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

Morrisville Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? If you have encountered a Morrisville rental property viewed as “unmortgageable,” you may have questioned why. In rather simple terms, an unmortgageable property is one for which buyers are unlikely to be able to get the usual traditional financing, that is to say, a mortgage.

In practically all real estate transactions, that will make completing the sale almost quite impossible. As an investor and Morrisville property manager, it’s pivotal to learn what things could cause your property to be unmortgageable, consequently, so you can avoid them. The last thing you want is to sadly be unable to sell or refinance your single-family rental properties because of these negative 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 important rooms in any home is the kitchen. The same can be said for the bathroom. These are two rooms that potential homebuyers will consider closely when giving thought to purchase, and if either is in very bad shape, it can make a property unmortgageable if you’re endeavoring to sell one of your rental properties, always make certain to update any antiquated or damaged kitchens and bathrooms before ever putting it on the market.
  2. Too Many Kitchens. In some cases, having too many kitchens can be just as bad as having a bad one. It can be quite hard to finance if a property has multiple kitchens – for example, in a duplex or triplex. The thing is that lenders view multiple kitchens as a potential liability, and they may be unwilling to guarantee a mortgage for such a property. If you’re looking to sell or refinance a rental property with various kitchens, you may have to find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders, usually, settle on properties that are located in residential areas. This is because they like them as a safer investment. If your rental property is too close to commercial property – for a case in point, 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 – for instance 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 absolute fix is to do everything you can to attain 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 – for example, if it has a steel frame or is a concrete pre-fabricated build. Allowing that it may not make a property unmortgageable, it may certainly slow things down noticeably.
  6. Natural Hazards. If your rental property is spotted in a district with a history of natural disasters – for example, in a flood or an earthquake zone – it will make mortgage lenders hesitate. The same thing applies if the property is infested with invasive plants or there is a nearby visible flood or fire damage. Sadly, there isn’t so much you can do for elements out of your control.
  7. Undesirable Location. If your rental property is in an undesirable area – specifically, in a high-crime neighborhood or an area with quite a few environmental contaminants – it may be stressful to finance. Other issues, including being too close to a landfill or a government land development, can particularly develop into problems during a sale.
  8. Very Low Property Values. It could be difficult to finance your rental property if it’s built in an area with very low property values – for instance, in a rural area or an economically depressed neighborhood. Particularly true indeed 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, carefully fixing it will help. There are different budget-friendly renovations you can do to cause an increase in property values in a short amount of time.
  9. Weak Infrastructure. If your rental property is located in an area with weak infrastructure – as an illustration, if the roads are in ill shape or there is a lack of public transportation – it may be burdensome to finance. This is because of fact that lenders see weak infrastructure as an indication that the area is undesirable, and they may be indifferent to extending a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – in particular, if the foundation is deteriorated or needs a new roof or other major repairs – it may be taxing to finance. If the damage is big, it may make the property completely unmortgageable. The effective means to make this right is to always make certain the property is in good condition before you try to sell it.

So what it all comes down to, is consistent property maintenance and regular improvements can certainly enable you to prevent any one thing on this list. It is, in a like manner, necessary to study your investment properties carefully before shelling out money for any with these red flags, both now and in the future. Though no one can consider everything that might happen, by utilizing complete market evaluations and caring for the properties you own, you can better always make sure 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 Raleigh today.

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