CA Homeowners: New ADU and Lot Split Laws Can Turn Your Property into a Cash-Flowing Asset

The following article is provided by Loophole Lawyer, PC for general informational purposes only. This article does not constitute legal advice nor does it create an attorney-client relationship. Each circumstance and case is fact dependent—if you have questions about your case, call our office for a free consultation.

California homeowners may be sitting on untapped real estate opportunities right in their backyards. New laws now make it easier than ever to add rental units, convert garages, or split lots, unlocking additional income streams without the usual city red tape.

Accessory Dwelling Units (ADUs): Your Backyard Gold Mine

Recent changes in California law require cities to approve ADUs “by-right”, meaning:

• No public hearings

• No discretionary zoning review

This opens the door for homeowners to:

• Convert a detached garage into a rental unit

• Build a unit above an existing garage

• Construct a new backyard dwelling

These ADUs can provide a steady rental income, increasing the value and cash flow of your property.

AB 1033: Sell Your ADU Separately

Passed in late 2023, AB 1033 allows cities to opt-in to a transformative rule: homeowners can legally sell their ADU as a separate unit, similar to a condo.

This gives property owners unprecedented flexibility:

• Generate rental income before selling

• Sell the ADU independently to recoup investment

• Enhance overall property liquidity

SB 9: Lot Splits for Maximum Value

Senate Bill 9 (SB 9) enables homeowners to split a single lot into two separate parcels and build additional houses. Combined with ADUs, this means a single-family property could legally support up to four units:

1. Original house

2. Backyard or garage ADU

3. Second house on a split lot

4. ADU for the new lot

The result? A single suburban home can potentially transform into four income-producing units, all while remaining fully compliant with California law.

Why This Matters for Homeowners and Investors

These legal changes eliminate much of the traditional city bureaucracy that slowed development. Savvy property owners and investors can now:

• Maximize cash flow from rental units

• Increase property value through legal unit expansion

• Flip single-family homes into multiple-income assets without facing zoning obstacles

Key Takeaways

California’s ADU and lot-splitting laws are creating new opportunities for homeowners to monetize underutilized space. By leveraging AB 1033 and SB 9, a single-family property can be converted into multiple revenue-generating units legally and efficiently.

Whether you’re a homeowner looking for extra income or an investor seeking to expand your portfolio, these changes make it easier than ever to unlock the hidden potential of your property.