Sink back into the bath in the ensuite bathroom at Lamper Head and you can gaze at the sky through a glass canopy above. But it is when you turn your head slightly to the left that you get an even better surprise: a small, strategically placed window frames one of the best views in Devon, with the River Dart curling its way through the valley below.

Such imaginative details are typical of the money-no-object philosophy that has seen Craig Smith, 52, and his wife, Kate, 43, from Warwickshire, spend more than £1.5m on renovating the two-storey wood-framed house they bought for £700,000 as a second home in 1999.

However, in what should serve as a warning to anyone embarking on a similarly large renovation project, the work has cost the couple so much, they can no longer afford to live there. Instead, they are putting the house on the market for £5m. It may rent out to holidaymakers for as much as £6,250 a week in high season, but that is not enough to pay the bills.

“I think we got rather carried away and overegged it,” Craig admits. “It became too valuable to have as a holiday home, so we began to let it out, but it is worth such a lot of money that the rent doesn’t cover it, and it means we don’t get to enjoy the house any more.”

Tucked away in a tranquil corner between Totnes and Dartmouth, Lamper Head was designed in 1991 by Roderick James, an architect whose projects have featured in the Channel 4 programme Grand Designs. But when the couple came across it, Craig said it looked like “a hippie encampment”. It was surrounded by rough, uncultivated land, the green oak structure was exposed and, besides a living area and kitchen, most of the other rooms were not defined.

The Smiths, however, were immediately captivated by the fabulous views, and saw it as the perfect place for holidays with their children, Cordelia, now 12, Eleanor, 10 and Alex, 9. “There were mattresses on the floor and no wardrobes, only nails in the walls,” Craig recalls. “I am not a designer, but I have worked on refurbishing houses before, so I could see its potential immediately. We wanted to aim for a cleaner, stylish, more minimalist look.”

The first phase of the project was to make the house more habitable, dividing both floors into rooms and plastering over the bare wood walls but leaving beams exposed. Next, the couple more than doubled the size of the property: they added another bedroom suite on the ground floor and a spectacular 26ft x 26ft infinity pool with glazed panels on all four sides. The pool room, which covers 1,300 sq ft, has doors that fold open to the terrace outside, which overlooks the river and farmland towards Dartmoor.

The pool had to be dug out of solid rock, which was then used to create garden walls and landscape the vastly extended grounds; the property came with just two acres, but, over the years, the Smiths gradually bought an extra 13 from surrounding farms.

Bunny Guinness, an award-winning landscape artist, helped with the design of the garden, including the Mediterranean-style courtyard at the rear, but it was Craig, who runs an art-promotion business, who masterminded the interior work.

“I had some rough plans drawn up for planning purposes, but I did most of it myself,” he says. “I contracted a local joiner, who worked for Carpenter Oak, the company that first built the house, and subcontracted out the other work.

“We used a mixture of oak and douglas fir, and had the roof retiled. It was partly grassed originally, but that didn’t work, as it was too steep and the grass kept washing away.”

The Smiths initially used the house for about four months of the year. Five years on, they had created a sumptuous home with six bedrooms – two with ensuite bathrooms – three further bathrooms and a treatment room for relaxing massages. An underground garage had been carved out of hilly ground in front of the house.

From the start, the couple’s aim was to make the most of the spectacular setting. The timber construction lends itself to a more unconventional layout and a labyrinth of rooms flows from one to another on different levels. It also has hidden corners, such as a secret play area above the children’s bedroom, from which they can look down on the kitchen. There is also a bar placed covertly off the open-plan living area. The house has an integrated entertainment system, a sophisticated lighting network and a retractable television in one of the bedrooms.

A barn in the grounds, meanwhile, was converted into a guest lodge cum artist’s studio, with a kitchen on the ground floor and a bedroom above, which is where the family usually stay while the main house is let out.

Craig claims that he has no regrets. “I’m not sure I would do anything differently,” he says. “We have had a great time and created a wonderful home we are proud of.”

Lamper Head is for sale for £5m through Marchand Petit; 01803 839190, www.marchandpetit.co.uk

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