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How Realtors Use SB-9 to Enable Sellers to Make More Money and to get New Listings in San Francisco
SB-9 has opened new profit opportunities for San Francisco homeowners by permitting lot splits and additional residential units in single-family zones. Realtors help these homeowners navigate SB-9 requirements, assisting them in marketing and selling either new units or vacant parcels created through lot subdivision. Through SB-9, homeowners can access quick cash by selling portions of their subdivided property. This creates a win-win scenario where realtors can grow their business by listing these parcels and connecting with buyers who want to build custom homes on vacant lots.
California’s SB-9 or Senate Bill 9 gives homeowners a new way to maximize their property’s potential, especially if they have underused land. Now, you can split your lot and build up to 2 units per parcel, or even 2 units plus an ADU, as long as your property is in a single-family zone. Instead of being limited to just one home, you now have the chance to add up to 4 units.
This creates new opportunities to generate profit, and lot splits have quickly become the most popular option among homeowners.
What is a Lot Split per SB-9?
A lot split allows you to divide your property into 2 separate parcels, but only if it’s in a single-family zone. Each new lot must be at least 2,400 square feet to qualify.
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
Owning a 9,000 sq. ft. lot in San Francisco, a homeowner decides to subdivide and build a contemporary duplex on the new parcel. After putting in a $4,000,000 investment, they sell the finished property for $12 million, walking away with a 200% ROI before taxes and other costs. The profit far outweighs the initial land value, making the effort more than worthwhile.
For those ready to invest time and capital, this approach offers the potential for a great return.
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
A homeowner in San Francisco takes advantage of their 6,200 sq. ft. lot by subdividing it and putting the newly created parcel on the market for $550,000. Within 3 months, they find a buyer and close the deal 4 months later, locking in a solid profit without dealing with construction.
For anyone looking for a fast and straightforward way to cash in on their property, this strategy delivers.
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
A San Francisco homeowner with a 10,000-square-foot property decides to subdivide it, creating a 5,000-square-foot parcel. They built a 3-bedroom rental unit on the new lot, putting in $2,000,000 for the project. The property rents for $4,100 per month, generating steady income that covers financing costs while building long-term equity.
This strategy works well for anyone looking to increase property value, build wealth, and establish a reliable rental income.
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 Francisco, check out All You Need to Know About Building on Properties in San Francisco City per SB-9. You'll find useful information about development opportunities and regulations.
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