Latest / Own More Doors / #38 How to Double Your Property’s Value with SB9 Lot Splits!

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#38 How to Double Your Property’s Value with SB9 Lot Splits! · Own More Doors

0:00
SPEAKER_00: What's up everyone?
0:00
SPEAKER_00: Juan Weezar here with the Own More Doors Podcast.
0:03
SPEAKER_00: This specific episode was first shared on our YouTube channel, Sage Real Estate.
0:08
SPEAKER_00: Check it out.
0:08
SPEAKER_00: And we're excited to bring it to you here.
0:11
SPEAKER_00: We hope you enjoy the interview.
0:13
SPEAKER_00: If you're a homeowner in California, I got excellent news.
0:15
SPEAKER_00: I'm going to show you in this video today how you could potentially double the equity in your property.
0:20
SPEAKER_00: So make sure you tune in and I'm going to show you how you could do a lot split through the SB9 law here in California.
0:28
SPEAKER_00: I'm sitting down with Peter Rikers with Rikers Engineering, the leading company at SB9 splits.
0:34
SPEAKER_00: Folks, there's three reasons why anyone would consider it.
0:37
SPEAKER_00: The first one is for a nest egg.
0:39
SPEAKER_00: You have a lot, you know the property next to you that you own is worth a lot.
0:44
SPEAKER_00: Why not subdivide it?
0:45
SPEAKER_00: Okay, so that's reason one.
0:46
SPEAKER_00: Two, you're afraid that your kids are gonna be priced out of California and they're gonna have to move out of state, and you don't want that, do you?
0:52
SPEAKER_00: So that'd be the second reason.
0:53
SPEAKER_00: The third reason, you simply need some cash.
0:56
SPEAKER_00: You're gonna lot split.
0:58
SPEAKER_00: Peter's gonna show us how to do that, you're gonna sell that lot off, and you're gonna be happy.
1:02
SPEAKER_00: So make sure you tune in while we do a deep dive on SB9.
1:07
SPEAKER_00: Let's hop right into it.
1:09
SPEAKER_00: Hey everyone, I'm super excited.
1:10
SPEAKER_00: I'm sitting next to Peter Rikers with Rikers Engineering, and we're gonna be talking all about SB9 lot splits.
1:16
SPEAKER_00: And so this is a law that was passed several years ago.
1:19
SPEAKER_00: We're gonna get right into it.
1:21
SPEAKER_00: Peter, thank you so much for being here today.
1:24
SPEAKER_00: Um, tell us a little bit.
1:26
SPEAKER_00: Let's first talk about SB9 and then we'll get into your background.
1:31
SPEAKER_00: But just give us some basics on what is SB9, who passed it, how long has it been around, and how can our folks watching benefit from it?
1:41
SPEAKER_01: So SB9 is a fairly new law, just about three years old now, uh, put in place by the state.
1:47
SPEAKER_01: The state usually does not get involved in land use matters, but they see that we've got this huge housing problem, not enough housing, and so they're trying to unlock uh assets that are out there that are underutilized.
1:59
SPEAKER_01: So the state went ahead and created SB9.
2:04
SPEAKER_01: SB9 basically allows a single family zoned parcel that has some extra land that could be developed with another residence or two to be divided so that somebody can make use of that extra land.
2:17
SPEAKER_01: Whether it's you as the homeowner building another house for a rental or for your kids, or whether you want to sell that parcel so that another family can build their home on their dream home on there and you collect the fees.
2:31
SPEAKER_01: Um that's the basis of SB9.
2:33
SPEAKER_01: There's a second component that allows you to build a second uh building on the lot, but the more valuable component to landowners is the SB9 Urban Lot Split.
2:44
SPEAKER_00: Perfect.
2:44
SPEAKER_00: Thank you so much for that.
2:45
SPEAKER_00: Uh Peter, tell us a little bit about your background.
2:48
SPEAKER_01: I have been a licensed civil engineer and surveyor in the state of California for 40 years.
2:54
SPEAKER_01: I had a larger civil engineering company.
2:56
SPEAKER_01: We did all kinds of engineering development work.
2:59
SPEAKER_01: Retired from that about 15 years ago, was happily retired until three years ago when I heard on the radio Governor Newsom just signed SB9, and I heard about it, and I said, that's not possible.
3:10
SPEAKER_01: In California, we're allowing lot splits that aren't guided by local ordinances.
3:15
SPEAKER_01: I looked into it, I started this company the next day.
3:18
SPEAKER_01: We've been doing lot splits all over the state of California ever since then.
3:23
SPEAKER_00: Peter, who who exactly is doing these lot splits?
3:26
SPEAKER_00: Like who is this benefiting?
3:28
SPEAKER_01: Uh homeowners, definitely.
