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

Muskegon Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? Just in case you have discovered a Muskegon rental property labeled “unmortgageable,” you may stop to consider why. In broad terms, an unmortgageable property is one for which buyers are unlikely to be able to find normal financing, as an illustration, a mortgage.

In numerous real estate transactions, that will make completing the sale almost improbable or impossible. As an investor and Muskegon property manager, it’s really important to completely understand what things could cause your property to be unmortgageable so that you can sidestep them. The last thing you want is to be ineffective at selling or refinancing your single-family rental properties because of 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 central key rooms in any home is the kitchen. The same can be said for the bathroom. These are two rooms that potential homebuyers will scrutinize when going into a purchase, and if either is in poor form, it can make a property unmortgageable. If you’re purposing to sell one of your rental properties, ensure to update any sad-looking or damaged kitchens and bathrooms before putting it up on the market.
  2. Too Many Kitchens. In some cases, having too many kitchens can be just as bad as having an ineffectual one. It can be tricky to finance if a property has multiple kitchens – take one example, in a duplex or triplex. The fact of the matter is that lenders determine multiple kitchens as a potential liability, and they may be unenthusiastic to offer a mortgage for such a property. If you’re looking to sell or refinance a rental property with many kitchens, you may not have a choice but to find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders consistently get properties that are in residential areas. The fact of the matter is that they prefer them as a safer investment. If your rental property is too close to commercial property – for instance, if it’s in a mixed-use development – it may be stressful to get financing.
  4. History of Short Leases. It may be tricky to finance if your rental property has a history of short leases – such as if tenants only stay for six months or a year. This has to do with the fact lenders see it as a higher-risk investment. The straight fix to apply here is to do everything you can to garner longer leases and encourage tenants to stay.
  5. Non-Standard Construction. It may be tedious to finance your rental property if it has non-standard construction – like if it has a steel frame or is a concrete pre-fabricated build. Conceding that it may not make a property categorically unmortgageable, it will perhaps slow things down a whole lot.
  6. Natural Hazards. If your rental property is placed in a territory with a history of natural disasters – take for example, a flood or an earthquake zone – it may quite possibly make mortgage lenders hesitate. This is also true if the property is infested with invasive plants or there is a nearby visible flood or fire damage. Sad to say though, there isn’t a heap you can do concerning elements out of your control.
  7. Undesirable Location. If your rental property is in an awful area – as an illustration, in a high-crime neighborhood or an area with various environmental contamination – it may be quite hard to finance. Other obstacles, such as an illustration being too close to a landfill or a government land development, can, as well, result in problems during a sale.
  8. Very Low Property Values. It is also quite possibly difficult to finance your rental property if it’s located in an area with very low property values – such as, in a rural area or an economically depressed neighborhood. This is especially true 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, rehabilitating it will help. There are quite a lot of budget-friendly renovations you can do to allow 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 – case in point, if the roads are appalling or there is a lack of public transportation – it may be stressful to finance. The fact of the matter is that lenders see weak infrastructure as a symptom that the area is undesirable, and they may not be open to granting a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – for example, if the foundation is quite dilapidated or needs a new roof or other major repairs – it may be hard to finance. If the damage is substantial, it may make the property completely unmortgageable. The best method to find the answer to this is to ensure the property is in good condition before you try to sell it.

At the end of the day, consistent property maintenance and usual regular improvements can lead you to steer away from most issues on this list. It is similarly substantial to study your investment properties carefully before ever buying any with these red flags, both now and in the future. While it’s true, that not everyone can see everything that might happen, by carrying out complete market evaluations and caring for the properties you own, you can better see to it 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 Investment Solutions today.

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