California's SB-9 gives homeowners new ways to maximize their properties, especially those with unused space. It allows them to split their lot and build up to 2 units per lot or add 2 units plus an ADU, but only in single-family zones. A property that once allowed just one home can now have up to 4 units.

These changes create different ways to generate profits, with lot splitting being the most popular choice among homeowners.

What is a Lot Split per SB-9? 

SB-9's lot split allows homeowners to divide a property into 2 separate parcels, but only in areas zoned for single-family homes. Each new lot should be at least 2,400 square feet.

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

With a 10,000 sq. ft. lot, a homeowner sees an opportunity and takes action. They subdivide the property and build a duplex on the new parcel. After investing $4,500,000, they sell the finished property for $10 million, securing a 120% ROI before taxes and other costs. The return far exceeds the initial land value, making every step of the process well worth it.

For those ready to put in the time and capital, this approach can lead to a significant 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

Seeing potential in their 5,000 sq. ft. lot, a homeowner decides to subdivide and list the newly created parcel for $500,000. In just 2 months, they find a buyer and close the deal 3 months later, walking away with a solid profit and no construction required.

For anyone who wants a quick and hassle-free way to make money from their property, this strategy gets the job done.

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

Owning a 9,000-square-foot property opens the door to new opportunities. Subdividing it to create a 4,500-square-foot parcel makes room for a 3-bedroom rental unit. With a $3,000,000 investment, renting it out for $4,300 per month helps cover financing costs while increasing the property’s overall value.

This approach builds long-term wealth, strengthens equity, and provides a steady 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.

If you want to learn more about SB-9 and how it impacts single-family zoning in California, check out What the new SB-9 housing law means for single-family zoning in California. You'll find useful information about development opportunities and regulations.