SB-684 and ADU Development: Combining Lot Splits with Accessory Dwelling Units

Understanding the Combination Opportunity

SB-684 lot splits create separate parcels, and each resulting lot may qualify for its own ADU under California's ADU laws. This combination can potentially double or triple your development opportunities.

Legal Framework

*SB-684 Lot Split Rights

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• Divide one lot into two separate parcels

• Each parcel becomes independently developable
• No restrictions on subsequent ADU development

*California ADU Rights

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• Each single-family lot can have one ADU
• Additional Junior ADUs (JADUs) may be allowed
• Streamlined approval process for most ADUs

*Combined Opportunity

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• Original lot with existing house + ADU
• First new lot with new house + ADU
• Second new lot with new house + ADU
• Potential for 3 primary units + 3 ADUs = 6 total units

Strategic Planning Considerations

*Lot Configuration for ADU Development

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• Size lots to accommodate both main house and ADU
• Consider setback requirements for both structures
• Plan utility connections for multiple units
• Optimize lot orientation for privacy and access

*Phased Development Strategy

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- Phase 1

Complete lot split process

- Phase 2

Develop first lot with house and ADU

- Phase 3

Develop second lot or sell as buildable lot

- Phase 4

Add ADUs to any remaining lots

Market Analysis

*Rental Income Potential

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• ADUs can generate $1,500-4,000+ monthly rent
• Multiple units provide income diversification
• Strong rental demand in most California markets
• Potential for significant cash flow generation

*Property Value Enhancement

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• Lot split typically increases value 40-80%
• ADUs add additional 15-25% value
• Combined effect can double property value
• Creates multiple exit strategies for owners

Design Optimization

*Site Planning

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• Plan building placement for optimal privacy
• Design circulation to serve multiple units
• Consider parking requirements for all units
• Plan utility services efficiently

*Architectural Considerations

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• Coordinate design themes across units
• Plan for optimal solar access
• Consider noise separation between units
• Design for different tenant types

Financing Strategies

*Construction Financing

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• Lot split creates additional collateral
• ADU construction loans increasingly available
• Potential for sale of one lot to finance development
• Cash-out refinancing on increased value

*Investment Analysis

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• Calculate return on investment for each phase
• Consider holding vs. selling strategies
• Analyze cash flow projections
• Plan for property management needs

Regulatory Compliance

*Permitting Coordination

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• Complete lot split before ADU permits
• Coordinate with local planning departments
• Understand ADU approval timelines
• Plan for utility connection approvals

*Zoning Compliance

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• Verify ADU allowances in your zone
• Understand parking requirements
• Check height and setback restrictions
• Consider historic district limitations

Timeline Coordination

*Sequential Development

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- Months 1-8

Complete SB-684 lot split

- Months 9-12

Design and permit first development

- Months 13-18

Construct first house and ADU

- Months 19-24

Develop second lot or market for sale

*Parallel Processing

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• Begin ADU planning during lot split process
• Coordinate design and permitting
• Optimize construction scheduling
• Manage financing and cash flow

Common Challenges

*Infrastructure Capacity

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• Multiple units require adequate utility capacity
• May need utility upgrades for full development
• Coordinate with utility providers early
• Plan for potentially significant upgrade costs

*Neighborhood Compatibility

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• Higher density may concern neighbors
• Traffic and parking impacts
• Consider community relations strategy
• Design for neighborhood compatibility

*Financial Complexity

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• Multiple financing needs and timelines
• Complex cash flow projections
• Property tax implications
• Insurance and liability considerations

Success Strategies

*Professional Team

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• Use professionals experienced with both SB-684 and ADUs
• Coordinate architects, contractors, and consultants
• Establish clear communication protocols
• Plan for integrated project management

*Market Research

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• Analyze rental markets for different unit types
• Research buyer preferences for buildable lots
• Consider timing of development phases
• Plan marketing strategies for each phase

*Financial Planning

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• Develop comprehensive pro formas
• Plan contingencies for cost overruns
• Consider different exit strategies
• Evaluate tax implications

Exit Strategies

*Hold and Rent Strategy

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• Generate ongoing rental income
• Build long-term wealth through appreciation
• Benefit from tax advantages of rental property
• Maintain control over property development

*Develop and Sell Strategy

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• Sell completed units for immediate profit
• Retain one lot for personal use
• Market to different buyer segments
• Optimize pricing and timing

*Mixed Strategy

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• Develop one lot, sell the other
• Retain ADUs for rental income
• Balance immediate profit with long-term income
• Maintain flexibility for changing circumstances

Market Trends

*Growing Demand

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• Increasing acceptance of ADUs
• Strong rental markets statewide
• Rising property values support development
• Government support for housing creation

*Regulatory Evolution

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• Continued streamlining of ADU approvals
• Potential coordination between lot split and ADU laws
• Local jurisdictions adapting to combined development
• Financial incentives and support programs

Combining SB-684 lot splits with ADU development represents one of the most powerful strategies available to California property owners for maximizing both property value and income potential. Success requires careful planning, adequate financing, and coordination of multiple regulatory processes, but the potential returns can be substantial.