Since the lot is too small for the builders to want it, expanding the square footage is probably the best thing you can do to improve value. Many homes in that area raise the house up and put the additional square footage on the ground level. There's one over by 63rd that is doing that now, though the lot is not small. This would give you the option to put a garage under and configure it like the newer town homes.
You might not get a lot more for it after the improvements, so hopefully you are doing this to make the house better for yourself and not as a flip project. Flip projects don't work out well unless the main floor footprint is at least 1,000 square feet. No parking becomes a big negative as well, so if you can raise and put a garage in, you might be better off on resale.
Cost it both ways and then decide. I noted the company that raises them up in a Rain City Guide post I did, including the photo after they raised it. The post is called "Jack This House" and was posted on February 17, 2007. It shows the house raised before they started building under it. If it has a cute roof line like this one, often better to preserve the bungalow charm, rather than squaring out the top to get a full 600 sf on the second floor.
I expect the company raising it would get the permits and you can have a contractor to most of the work and do the finish details yourself after all permitted improvements are complete. Some sweat equity will help it be a worthwhile project cost-wise. If it's within walking distance to Green Lake, all the better.