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

West Fargo Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? In case you have encountered a West Fargo rental property declared “unmortgageable,” you ask why. In rather simple terms, an unmortgageable property is one for which buyers are unlikely to be able to get accepted financing, for example, a mortgage.

In almost any real estate transaction, that will make completing the sale almost implausible. As an investor and West Fargo property manager, it’s foremost to be aware of what things could cause your property to be unmortgageable so, there and then, you can elude them. The last thing you want is to be incapable of selling or refinancing your single-family rental properties arising from conflicts 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 most crucial rooms in any home is the kitchen. The same can be said for the bathroom. These are two rooms that potential homebuyers will look at when looking into a purchase, and if either is in a lamentable state, it can make a property unmortgageable. If you’re endeavoring to sell one of your rental properties, always make sure to update any worn-out or damaged kitchens and bathrooms preliminary to putting it on the market.
  2. Too Many Kitchens. In some cases, having too many kitchens can be just as bad as having an unsuitable one. It can be arduous to finance if a property has multiple kitchens – to cite an instance, in a duplex or triplex. The thing is that lenders view multiple kitchens as a potential liability, and they may be not willing to render a mortgage for such a property. If you’re looking to sell or refinance a rental property with quite a lot of kitchens, you got to find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders usually single out properties that are in residential areas. The thing is that they consider them 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 exhausting to get financing.
  4. History of Short Leases. It may be arduous to finance if your rental property has a history of short leases – by way of illustration if tenants only stay for six months or a year. This is because lenders see it as a higher-risk investment. The definite fix to this is to do everything you can to attain longer leases and encourage tenants to stay.
  5. Non-Standard Construction. It may be hard to finance your rental property if it has non-standard construction – particularly if it has a steel frame or is a concrete pre-fabricated build. Though it may not make a property undoubtedly unmortgageable, it will slow things down a lot.
  6. Natural Hazards. If your rental property is located in a district with a history of natural disasters – for instance, in a flood or an earthquake zone – it most probably 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. But sadly, there isn’t anything more you can do relative to elements out of your control.
  7. Undesirable Location. If your rental property is stationed in an unpleasant area – for example, in a high-crime neighborhood or an area with countless environmental contamination – it may be a headache to finance. Other negative issues, such as an example being too close to a landfill or a government land development, can additionally develop into problems during a sale.
  8. Very Low Property Values. It is most probably difficult to finance your rental property if it’s built in an area with very low property values – specifically, in a rural area or an economically depressed neighborhood. Particularly so 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 multitude of budget-friendly renovations you can do to increase property values in a short amount of time.
  9. Weak Infrastructure. If your rental property is located in an area with weak infrastructure – take one example, if the roads are in poor form or there is a lack of public transportation – it may be exhausting to finance. The thing is that lenders see weak infrastructure as a warning that the area is undesirable, and they may be uncooperative to offer a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – for an instance, if the foundation is deteriorating or needs a new roof or other major repairs – it may be demanding to finance. If the damage is quite great, it may make the property completely unmortgageable. The common practice to tackle this is to always make sure the property is in good condition before you try to sell it.

In the final analysis, consistent property maintenance and regularly accepted improvements can be of help to you in warding off the many issues on this list. It is correspondingly integral to study your investment properties carefully previous to taking any of these with red flags, both now and in the future. Allowing that no one can consider ahead of time everything that might happen, by applying total market evaluations and caring for the properties you own, you can always make certain 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 Optimum today.

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