To say that the three-story town house at 12 R St. NW was a shell in 1991 is the absolute truth.

It had no roof and no floors, and the kitchen and garage had burned in a fire. It had been abandoned for about 20 years, though a squatter had settled in. But Pat and Bruce Mitchell saw great potential and entered the '91 lottery for the $250 property just off North Capitol Street in Bloomingdale.

It was the only property they applied for.

"It was the only one that I saw where I liked the architecture," said Pat Mitchell, a community activist.

Luckily, her husband is an architect and, although "he doesn't like to do houses," he was eager to restore his own late-1890s house. Bruce Mitchell's experience in building Residence Inns for Marriott and the couple's completion of a similar renovation in Houston also made the overhaul project more manageable. The couple moved to the District in 1987.

The regular home-buying route would have been less exhausting for the Mitchells, but the homestead house fit their financial situation better. The couple had been searching for a house for a while; then Bruce Mitchell lost his job when Marriott downsized. So the house hunt became based on Pat Mitchell's income alone.

Because the interior of the house had been gutted, Bruce Mitchell had "nothing to restore," said Pat. Instead, he designed a modern interior, with skylights and white oak floors. Perched on an alley, the house shines with new windows and brick.

The renovations took nine months and cost about $130,000, Pat Mitchell said. The couple's income was too high for the city's interest-free $10,000 loan, but they secured a HUD-backed 203(k) construction loan that rolled over into a mortgage. The only bank offering 203(k) loans at the time was Theodore Roosevelt National Bank.

Things got panicky, though, when the bank was taken over by the Federal Deposit Insurance Corp. "We just barely squeaked through" in obtaining the money, remembered Pat Mitchell, before the bank was closed.

The situation is different now, because many other institutions besides the city Housing Finance Agency are scrambling to offer the much-in-demand 203(k) loans, said lottery head Lynn C. French.

The house is assessed at $90,000, but Bloomingdale is considered a hot market, and at least one friend estimates it could sell for as much as $300,000. Though the Mitchells have no intention of selling--yet. With three other renovations on the block, Pat Mitchell sees an even brighter future. "I believe probably in five years they'll be calling this Capitol Hill North," she laughed.

CAPTION: Pat Mitchell and her husband, Bruce, saw the potential in an abandoned and fire-damaged 100-year-old house, below, that lacked a roof and floors.