3:30
SPEAKER_01: Uh it is all individual homeowners because there's a requirement right now that the homeowner actually reside on the property.
3:39
SPEAKER_01: That might change in the near future, but I can't promise it quite yet.
3:43
SPEAKER_01: So it's the homeowner that benefits.
3:45
SPEAKER_00: And you gave us a couple of different options.
3:48
SPEAKER_00: That they're doing the lot split, and sometimes they're they're they're building, say, a single-family home is one option.
3:55
SPEAKER_00: Sometimes they're building the ADU behind that as well.
3:59
SPEAKER_00: The folks that you're helping, do you get to see what end what they ended up doing?
4:02
SPEAKER_00: Like, or do they tell you, hey, once we're done with this lot split, I'm selling the lot?
4:07
SPEAKER_00: Like what, like, what are they really doing?
4:09
SPEAKER_01: Right.
4:09
SPEAKER_01: So there's three distinct groups of uh clients that I have.
4:13
SPEAKER_01: One group sees the value in creating a legal parcel that they can sell sometime down the future.
4:20
SPEAKER_01: So it's a nest egg for them.
4:21
SPEAKER_01: Now, when I retire, I can sell this parcel for a couple hundred thousand dollars, somewhere between two hundred, a thousand, a million.
4:28
SPEAKER_01: Um, and that's one group.
4:30
SPEAKER_01: The second group is boy, I really want my kids to be here on this property.
4:34
SPEAKER_01: I've got this extra parcel, this extra land in back.
4:37
SPEAKER_01: I want my kids to build on here so we can have a nice family compound.
4:41
SPEAKER_01: The third is, hey, I need some cash right now.
4:44
SPEAKER_01: Uh, I want you to create this lot so I can sell it.
4:47
SPEAKER_01: I continue to live here and I can live off that.
4:49
SPEAKER_01: I can maybe reduce my mortgage a little bit, or just have uh a great source of income right now.
4:56
SPEAKER_00: Peter, when we did a very basic video about the SB9 lot split years ago, one of the gals here in our office did a really good video.
5:06
SPEAKER_00: And a lot of the comments that we got was that yeah, it's a great law, but it's not applicable, or in places like Long Beach where maybe where the homes were placed on the lot.
5:18
SPEAKER_00: So we got a lot of feedback, like, yeah, yeah, that's great, but we there's we really can't do it here.
5:25
SPEAKER_00: Where, I mean, is there is there some cities where you see more of this happening?
5:30
SPEAKER_00: I mean, is it or is it some cities, it's not that Long Beach is not allowing it.
5:34
SPEAKER_00: They're they're just saying one in Long Beach, you really can't get away with lot splits for one reason or the other.
5:40
SPEAKER_01: So, first of all, there's a big misconception that SB9 can't be done in my jurisdiction.
5:46
SPEAKER_01: Nobody's building, there's no development, the city council doesn't allow it.
5:49
SPEAKER_01: SB9 is a state law, and as a state law, it overrules local zoning and general plan laws.
5:55
SPEAKER_01: As long as we follow the directive and the requirements under SB9, we can do the lot split.
6:01
SPEAKER_01: What we need to do is we need to prove that the parcel is environmentally not sensitive, and then we need to see that we have a small area that we can still build upon, and in most cases we need access so that somebody can drive to that.
6:16
SPEAKER_01: For instance, if you have a lot with a 12-foot strip next to your house, but you have a big backyard, that 12-foot strip can become the flag lot to the back lot.
6:26
SPEAKER_01: Um, so as long as we've got some buildable area and not environmentally sensitive, you can do the division of the of the parcel.
6:36
SPEAKER_00: What what parts of California are you are you seeing that that this is a lot more prevalent?
6:43
SPEAKER_01: So we do SB9 lots place over the entire state of California.
6:48
SPEAKER_01: We see that in urban areas we have more uh use of the parcels because they're more valuable.
6:56
SPEAKER_01: Um Central Valley and Northern California, north of this San Francisco Bay Area, not so much because there's just not that much value in the land and house prices are lower, and so there's not too much to be gained.
7:08
SPEAKER_01: It's not inexpensive to do an SP9 lot split, but you have a lot to gain in areas where the real estate values are high.
7:14
SPEAKER_00: If I'm a homeowner and I'm watching this video and I'm like, I'm looking at my lot thinking, you know what, I I fall into the third category, I would like some cash.
7:24
SPEAKER_00: How big can this lot be?
7:26
SPEAKER_00: How small can it be?
7:27
SPEAKER_00: Like what are the requirements?
7:29
SPEAKER_01: The law specifies that the lot has to be at least 1,200 square feet.
7:34
SPEAKER_01: Nothing, right?
7:35
SPEAKER_01: That's postage stamp.
7:36
SPEAKER_00: That's small.
