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

Fruitland Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? If in case you come across a Fruitland rental property labeled “unmortgageable,” you may wonder why. In general terms, an unmortgageable property is one for which buyers are unlikely to be able to garner typical financing, such as a mortgage.

A multitude of real estate transactions will make completing the sale almost unimaginable or impossible. As an investor and Fruitland property manager, it’s relevant to perceive what things could cause your property to be unmortgageable such that you can prevent them. The last thing you want is to not be able to easily sell or refinance your single-family rental properties resulting from issues 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 prioritize when taking into account a purchase, and if either is in terrible shape, it can make a property unmortgageable. If you’re plotting to sell one of your rental properties, see to it to update any dated or damaged kitchens and bathrooms just before putting it on the market.
  2. Too Many Kitchens. In some cases, having too many kitchens can be just as bad as having an impractical or useless one. It can be tough to finance if a property has multiple kitchens – for instance, in a duplex or triplex. This is related to the fact lenders mark multiple kitchens as a potential liability, and they may be resistant to granting a mortgage for such a property. If you’re looking to sell or refinance a rental property with several kitchens, you will need to find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders often desire properties that are based in residential areas. This is related to the fact they think about them as a safer investment. If your rental property is too close to commercial property – in particular, if it’s in a mixed-use development – it may be burdensome to get financing.
  4. History of Short Leases. It may be laborious to finance if your rental property has a history of short leases – as an illustration if tenants only stay for six months or a year. This is due to lenders seeing it as a higher-risk investment. The clear fix is to do everything you can to obtain longer leases and encourage tenants to stay.
  5. Non-Standard Construction. It may be complicated 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. Whereas it may not make a property unmortgageable, it may indeed slow things down.
  6. Natural Hazards. If your rental property is established in a neighborhood with a history of natural disasters – for instance, in a flood or an earthquake zone – it quite possibly makes mortgage lenders hesitate. The same goes if the property is infested with invasive plants or there is a nearby visible flood or fire damage. Regretfully, there isn’t so much you can do concerning elements out of your control.
  7. Undesirable Location. If your rental property is built in a displeasing area – like, in a high-crime neighborhood or an area with a bunch of environmental contamination – it may be stressful to finance. Other complexities, such as being too close to a landfill or a government land development, can supplementarily give rise to problems during a sale.
  8. Very Low Property Values. It is quite possibly difficult to finance your rental property if it’s located in an area with very low property values – to cite an instance, in a rural area or an economically depressed neighborhood. This relates in particular 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, making your property as good as new will certainly help. There are several budget-friendly renovations you can do to ensure increased property values in a short amount of time.
  9. Weak Infrastructure. If your rental property is located in an area with weak infrastructure – by way of illustration, if the roads are in poor shape or there is a lack of public transportation – it may be burdensome to finance. This is related to the fact lenders see weak infrastructure as an obvious sign that the area is undesirable, and they may not be eager to supply a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – as a sample, if the foundation is run-down or needs a new roof or other major repairs – it may be taxing to finance. If the damage is huge, it may make the property completely unmortgageable. The best approach to handle this is to see to it the property is in good condition before you try to sell it.

On that note, consistent property maintenance, and typical, regular improvements can be to your advantage if you take care to avoid the challenges on this list. It is especially important to study your investment properties carefully preceding buying any with these red flags, both now and in the future. Even as no one can foresee everything that might happen, by implementing 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 Uintah today.

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