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Maximizing Returns for Flipping an SB-9 Property

SB-9 has transformed real estate investment in California by allowing single-family lots to build duplexes or redeveloped through urban lot splits. This shift brings both opportunities and challenges. Through experience, several key lessons have emerged that can help maximize returns and avoid costly mistakes.

Profit Is Made When You Buy, Not When You Sell

SB-9 projects require careful financial planning. The purchase price determines profitability, not the sale price. Overpaying for a single-family home or lot can make it impossible to turn a profit, no matter how well the project goes. Here’s how to buy right:

Look beyond the MLS

The best deals aren’t listed publicly. Off-market properties and distressed sales offer the best opportunities.

Understand local pricing

Know what single-family homes and SB-9 developments sell for in the target area.

Calculate backward

Start with the desired profit, subtract development and holding costs, and determine the maximum purchase price.

Don’t hesitate to negotiate

Many sellers don’t know the potential value of their SB-9-eligible property, giving buyers leverage.

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Every Development Costs More Than Expected

No matter how well planned, SB-9 projects always come with unexpected expenses. Infrastructure costs, utility connections, and compliance with local regulations often push budgets higher. It is essential to set aside 15-20% on a rehab of the projected budget for unplanned expenses.

Time is also money. The longer a property is held, the higher the carrying costs. Speed matters in SB-9 developments. If an unexpected cost arises, delaying to find a cheaper alternative can cost more in holding expenses than paying the premium.

Focus on Functionality, Not Luxury

When rehabilitating a duplex or existing units, investors sometimes over-improve the property. While premium finishes might be tempting, SB-9 projects should prioritize efficiency and affordability over luxury. Here’s what works:

Durable, cost-effective materials like quartz countertops instead of high-end stone.
Practical layouts that maximize rentable space rather than overdesigning interiors.
Energy efficiency to attract long-term tenants while keeping costs low.

The goal isn’t to create the most beautiful unit but the most functional and desirable one for the market.

There’s No Bad Property, Only the Wrong Price

Many investors shy away from difficult properties, but when it comes to flipping projects, the most challenging deals often bring the highest returns. If a property has structural issues, zoning complications, or undesirable features, it’s not necessarily a deal breaker, it just needs to be bought at the right price.

Some of the best flips come from properties others ignore. The key is to understand what it will take to make the deal work and negotiate accordingly. If the numbers don’t make sense, walking away is the best option.

Sell Fast and Keep Capital Moving

Waiting for top dollar isn’t always the best move. When flipping a property, the faster a unit is sold, the sooner capital can be reinvested into the next deal. Listing slightly below the market can attract quicker offers and keep funds circulating. Volume and efficiency matter more than squeezing every last dollar from a sale.

Additionally, selling to investors rather than traditional homebuyers can make deals move faster, as they focus more on ROI than aesthetic appeal.

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