7:36
SPEAKER_01: But the bigger limitation is that we the the smaller of the two parcels has to be 40% of the overall lot area.
7:45
SPEAKER_01: Again, there is a glimmer of hope that this next round of law will change that, but I can't promise that yet.
7:51
SPEAKER_01: Right now, the limitation is that the parcel has to be at least 40%, which makes it about half of the existing parcel, a little smaller.
8:00
SPEAKER_00: Peter, walk us through the process of a lot split.
8:04
SPEAKER_00: Is this is is this something like can a homeowner do this on their own, or is it highly recommended that we bring someone like your like your firm?
8:13
SPEAKER_01: Unfortunately, a homeowner cannot do that.
8:16
SPEAKER_01: It requires a licensed civil engineer or surveyor to do that.
8:19
SPEAKER_01: Any licensed engineer or surveyor can do it.
8:22
SPEAKER_01: Most don't know what what the SB9 law is and don't want to get involved with it.
8:28
SPEAKER_01: Um we have specialized in SB9, that's all we do.
8:31
SPEAKER_01: Uh, and so we are our licensed surveyors and engineers.
8:34
SPEAKER_01: We take the project from beginning to end, we do all of the surveying required, all of the mapping, but it does require a licensed professional to prepare the maps, do the surveying, and record the parcel map.
8:45
SPEAKER_01: And we do all of it.
8:47
SPEAKER_01: How how long does this process take?
8:50
SPEAKER_01: That depends from jurisdiction to jurisdiction.
8:53
SPEAKER_01: Some jurisdictions have more of a bureaucracy that think they have to control things, which they can't.
9:00
SPEAKER_01: Um, I have done them as short as five months, but that is very short for SB9.
9:08
SPEAKER_01: Typically, it's an SP9 lot split, it takes between nine months and a year.
9:14
SPEAKER_00: You know, um, Peter, in in my world, you know, we help people buy and sell in investment in real estate, and it could be one of the most stressful things we go through, even when you do it a lot.
9:24
SPEAKER_00: It's just a it's it's it's it's a lot of calls, it's tons of emails, tons of paperwork, and no matter how how much I try to make it easier on the client, it ends up being a very stressful situation.
9:39
SPEAKER_00: What's the situation like when someone goes through an Espine line?
9:42
SPEAKER_01: So our product is very unique in that we take on the entire process from the very beginning until we record a parceling map that hands you two legal parcels to do with as you like.
9:53
SPEAKER_01: We will take care of everything.
9:55
SPEAKER_01: Um what you will be involved in is you will be signing an application, you will be signing an affidavit that we turn into the city.
10:05
SPEAKER_01: We will prepare the site plan that shows the dividing line.
10:08
SPEAKER_01: We will send that to you, you will approve the layout or we change the layout if you'd like to change it.
10:14
SPEAKER_01: After that, there is no more involvement on your part until we have the final approval of the final parcel map nine months down the road.
10:24
SPEAKER_01: At that point in time, we will get in touch with you and say, okay, we have the final approval.
10:28
SPEAKER_01: We will be mailing, we will be mailing you the final parcel map for your signature.
10:33
SPEAKER_01: Uh, you will need to pay your property tax current, and then we record and hand you the map, and the project is done.
10:42
SPEAKER_00: Okay, that that gives me two two questions that that came.
10:45
SPEAKER_00: So you said you're gonna deliver us two legal parcels, so just take my house for now.
10:50
SPEAKER_00: So anyone who has a parcel, we have an assessor parcel number, what we call an APN.
10:55
SPEAKER_00: Does that APN go away because it's replaced by two now?
10:58
SPEAKER_00: Is that what happens?
10:59
SPEAKER_01: Yes, it will eventually.
11:00
SPEAKER_01: Assessor parcel numbers are strictly for the tax assessor to be able to send you bills to with distinct uh qualifications.
11:06
SPEAKER_01: When we divide the parcel, the assessor will remap the parcel and he will create a new assessor parcel number for each of the parcels.
11:14
SPEAKER_00: Okay.
11:15
SPEAKER_00: Um someone's gonna ask, Juan, when I when I create two parcels, am I am I paying taxes on this new parcel?
11:24
SPEAKER_01: Very good question.
11:25
SPEAKER_01: Okay.
11:25
SPEAKER_01: So your tax bill consists of three components.
11:28
SPEAKER_01: Uh, you have a component for the uh improvement value, the house basically, you have a component for the land value by the square foot, and you have a component for a per parcel tax, that's for like the mosquito districts and a couple other things.
11:41
SPEAKER_01: When we divide the parcel, the tax assessor will evaluate the value of each parcel as it is, but they will not reassess the value.
11:50
SPEAKER_01: They will simply take the value that they had prior to the development and they will split those costs between those two parcels.
11:57
SPEAKER_01: But you will get two separate tax bills.
