Thursday, August 31, 2006

Elk Grove, Pot Houses, and the "Flipper Effect"

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:

13 comments :

Lander said...

Great post!

Anonymous said...

These busts haven't reduced the demand for pot. The houses will move to Roseville and Folsom next, if they're not there already.

Anonymous said...

Great catch on the pot house busts in Elk Grove, etc.

Follow the money and see who the loan broker is as well as the agents involved. This was likely a money laundering scheme as well.

If you track the lenders and or money sources, you might find more houses faster.

Carlsbad Jim said...

Regarding what the government does when they seize a house - there's one house in my neck of the woods was seized by the Department of Homeland Security.

Somebody is collecting rent, but house is in foreclosure.

Anonymous said...

At first I thought you had a pattern there, but the "dots" represent sales. The reason there are a many on one street is these are new homes subdivisions. Do your research!

Anonymous said...

Hey I see federal fraud.

Those guys bought with 100% financing meaning that they told the lender that they are owner occupants lied on the loan applications.

Investors have to put 25% down on federally insured loans,don't they?

that is federal fraud! Have fun at the big house!

Anonymous said...

Is this true?

There are more homes for sale per capita in Elk Grove than any other city in California.

That is going to be an ugly market.

Max said...

At first I thought you had a pattern there, but the "dots" represent sales. The reason there are a many on one street is these are new homes subdivisions. Do your research!

The dots represent resales within the last three years. New home sales are not included.

Anonymous said...

Greetings from the Pot Capital of Sacramento County!

I live in Elk Grove in one of the pot bust neighborhoods. In my posts to the website for our nascent neighborhood association, the Franklin Reserve Neighborhood Association (FRNA)(franklinreserve.org), I've mentioned that basically it's war between the FRNA homeowners and absentee Bay Area landlords and their scummy tenants. These absentee landlords don't care anything about the neighborhoods they're destroying with their scumbag tenants.

One of my neighbors, a homeowner, was having problems with her neighbors partying 'till three in the morning in their backyard spa. She couldn't believe they were renters because she thought the house was too expensive to be a rental. Well, to her surprise, but not mine, they were indeed tenants. With a Bay Area landlord.

Mind you, I'm a renter who is sitting out the out-of-control real estate market, but I pull county assessor's records to find out the percentage of renters on any street I'm interested in. I wouldn't even buy a house on the street I live -- it has 39% renters.

Ah, research. Homebuyer beware!

Anonymous said...

You are right.

I live in East FrankHood.

The place looks like South Sacramento in the making.

Low riders,
thumping speakers,
punk kids,
people cooking in the garage,
sofas on the lawn,
paved over lawns with six cars in front,
wild parties,
Section 8 houses, speeders
and idiots who can't read the word s-t-o-p at four way intersections.

The huge number of flipper Bay Area investors is leading to the slumification of East Franklin.

You pay cash, I rent to you.

No credit check, no criminal background check.

Who cares if you are a child molestor, I don't check.

You pay, I rent.

Section 8 with drug dealing pimp ass kids, better yet, County pays I rent.

I smell fried dolphins on the horizon.

Fippper faster than lightning or however that song went.

Anonymous said...

Can this neighborhood (Franklin Reserve) be turned around? Can the neighborhood association make a difference? Can a neighborhood association ever turn a neighborhood around?

Wow, you sound way bothered by the neighborhood. Do you own or rent?

Anonymous said...

Inhale...
Exhale...
Just got an ounce in the mail


word, Elk Grove diggity-dank!!!

Anonymous said...

When they said, "ELK GROVE IS THE FASTEST GROWING CITY", you overlooked the word "GROWING" and that is a small part of why it is now a sh!thole of a community. I blame the people who voted for this place to become a city, all in the name of expand for more money, should have left it a rural community dumbazz's!! All you diggity-dank punkazz kids in EG, do us all a favor and send your parents to drug rehab, WORD!!!