As for space, you really just need an unused corner of the room. Build a small platform that sets off the area from the rest of the room. And then hang drapes that go from the ceiling down to the floor. If you're carpentry-inclined, you could even install a cornice to set it off. Dress it with props like in the photo above or leave it open for your kids to use their imagination. This little play stage can double as a cozy reading nook too.