11:59
SPEAKER_01: So for that extra parcel, you will incur an additional annual per parcel tax, somewhere between one or two thousand dollars, but no reassessment.
12:07
SPEAKER_00: Okay, that's actually that's really, really good.
12:10
SPEAKER_00: Um, talk to us about the the current requirement.
12:14
SPEAKER_00: And I understand that things could change in the future, and and some laws will be tweaked um, sometimes in our benefit benefit, and sometimes not in our benefit, but the requirement of if you do this lot split, you you, as the homeowner, must be living in in one of the homes and must live there for three years.
12:34
SPEAKER_01: Um so let me tell you exactly what the law says.
12:37
SPEAKER_01: The law says that at the time of application, the applicant needs to sign an affidavit stating that they intend to reside on the property for at least three years.
12:48
SPEAKER_01: Okay.
12:49
SPEAKER_01: Intend to reside.
12:50
SPEAKER_01: There is nothing that will get recorded or is required that you continue to live there after the parcel map is recorded.
12:57
SPEAKER_01: Now you want to have an intent to reside there when you sign this paper because it is a legal document, you're signing under perjury, uh, but then after we record the parcel map, there is nothing that requires you not to change your mind.
13:10
SPEAKER_01: Okay, okay.
13:12
SPEAKER_00: You know, some folks are gonna ask.
13:14
SPEAKER_00: They're gonna ask, well, well, Juan, what happens if I don't live there?
13:19
SPEAKER_01: Um nothing.
13:22
SPEAKER_01: Um you're signing a document under perjury that your intent was, so somebody would have to disprove that you intended not to do what you had intended when you signed the document.
13:32
SPEAKER_01: Hard thing to prove.
13:33
SPEAKER_01: So somebody would have to take you to court and prove this intent a year ago.
13:37
SPEAKER_01: That doesn't happen.
13:39
SPEAKER_00: Got it.
13:40
SPEAKER_00: Um some folks are, you know, when this when this law was passed, they said, oh, so you do the lot split, you have your house, you build an ADU behind your house, now you have this additional lot, you have a house up front and an ADU.
13:58
SPEAKER_00: Did that did that catch on?
14:00
SPEAKER_01: And did did people do that?
14:02
SPEAKER_01: Yeah, ADUs is a very popular process, and there's more and more ADUs being built in the state of California.
14:07
SPEAKER_01: As a matter of fact, most building permits last year were for ADUs, believe it or not, rather than single-family homes, etc.
14:14
SPEAKER_01: But when we talk about SB9, we no longer talk about ADUs because every parcel that we create, you can build two full-sized houses as long as they meet the zoning requirements for FAR setbacks, etc.
14:29
SPEAKER_01: The state guarantees that you can build two residences on each parcel, limited in size to 800 square feet.
14:36
SPEAKER_01: If you want to build bigger than 800 square feet, you need to meet the local zoning requirements for uh coverage and uh and setbacks.
14:44
SPEAKER_01: But no longer ADUs, large homes approved on both the original parcel and the back parcel.
14:51
SPEAKER_00: Okay, so you still get two structures, but we don't have to use the word ADU anymore.
14:55
SPEAKER_01: Because the larger ADUs have uh a connotation of uh being limited to 1200 square feet, typically, uh two bedrooms, a lot of restrictions.
15:03
SPEAKER_01: They don't apply anymore.
15:05
SPEAKER_00: I'm being told that some people uh are building the the two homes on the lot split and then they're converting the garage or they're doing a junior ADU.
15:15
SPEAKER_00: Um have you seen it?
15:16
SPEAKER_00: Uh the some of the folks that you're talking to, are they doing something?
15:19
SPEAKER_01: Quite a few clients are doing that because now you've got the ability to build two on each parcel for a total of four four residences.
15:27
SPEAKER_00: Well, then I guess you could build, well, then it would be four per parcel.
15:31
SPEAKER_01: No, it so there are a few limited jurisdictions that allow four per parcel.
15:36
SPEAKER_01: It's uh it's an interpretation of SB9.
15:39
SPEAKER_01: Uh, not every jurisdiction allows that.
15:41
SPEAKER_01: Some do and some don't.
15:43
SPEAKER_01: In your particular jurisdiction, we would have to look into whether the four unit per parcel is allowed or whether it's four for the original parcel.
15:52
SPEAKER_00: Um, Peter, talk to us about not every property is going to qualify.
15:58
SPEAKER_00: So here we're in Long Beach, we're in the Bluff Park Historic District, we're two blocks from the water.
16:04
SPEAKER_00: I my office is actually part of the Coastal Commission.
16:07
SPEAKER_01: What areas are not allowed parcels that are listed on historic um registers, parcels that are in historic districts unfortunately are not allowed.
