First step is just talk to the city, there may be rules you are not aware of. Height restrictions, allowances to side of property, max house size for size of lot size are just some things you should know. Around here you would have to draw up a set of plans and submit them with the city for approvel so asking questions first is a big plus.
How old is the house, how many sq. feet, and type of foundation and footing does it have now.