This is not a low cost project, if there are viable options stay away from this one as it requires time, work and capital.
Let’s start at the basics the single story shown in the bottom photo already exists, it was designed with a foundation with load calculations to carry a single story home. You may luck out and find the foundation oversized and adequate to carry the weight of a second story without modification.
If modification is required the easiest and most efficient method is auger piles, they are drilled with the leading edge against the existing foundation from the outside at an angle set by an engineer for example 7 degrees. These auger piles are filled with a rebar cage and filled with high strength concrete. They catch the existing foundation under the bottom edge thus supporting additional load.
The process involves setting a auger pile every so many feet to carry load and to provide additional support to the existing width of the foundation, the process is complicated and requires a week or two to complete and to fully cure concrete requires 30 days. A basement home requires additional work and expense.
Then where do you build a staircase? It must have legal width and head height and the run and riser of each stair tread must be within building code standards. The exterior windows must meet the minimum square footage required by the fire, life and safety code to allow someone to escape during a fire or emergency.
Now if you do this remodel 100 percent of all electrical, plumbing and mechanical will have to be updated, the city will require hard wired smoke detectors and probable require ARC-Fault circuits for all bedrooms. This home was built before 1978 so all asbestos and lead based paint will need to be abated by a licensed company and certified to the city. You will not be able to get a permit without agreeing to this requirement.
At the ceiling of the second story my guess is the ceiling joists are probable 2x4 or 2x6 with a freehand framed roof system which will require adequate sized floor joists sized appropriately to support “Live Load” on the new second story floor. The “Collar Tie” system will need redesign along with how the new dormer is tied in and supports roof load, etc.
If this is snow country expect snow load calculations with adequate structure to support area snowfall.
Typically a freehand framed roof structure has a ridge beam, purlins, strong backs, rafter jacks, etc. which will require redesign on one side and ridge beam design which ties in the dormer. Loads will need to be carried to the foundation so existing windows and doors may require re-working to increase header sizes and load support.
The city will probable require replacement of all windows and exterior doors to meet existing code. The electrical panel will probable require upsizing to 200 Amp service. You may be required to replace sewer piping “Clay” with ABS from the street to the main and required to replace galvanized water piping from water tap to the house.
If this home has a septic field a re-engineering may be required with a resized coffin tank and water settling tank required for the additional bathroom. Obviously all current code applies and will be required in order to draw a permit.