16:23
SPEAKER_01: Parcels in the coastal zone are allowed, but we still have to follow the coastal regulations.
16:30
SPEAKER_01: The caveat there is the coastal commission and the planning department may not require a public hearing, uh, and they may not require, or they may not allow discretion.
16:39
SPEAKER_01: So whatever the current rules are in the coastal plan have to be applied and will get applied.
16:45
SPEAKER_01: So we will have to apply for a coastal permit in parallel with the SB9 permit.
16:50
SPEAKER_01: Makes it more difficult, more expensive, more time consuming, but it's not a no-go.
16:57
SPEAKER_00: Does the SB9 lot split process also go through the most most municipalities uh building and safety department?
17:07
SPEAKER_00: Is that is that where it's going through?
17:09
SPEAKER_01: When we submit a tentative map for an SB9 lot split, that will get um sent out to the fire department, the water department, all the departments to make sure that they can service that lot when a future residence gets built.
17:22
SPEAKER_01: So they want to make sure that we do not create a parcel that's unbuildable.
17:27
SPEAKER_01: Makes sense.
17:27
SPEAKER_01: You don't want to spend money on creating a parcel that's unbuildable.
17:30
SPEAKER_01: So they will go through the process of verifying that the parcel will be buildable, and that's when the various departments will put their two cents stamp on there.
17:41
SPEAKER_00: Okay.
17:42
SPEAKER_00: So it doesn't go through the building and safety department.
17:45
SPEAKER_01: No, it well, yeah, I guess you're not building anything.
17:47
SPEAKER_01: The building department does not get involved.
17:48
SPEAKER_01: It's only the utility departments and the fire department that get to look at it.
17:54
SPEAKER_00: Peter, what are some of the misconceptions that that you hear frequently?
17:59
SPEAKER_01: Hmm.
18:00
SPEAKER_01: Oh, I can't do it in my community.
18:02
SPEAKER_01: We don't have uh development allowed.
18:04
SPEAKER_01: Everything gets turned down.
18:05
SPEAKER_01: The neighbors are so fiercely opposed to any development.
18:09
SPEAKER_01: Um it's it'll never happen.
18:11
SPEAKER_01: SB9 does not allow any kind of appeal process.
18:15
SPEAKER_01: SB9 does not allow uh the city um officials to make discretionary calls, SB9 does not allow dedication of right-of-ways, SB9 does not allow the city to require off-site improvements.
18:29
SPEAKER_01: Um all of those conditions that we are familiar with for normal development and normal lot splits have gone away.
18:37
SPEAKER_01: Uh so very, very limited.
18:39
SPEAKER_01: That's one misconception.
18:41
SPEAKER_01: Um misconception.
18:43
SPEAKER_01: We are based in in Northern California, but we do lot splits over the entire state.
18:48
SPEAKER_01: Folks in Southern California say, oh, you're in Northern California, you don't know what you're talking about.
18:53
SPEAKER_01: SP9 of the state law applies equally throughout the state.
18:57
SPEAKER_01: We have done SP9 lot splits in 50 jurisdictions.
19:00
SPEAKER_01: Uh, we need to educate each jurisdiction that we work on for the first time that hasn't done an SP9 lot split as to what the rules are under Fisp9.
19:08
SPEAKER_01: But obviously, we were successful in convincing them and telling them what the law is that they don't know about.
19:14
SPEAKER_00: And so going back to the first misconception, um, when someone's watching this video, what what Peter was saying is you don't have to go to the Planning Commission.
19:24
SPEAKER_00: You don't have to apply for a conditional use permit.
19:27
SPEAKER_00: We're not going in front of city council praying that we lobbied to them for them to give us the stamp.
19:33
SPEAKER_00: What Peter's saying, they're not involved, they're not able to be involved.
19:37
SPEAKER_00: Which is which is a huge benefit if someone is thinking, hey, this is a process that I want to go down on.
19:43
SPEAKER_01: It's huge, right?
19:44
SPEAKER_01: Because typical development, you apply, you spend your application fee, you wait for the planner to send you conditions, you don't know what those conditions are going to be.
19:52
SPEAKER_01: You wait for the planning commission, maybe the city council, and they say, no, neighbors said they don't really like it in my neighborhood, so nope, can't have it.
19:59
SPEAKER_01: And you've spent tens of thousands of dollars.
20:01
SPEAKER_01: We guarantee the process.
20:02
SPEAKER_01: You actually don't spend any of that money up front.
20:04
SPEAKER_01: We guarantee it you only pay if we hand you a final parsimon that we recorded that next day.
20:10
SPEAKER_00: So we're talking about payment.
20:12
SPEAKER_00: Um, I gotta ask.
20:13
SPEAKER_00: Folks are gonna wonder, okay, I love what I'm hearing.
20:18
SPEAKER_00: What's the cost to do something like this?
