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10 Things That Make a Property Unmortgageable (and How to Avoid Them)

Prince Frederick Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? If you have looked at a Prince Frederick rental property that’s labeled “unmortgageable,” you may ask why. In rather simple terms, an unmortgageable property is one for which buyers are unlikely to be able to access basic financing, such as a mortgage.

In multiple real estate transactions, that will make completing the sale almost absolutely impossible. As an investor and Prince Frederick property manager, it’s pertinent to understand what things could cause your property to be unmortgageable such that you can keep far away from them. The last thing you want is to fail to sell or refinance your single-family rental properties because of hindrances that make them unmortgageable.

To get the most out of your investments, here are ten things that could make your property unmortgageable and how to avoid them.

  1. Unusable Kitchen or Bathroom. One of the crucial rooms in any home is the kitchen. The same can be said for the bathroom. These are two rooms that potential homebuyers will take note of when looking to purchase, and if either is in poor status, it can make a property unmortgageable. If you’re orchestrating to sell one of your rental properties, always see to it to update any obsolete or damaged kitchens and bathrooms when putting them on the market.
  2. Too Many Kitchens. In some cases, having too many kitchens can be just as bad as having an unfunctional one. It can be a pain to finance if a property has multiple kitchens – like in a duplex, or triplex. This is because lenders distinguish multiple kitchens as a potential liability, and they may be unwilling to lend a mortgage for such a property. If you’re looking to sell or refinance a rental property with several kitchens, you may need to find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders conventionally desire properties that are found in residential areas. This is related to the fact they see them as a safer investment. If your rental property is too close to commercial property – to cite an instance, if it’s in a mixed-use development – it may be arduous to get financing.
  4. History of Short Leases. It may also be a pain to finance if your rental property has a history of short leases – particularly if tenants only stay for six months or a year. This is due to lenders seeing it as a higher-risk investment. The right fix is to do everything you can to acquire longer leases and encourage tenants to stay.
  5. Non-Standard Construction. It may be challenging to finance your rental property if it has non-standard construction – such as if it has a steel frame or is a concrete pre-fabricated build. Although certainly, it may not make a property outrightly unmortgageable, it will most probably slow things down notably.
  6. Natural Hazards. If your rental property is found in a locality with a history of natural disasters – like in a flood or an earthquake zone – it could make mortgage lenders hesitate. The same also applies if the property is infested with invasive plants or there is a nearby visible flood or fire damage. But sadly, there isn’t a great deal you can do as regards elements out of your control.
  7. Undesirable Location. If your rental property is set in an unpleasant area – in a high-crime neighborhood or an area with a handful of environmental contamination – it may be too hard to find financing. Other possible problems being too close to a landfill or a government land development can especially elicit problems during a sale.
  8. Very Low Property Values. It could understandably be difficult to finance your rental property if it’s found in an area with very low property values – for instance, in a rural area or an economically depressed neighborhood. Especially applicable if the property has liens close to or over the property’s current value. If the property’s condition has caused property values to go down, mending it will actually help. There are countless budget-friendly renovations you can do to really help increase property values in a short amount of time.
  9. Weak Infrastructure. If your rental property is located in an area with weak infrastructure – for instance, if the roads are in very bad condition or there is a lack of public transportation – it may be arduous to finance. This is related to the fact lenders see weak infrastructure as an unwelcome sign that the area is undesirable, and they may be opposed to offering a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – specifically, if the foundation is crumbling or needs a new roof or other major repairs – it may be hard to finance. If the damage is significant, it may make the property completely unmortgageable. The perfect method to straighten this out is to always make certain the property is in good condition before you try to sell it.

Finally, what it all comes down to, consistent property maintenance and basic improvements can greatly contribute to you successfully evading the issues on this list. It is additionally vital to study your investment properties carefully before spending on any with these red flags, both now and in the future. While it is true that no one can actually see everything that might happen, by applying methodical market evaluations and caring for the properties you own, you can better check and guarantee that you reap the rewards of your investments when the time is right.


If you’d like to learn more about how to optimize your investment properties, contact Real Property Management Gold today.

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