Bombed Out

What it is

Bombed out is the far left of the scale of livability. These houses are bombed out — they need work. What you’re doing as a house flipper is buying on the left side of the line of livability and pushing them past it all the way over to the range of comps.

Bombed out means unlivable. Banks won’t lend on it. An FHA inspection isn’t going to pass. The stove is missing, the HVAC is stolen, the copper is gone, windows are boarded. Nobody is moving in tomorrow, and no conventional loan closes on Friday. Hard money and private money will touch it if the numbers work. FHA and conventional won’t get past the appraiser.

Why it matters

The best return on investment you’re going to get is moving a house from the farthest left to the farthest right — into the range of comps. You’re crossing the threshold of livability. That’s where banks start lending and owner-occupant buyers start bidding. That threshold is not a linear price curve. It’s a cliff. Get the property across it and the comp set jumps.

That same cliff runs the other direction. Bombed out houses are cash-in, cash-out jobs until they’re across the threshold. The work to get them there is a full gut. If your rehab budget runs out at 70% complete, you own an unfinished bombed out house with negative equity and a hard money clock ticking. Running out of money on a bombed out project is the single fastest way to lose a deal.

That’s why I always tell beginners: start with barely bankable. Same playbook, but the banks will lend, the lights work, and you can live in it if the math goes sideways. The entry price is higher, but the risk is a lot more forgiving.

How it shows up

I walked into one house — windows boarded up, adult toys everywhere, signs of some weird parties. Old mattresses and syringes all around the property. Dead center of the living room: actual human feces. Yeah. Disgusting. But I bought that house for $21,000. Spent about $30,000 to clean it up and do a small renovation. When it appraised, it came in at $200,000. Because I bought it so cheap, I had massive room for mistakes. And I make a lot of mistakes. But even after those huge mistakes, there was still a huge margin in it. Lenders loved it because I was all in for $50,000 on a $200,000 house.

That’s the bombed out play. The buyer pool is tiny — maybe 10 investors in the metro willing to touch it. That’s exactly why the entry price is low.

Only buy bombed out with a real contingency line in the budget and real reserves in the bank. A cosmetic flipper gets surprised and loses some margin. A bombed out flipper gets surprised and loses the deal.

Related

scale of livability, barely bankable, range of comps, hard money, gut job, contingency