20:20
SPEAKER_01: Not inexpensive.
20:21
SPEAKER_01: Um, we guarantee the product, which means besides a very small application fee up front, we will actually incur all costs.
20:28
SPEAKER_01: We will pay the city application fee, we will pay for the map check fee, we will pay for the surveying, we will pay for uh the recording of the boundary map, we will pay for the title guarantee, uh, we'll pay for the tax collector fee, tax assessor fee, on and on, recording fees.
20:46
SPEAKER_01: If at the end of the day the city or county does not approve the parson map to be recorded, you will owe none of that final fee.
20:53
SPEAKER_01: If that map gets recorded, we will tell you what that fee is at the very beginning before you enter into contract.
21:00
SPEAKER_01: And typically those fees range the total cost of the project range between um$55,000 and$75,000, depending on the complexity of that community and depending on the complexity of the uh the survey work that has to be done.
21:15
SPEAKER_00: So it what I'm hearing you say is all the soft cost, which is gonna be a lot of cost.
21:22
SPEAKER_00: I mean, he he rattled off 12 12 12 names of of fees that have to be paid.
21:28
SPEAKER_00: What what they're doing is picking up all that fee, and you're not paying that kind of the final payment unless unless it unless you get the lot split approval.
21:38
SPEAKER_00: Exactly.
21:38
SPEAKER_00: So you as a company are taking a lot of risk from the very beginning.
21:41
SPEAKER_00: But I I would imagine that you're only taking the risk knowing that this is definitely going to happen.
21:46
SPEAKER_01: We have the expertise and the experience with over a hundred SP9 lot splits to to know when we think we can get a project approved and we pay when we think we might not work.
21:56
SPEAKER_00: So if someone's watching and it's just thinking about it, you know.
22:00
SPEAKER_00: A lot of my channel folks is it has always been to educate people on how to build wealth through real estate.
22:05
SPEAKER_00: Now, in this way, you're gonna be building wealth by building that that extra parcel, and maybe you decide to build or maybe you sell it off.
22:13
SPEAKER_00: But it's a way to utilize the the current asset that you have and and and figure out its maybe highest and best use potentially.
22:20
SPEAKER_00: Um, and so I I love what I'm hearing.
22:24
SPEAKER_00: Peter, since this law has passed, at first I personally heard a lot about it, and then I guess in my world, and and listen, guys, I don't do lot splits.
22:35
SPEAKER_00: I've never personally done it.
22:36
SPEAKER_00: I should be doing it because I believe in what Peter's saying.
22:40
SPEAKER_00: I felt like it kind of trickled off, but like, are you seeing an increase?
22:44
SPEAKER_00: Like, tell us what what you're seeing.
22:45
SPEAKER_01: We're definitely seeing an increase right now, and it's kind of like the ADU law that was first introduced about 15 years ago, maybe.
22:53
SPEAKER_01: And at the beginning, very few ADUs were built.
22:55
SPEAKER_01: Right now they're skyrocketing because you hear your neighbor has done one, you read in the newspaper something someone has done one.
23:02
SPEAKER_01: Initially, SB9 says, Yeah, sure, whatever, but now you're seeing more and more folks doing it, and say, Oh, maybe I can do that too.
23:09
SPEAKER_01: So we do see an increase in that.
23:11
SPEAKER_01: Also, uh, we've had some help from uh State Senator Wiener, who introduced new legislation in January, um, SB 450, which requires the city to act quicker.
23:22
SPEAKER_01: Uh, they're supposed to uh approve or deny a project within 60 days from the time that we submit a complete application.
23:29
SPEAKER_01: That's a huge help.
23:30
SPEAKER_01: Um, it also has taken away some of this question the cities had.
23:34
SPEAKER_01: Some cities had put limitations on what you can do under SB9, which was limiting.
23:38
SPEAKER_01: They have eliminated that.
23:39
SPEAKER_01: So now with this new SB450 on the books, I think we see we'll see a tremendous increase in use of SB9.
23:48
SPEAKER_00: What type of pushback do you hear from people that uh you're ruining neighborhoods and you're gonna make an apartment building next to my house?
23:56
SPEAKER_00: How how dare you?
23:57
SPEAKER_00: I don't know if you're if you're getting these comments.
23:59
SPEAKER_00: Uh sometimes I get the comments when we're doing ADUs, but I'm just curious as to what you hear.
24:03
SPEAKER_01: I do, and it's a misconception, right?
24:06
SPEAKER_01: Um, I do get maybe one in 400 calls that say, don't do that in my neighborhood.
24:14
SPEAKER_01: I'm not doing it on your parcel, and you won't really know if a neighbor two doors down is using his side yard for driveway for his building back there.
24:24
SPEAKER_01: So it doesn't really have any impact on you, but there's some fear, of course, and like in most things.
