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How Realtors Use SB-9 to Enable Sellers to Make More Money and to get New Listings in San Diego
SB-9 has created new profit opportunities for homeowners in San Diego by allowing lot splits and additional housing units in single-family zones. Realtors guide homeowners through SB-9 opportunities, helping them market and sell either the newly created housing units or the vacant parcels that result from lot splits. This article explores how SB-9 creates opportunities for both homeowners and realtors. Homeowners can generate immediate cash by selling portions of their subdivided property, while realtors can expand their business by listing these parcels and connecting with buyers seeking vacant lots to build custom homes.
California’s Senate Bill 9 or SB-9 has created new possibilities for homeowners, particularly those with unused space on their properties. The law allows for lot splits and permits up to 2 units per lot, with the potential to add an ADU as well. This applies exclusively to properties in single-family zones, meaning areas that previously allowed just one home can now accommodate up to 4 units.
These changes provide multiple ways to generate income, with lot splitting emerging as the most popular choice among homeowners.
What is a Lot Split per SB-9?
A lot split is the process of dividing a property into two separate parcels, allowed only in zones designated for single-family homes. The minimum lot size for the lot is 2,400 sq. ft.
Options for homeowners to make money with SB-9
Sell a Lot after Development
One way to profit from a lot split is by developing the new lot and selling it as a newly constructed home or duplex. This approach provides the opportunity for the most profit once the development is complete.
Advantage
Increase Earning Opportunities: Selling a developed property can generate higher returns compared to selling a vacant lot.
Generate Income from a Lot: Turn an underused lot into a valuable asset by building a market-ready single-family home or a duplex.
Disadvantage
High Investment Requirements: This strategy requires an upfront investment between $600,000 to $1,000,000 + depending on the location.
Extended Development Timeline: Expect around 2 years for lot split, construction, approvals, and sale.
Case Study
If you own an 8,550 sq. ft. lot in San Diego, you could subdivide it and build a contemporary duplex on the new parcel. With a $3,000,000 investment, selling the property for $6.5 million would give you an ROI of 115% before taxes and other costs. That kind of return goes well beyond the original land value, making it a highly rewarding move.
For those willing to put in the time and capital, this strategy offers a real chance at a major payout.
Pre-Selling a Lot for Instant Profit
If you're looking for a quicker and less capital-intensive way to profit, pre-selling your new lot can be a smart move. This method involves selling the newly subdivided parcel without developing it.
Advantage
Guaranteed Sale Price: Pre-selling secures a fixed sale price, offering stability and instant financial returns.
No Investment Required: You don't need to spend money on construction, labor, permits, or development.
Disadvantage
Delayed Payment: Although you avoid development expenses, the sale process typically takes more than half a year.
Case Study
If you own a 3,500 sq. ft. lot in San Diego, you could subdivide it and list the new parcel for $150,000. Without spending anything on construction, you might find a buyer within two months and close the deal just a few months later. That means quick profit without the hassle of development.
If you're looking for a fast, hassle-free return, this strategy can be a great way to cash in on your property.
Build on a Lot for Long-Term Value
Another profitable way to leverage an SB-9 lot split is by retaining the new lot and constructing a home or duplex on it. This strategy can serve as a long-term investment, offering rental income or additional space for family use.
Advantage
Boost Your Net Worth: Transforming one property into two separate lots increases the overall value of your real estate holdings.
Generate Rental Income: Building a new rental unit allows you to secure a steady income stream over time.
Family Expansion: If your family needs more space, the new property can provide a convenient solution without requiring relocation.
Disadvantage
High Investment Requirements: This strategy requires a $600,000 to $1,000,000 + investment depending on the location.
Extended Development Timeline: Expect around 2 years for construction, approvals, and sale.
Case Study
If you own an 8,000-square-foot property in San Diego, you could subdivide it and create a 4,000-square-foot parcel to build a 3-bedroom rental unit. With a $3,000,000 investment, you can rent it out for $4,500 per month, generating steady income that helps cover financing costs while increasing your property’s value.
This is a great way to build long-term wealth, grow your equity, and create a reliable passive income stream.
By carefully weighing these strategies, investors and developers can select the option that aligns with their financial goals and timelines, making the most of California's SB-9 lot split opportunities.
See how much it will cost you to improve your property per SB-9
If you want to learn more about SB-9 and how it impacts single-family zoning in San Diego, check out All You Need to Know About Building on Properties in San Diego City Under SB-9. You'll find useful information about development opportunities and regulations.
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