence, I would go with the 2 bd/2bth plan. A bedroom doesn't add as much value as an incredibly functional floor plan. Most of the buyers that I work with want large bathrooms, nice sized bedrooms, closets, and great kitchens. Hope this helps.

One note - the house in an edwardian, it currently has 3 bedrooms already but small closets and a small split bath.

We call it bedroom count. If you are going to stay in your house for a while I would suggest making it suit your needs. 1400 square feet is a small three bedroom but 1400 sq feet is a terrific sized 2 bedroom. Just make sure if you do convert to three bedrooms it flows well with the age/style of the old home.

Best,

Monique Carrabba
The Reavis Group

Though personally I see the appeal of large bedrooms with big closets, and a large bathroom, I think that as a selling feature, 3 bedrooms will get you a better price in the end. 3 bedrooms opens you up to the families who are looking for a place in the city.
But, before you start working, have an experienced, San Francisco Realtor, who really knows your market, walk through the property with you, and let them advise you on the best course of action. If your plan is the resale value, it is never too early to get the advise of a Realtor who really knows the market.