24:32
SPEAKER_00: Currently, if you live within a planned unit development with a homeowner's insurance and HOA, do they have the right to deny this?
24:42
SPEAKER_01: It depends on your CC and Rs.
24:44
SPEAKER_01: If your CCNRs stipulate that you may not subdivide the parcel or that there is a minimum lot size, CCNRs are private uh agreements which actually supersede state law.
24:58
SPEAKER_01: However, most CCNRs do not have that restriction and therefore HOAs have no power to enforce something that's not in the CCNRs.
25:07
SPEAKER_01: And also, we have a new piece of legislation that Senator Wiener just introduced, SB677, which will do away with uh homeowners association controls.
25:20
SPEAKER_00: You had mentioned to me before we started the interview that there's that that that Senator Wiener is also proposing uh doing away with requiring that the that the that the um that the call that subdivider intends to occupy.
25:35
SPEAKER_01: Right now, one of the biggest restrictions we see is folks that have a parcel with some extra land in there that they own as an investment property.
25:45
SPEAKER_01: The law requires that you sign that uh that uh affidavit stating that you intend to reside on the property, which is intended to make this SB9 available for homeowners with owner occupancy.
26:01
SPEAKER_01: Um under the new law, they will eliminate the requirement for homeowner occupancy, which is huge.
26:09
SPEAKER_01: About 40% of the costs I get are restricted because of that.
26:13
SPEAKER_01: But we also have about 20% of the jurisdictions currently who read SB9 law differently than others, and they are allowing us to do an SB9 lot split on a rental property if the renter signs the affidavit.
26:28
SPEAKER_01: So we do have about 20% of the jurisdictions where we still can do SB9 if it's a rental property currently.
26:34
SPEAKER_00: You know, Peter, so going back to the ADU law, what when when it first was introduced, they would only allow accessory dwelling units on um on single-family homes.
26:46
SPEAKER_00: So, and so that was the case for a couple years, but then that didn't make sense, and so luckily our politicians got lobbied or pushed by someone to say you should really allow them on properties that are multi-dwelling, multi-unit.
27:00
SPEAKER_00: And so then the law changed.
27:01
SPEAKER_00: And so then a lot of apartment owners, which if if you're a housing provider and you already have like let's just say a four-unit or an eight-unit building, you're probably more inclined to build ADUs if you have the space or you could convert the garages.
27:13
SPEAKER_00: You already have uh multiple tenants on this site.
27:17
SPEAKER_00: So they corrected, they corrected that law, in my opinion.
27:20
SPEAKER_00: I I thought that was the right thing.
27:22
SPEAKER_00: People watching this, a lot of them own multi-dwelling, whether whether it's an R2 zone, so it means it already allows for it's zoned for two units or or three or four or more.
27:34
SPEAKER_00: Have you heard anything at the state level that they might be allowing a lot split on that?
27:40
SPEAKER_01: I don't believe that SB9 in and of itself will be applicable to multifamily zoned parcels in the near future.
27:50
SPEAKER_01: But there is a new law that came into effect at the beginning of this year called SB1123, which allows you to develop uh multifamily uh properties into uh multiple units, sometimes condominium or what have you, again outside of the purview of uh of city discretionary review.
28:11
SPEAKER_00: We I uh two years ago listed this property, and it in Long Beach, because we're an older city, it it we have a lot of mixed use.
28:20
SPEAKER_00: So on a busy street, kind of like we're on now, Broadway had a little, had a small little um commercial space and it had a a house in the back, but it was on the corner.
28:30
SPEAKER_00: So I was thinking, I'm gonna buy this because I SB9 was new, and I went to the city and I said, I want to lot split this, and I was gonna sell off.
28:38
SPEAKER_00: No, I was gonna keep the commercial space as a little flower shop, and then I was gonna sell off the house, it was gonna pay the anyhow.
28:44
SPEAKER_00: In my head, I was imagining this great investment, and I and I'm a genius, right?
28:48
SPEAKER_00: So I went to the city and the zoning was mixed use, and therefore it was not eligible.
28:53
SPEAKER_00: Unfortunately, that's it was not eligible, so so that I ended up not buying the building, and so it was it was not the best case scenario.
29:00
SPEAKER_00: So a couple things.
29:02
SPEAKER_00: Um here's my advice: it doesn't hurt if you're a homeowner, it does not hurt to know whether your uh parcel qualifies or not.
29:12
SPEAKER_00: Um, the process is gonna be between five to nine months, depending on where you're located.
29:17
SPEAKER_00: Um, pricing could be anywhere between$55,000 to$75,000, but that's only if and after the fact that you actually have gotten the goal of doing the actual lot split.
29:28
SPEAKER_00: Peter and his company is gonna absorb all the soft cost up front.
