Just a quick update on the pot house situation. There was another bust in Sacramento, this time in Rancho Cordova:
Pot plants seized in Rancho home
This comes on the heels of another big bust in Stockton:
Stockton pot ring uncovered
The similarities to the previous 21 busts in Sacramento were not lost on the media. Just like in Sacramento, the Stockton guys used the same Realtor:
Bay Area man helped all 5 buyers linked to operation
How big will this thing turn out to be..?
Over the past few weeks, several houses in Elk Grove and the Natomas neighborhood of Sacramento were found to be part of a large marijuana growing operation. Notable was the fact that most of these houses were in newly built housing developments and sold for an average of $500,000.
After our hastily prepared analysis of the Elk Grove pot house neighborhoods last week, we received several requests for a better work-up. While much anecdotal evidence exists that the newer developments where most of the pot houses were found are also hotbeds of flipper activity, a detailed examination was needed to say for certain.
Mostly out of curiosity, we began looking at property records and neighborhood sales data on these houses. (Agent Bubble's analysis of property records proved to be an excellent predictor of future pot house busts.) We also noticed what seemed to be a large number of house sales on these streets within the last three years, and speculated that it would be easier for criminals to infiltrate a neighborhood with high housing turnover, since the neighbors would not be around enough to notice anything suspicious.
Our speculation notwithstanding, further analysis shows us that these neighborhoods are far above the county average for turnover rate and current sales listings:
Sacramento County has had a turnover rate of 23.4% over the last three years. 15 of the pot house neighborhoods were above that number, some by three or four times. One street (Catherwood Way) has completely turned over within the last three years. 17 of the pot house neighborhoods had for-sale rates higher that the county average, with 14 more than double. While the motivations of the marijuana-growers can only be speculated upon, the neighborhoods where they chose to operate were clearly in flux.
We would like to thank the Sacramento Bee for respecting our privacy wishes while giving credit to the blog.
References
Pot raids hit six more homes
Sacramento County Assessor’s Office
Home 'for sale' signs soar
Recent home sales
The Plot Thickens
More homes have been busted and more are in the process of being busted. Information from a reporter at the Bee and the Special Agent in charge of the investigation from the DEA confirm that this ring is much larger than originally believed.
We looked at all of the addresses for the pot houses and examined the sales records to see who was involved. A tax records check revealed that ALL of the owners are male Asians, and several of them own multiple properties that have been busted.
While we were compiling this post, several other houses we pinpointed during the tax record check were also raided. These include all the houses in Natomas and the additional Elk Grove properties. The total number of raided pot houses stands at 21.
Further analysis revealed that the real estate agent representing the buyers for all 21 of these houses is the same person, and that the vast majority of the mortgages taken out on these properties was through a single lender. In fact, this real estate agent had very few transactions in the last two years except those involving the drug properties.
Right now we are uncomfortable releasing information that identifies the people involved here. Although these transactions look highly suspicious (You don’t put “drug dealer” on your mortgage application), we have no way of knowing the depth of their involvement. We do know that the transaction value of the 21 houses sold to the drug dealers is over $10,000,000, so the commission alone would be powerful incentive. It is also unclear why people engaging in mortgage fraud would also grow marijuana.
We have been in touch with law enforcement and the media regarding this new information, and we expect to learn more in the next few days. There are still other houses that fit our pattern that have not been raided. We also have some questions we think the folks in the media should follow up on:
Talk to Alexis Baker again and ask her how much she got for her place on Santa Ridge. Was it less than $495,000? Try and track down the sellers of the other pot houses.
Check the Metro MLS and the Bay Area MLS for similar types of transactions involving this agent.
Check with the lender and see if there are similar types of transactions involving this agent.
By Max and Agent Bubble
Elk Grove, CA is a suburb of Sacramento located in the southern part of the county. The last four years has seen Elk Grove more than double in size as thousands of new homes were built. Recently, Elk Grove was rated the fastest growing city in the United States.
Elk Grove has also been a hotbed of flipper activity. Currently, there are 341 flips on the market there, with 36 flippers in trouble. That is twice the rate for Sacramento County.
Recently, there has been a large number of major marijuana busts in upscale neighborhoods in Elk Grove. The Sacramento Bee has published several stories on the subject:
Police uncover pot farms in raids of two Elk Grove homes
Seven indoor pot farms raided in Elk Grove
Four people arrested in raid on indoor marijuana farms
We were curious about the neighborhoods these pot houses were in. Logically, you would think an illegal drug person (seller, producer etc.) would be attracted to neighborhoods with a lot turnover of residents. A flipper neighborhood would be the perfect place, since nobody who owns there really lives there, and the place is upscale enough that you wouldn't expect this kind of activity. Luckily, the Bee published the addresses or neighborhoods where the busts took place. So, we decided to look at the housing turnover in the last three years to see what would pop. What we got was the following map:
As you can see, each neighborhood was a hotbed of real estate transactions. The pot houses/neighborhoods had an average of 20 house sales, mostly in the last two years. Here is a close-up of two of them:
The news articles mentioned that the owners of the houses were suspected of being the drug people. So, how do marijuana-growers choose to finance their piece of the American Dream? How about with no money down:
(The question remains: if the DEA seizes your property during a drug bust, do they pay off the 100% mortgage after auction, or does the bank take the loss?)
Also according to the news articles, police learned about these pot houses after accidentally stumbling upon one when it caught fire. Subsequently, the police released a bulletin asking the public to report any suspicious activity they noticed in their neighborhoods. This led to tips which led to more busts.
It could very well be that these neighborhoods are stabilizing. Now that the residents have a stake in what happens on their street, they are paying more attention to stuff like this. However, it never hurts to do a little research before you buy. Just because the place costs $600,000 doesn’t mean there isn't a pot farm next door.
****Update****
There was *another* bust in Elk Grove on Castro Verde Way. Here's a map of the recent sales there:
