SB 9 To Lot Split Or Not - LA City
Hello Everyone,
I own a single family home on a 1 acre lot in NELA. There are two building pads, one has an 1100 sqft house and on the other I recently completed a freestanding 1200sqft ADU. I Looked into a lot split before I decided to build the ADU but it was too expensive.
I spoke to LA City Planning this week and found that I have a few options using SB9.
1. I am allowed to split the lot and build units on the newly created vacant lot, but the existing home and ADU must stay on the same lot(RSO applies now, apparently). This option is more expensive as it will require a large retaining wall. Combined lot values would be $3,300,000 building cost $600,000.
2. Or I can do an addition to the existing house and make it a duplex, I can also convert the garage into a JADU giving me a triplex. This option is much cheaper, the area is flat and unused, plus has a favorable Soils Report. 4 units on a lot bringing in $15,000/month, build cost $400,000
I plan on selling all this when the 3 year occupancy period expires as we will want a bigger home. Traditional logic would be to build a single family home on the new lot and sell it(Option 1), but the other day I saw cap rates on loopnet(no idea if that is a reliable site) for multifamily investing in LA and those numbers were actually more desirable(Option 2).
My question is what is the better option? What cap rate would I be looking at if it sold as a multi-family investment? Would it be comparable to a multi-family? 3 of the 4 units would be new construction and the old unit would have an extensive remodel. Any Advice is appreciated!