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

Belleview Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? When you have stumbled upon a Belleview rental property presumed “unmortgageable,” you may be surprised and ask why. In very simple terms, an unmortgageable property is one for which buyers are unlikely to be able to get regular financing, such as a mortgage.

In the majority of real estate transactions, that will make completing the sale almost impossible. As an investor and Belleview property manager, it’s principal to apprehend what things could cause your property to be unmortgageable so you can surely keep away from them. The last thing you want is to fail to sell or refinance your single-family rental properties arising from these issues and complications 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 critical rooms in any home is the kitchen. The same can be said for the bathroom. These are two rooms that potential homebuyers will focus on when assessing a purchase, and if either is in a bad state, it can make a property unmortgageable. If you’re orchestrating to sell one of your rental properties, make sure to update any old or damaged kitchens and bathrooms before putting them on the market.
  2. Too Many Kitchens. In some cases, having too many kitchens can be just as bad as having a useless one. It can be quite difficult to finance if a property has multiple kitchens – for illustration, in a duplex or triplex. This is because lenders see multiple kitchens as a potential liability, and they may be unwilling to offer a mortgage for such a property. If you’re looking to sell or refinance a rental property with many kitchens, you will need to find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders usually opt for properties that are located in residential areas. This is because they distinguish them as a safer investment. If your rental property is too close to commercial property – like, if it’s in a mixed-use development – it may be grueling to get financing.
  4. History of Short Leases. It may be tedious to finance if your rental property has a history of short leases – for example if tenants only stay for six months or a year. The reason for this is that lenders see it as a higher-risk investment. The way to fix this is to do everything you can to acquire longer leases and encourage tenants to stay.
  5. Non-Standard Construction. It may be a headache 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. While it is true that it may not make a property unquestionably unmortgageable, it will perhaps slow things down quite a bit.
  6. Natural Hazards. If your rental property is found in a locality with a history of natural disasters – for illustration, in a flood or an earthquake zone – it presumably makes mortgage lenders hesitate. The same applies if the property is infested with invasive plants or there is a nearby visible flood or fire damage. Unfortunately, there aren’t many things you can do in terms of handling elements out of your control.
  7. Undesirable Location. If your rental property is set in an unattractive area – like, in a high-crime neighborhood, or an area with a good deal of environmental contamination – it may be complicated and hard to finance. Other issues, like being too close to a landfill or a government land development, can certainly elicit problems during a sale.
  8. Very Low Property Values. It may also be difficult to finance your rental property if it’s found in an area with very low property values – for a case in point, in a rural area or an economically depressed neighborhood. Even more, 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, renovating it will help. There are a handful of budget-friendly renovations you can do to effectively 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 – such as, if the roads are in bad form or there is a lack of public transportation – it may be gruelingly tough to finance. This is because lenders see weak infrastructure as an implication that the area is undesirable, and they may be hesitating to offer a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – for example, if the foundation is breaking or needs a new roof or other major repairs – it may be tricky to finance. If the damage is pretty huge, it may make the property completely unmortgageable. The optimum solution to address this is to check and make sure the property is in good condition before you try to sell it.

When all is said and done, consistent property maintenance and standard, regular improvements can be beneficial to you in evading countless concerns on this list. It is particularly helpful to study your investment properties carefully before getting any of these red flags, both now and in the future. Since no one can truly see everything that might happen, by doing extensive market evaluations and caring for the properties you own, you can better 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 Diversified today.

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