29:33
SPEAKER_00: So it's not gonna be a whole lot of money outside of the application fee that he mentioned.
29:37
SPEAKER_00: So, you know, when I weigh this out, I'm like, it's it's kind of a win-win for you to find out.
29:43
SPEAKER_00: If I had a rental house, and even though the law has not passed yet, I would still want to find out.
29:50
SPEAKER_00: Because chances are I don't believe that that's gonna get blocked.
29:54
SPEAKER_00: I believe that that's actually most likely gonna get approved, whether it's a year or more, but that's gonna be happening, and you may want to, you may want to know right away.
30:02
SPEAKER_00: Because so I I don't want someone to say, well, it's a rental house, I it doesn't apply to me.
30:08
SPEAKER_00: What we're saying, it's looking like it's about to apply, and so you might as well get in line.
30:13
SPEAKER_00: Is it would be my advice?
30:16
SPEAKER_00: Is there, Peter, is there anything that I left out that you want our folks to know pertaining to SB9?
30:21
SPEAKER_01: Uh just something uh one of the things that we do first off when you contact us is we will check the eligibility of your parcel to see if it meets most all of the conditions under SB9 so that we don't waste your time, you don't waste our time.
30:35
SPEAKER_01: Uh simple process, you let us know your your parcel, we will look at it, we'll evaluate eligibility, and then we can go on if it is uh if it is possible or not.
30:46
SPEAKER_00: Perfect.
30:46
SPEAKER_00: So, Peter, uh you bring up a good point.
30:48
SPEAKER_00: So we've we've set up um uh Peter's company and my company a little bit of a partnership.
30:53
SPEAKER_00: And so if you're interested and you just want to raise your hand and say, hey, I I don't want to be sold anything by anybody, but like, do I qualify?
31:01
SPEAKER_00: Go on to our website, sage regroup.com.
31:05
SPEAKER_00: Again, that's s-agroup.com forward slash sb9.
31:10
SPEAKER_00: You plug that in, it'll take you to a landing page.
31:13
SPEAKER_00: Um, the information that Peter's gonna need, this is gonna go to him as your address and your contact information.
31:19
SPEAKER_00: That's all you need.
31:21
SPEAKER_00: Within a few days, Peter and his team will get a hold of you and say, Looks like it's a green light or looks like it's not, but at least you'll know.
31:29
SPEAKER_00: And I've always said, especially in our channel, that a lot of people wonder.
31:34
SPEAKER_00: I wonder if I qualify for a loan.
31:36
SPEAKER_00: I wonder if I qualify for a second loan.
31:38
SPEAKER_00: I wonder if I could buy that first eight-unit building that I've been thinking about.
31:43
SPEAKER_00: Guys, I don't want to ever think.
31:46
SPEAKER_00: I want to know.
31:47
SPEAKER_00: And what we're saying is check, check out our website, let's find out.
31:52
SPEAKER_00: And and even if even if Peter gives you a green light, doesn't mean that you got to sign up.
31:57
SPEAKER_00: Maybe you're not ready.
31:58
SPEAKER_00: Maybe you got to check with family, friends.
32:00
SPEAKER_00: Hey, is this a good idea?
32:01
SPEAKER_00: Here's what I'm thinking about it.
32:03
SPEAKER_00: But at least you have some information.
32:04
SPEAKER_00: In fact, if you're a homeowner and you're thinking about selling and you are not the one that would ever do this to your neighbors because your neighbors are gonna judge you and you've been living there for 30 years and they're gonna hate you if you lot split.
32:17
SPEAKER_00: Fine, but you are gonna sell anyways.
32:19
SPEAKER_00: Shouldn't you know if your property is eligible?
32:21
SPEAKER_00: Wouldn't that help out your value of your property?
32:24
SPEAKER_00: Of course it would.
32:25
SPEAKER_00: And I'll tell you this: most realtors out there do not know SB9.
32:28
SPEAKER_00: They don't.
32:29
SPEAKER_00: They don't.
32:30
SPEAKER_00: Um, appraisers aren't gonna know, real estate brokers aren't gonna know.
32:34
SPEAKER_00: This is still kind of formulating.
32:37
SPEAKER_00: It's still a lot of folks, unless if they've personally gone through it, are not gonna know.
32:40
SPEAKER_00: If you're a civil engineer, even they may not know.
32:43
SPEAKER_00: Clearly, Peter's company specializes in this.
32:46
SPEAKER_00: And so um I think it's a win-win.
32:48
SPEAKER_00: Peter, I thank you so much for coming in today.
32:50
SPEAKER_00: I learned a lot.
32:51
SPEAKER_00: I hope folks you learned a lot.
32:53
SPEAKER_00: If you have any questions, definitely send them below.
32:56
SPEAKER_00: Check out our website forward slash SB9.
33:00
SPEAKER_00: Until next time.