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

Arcadia Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? If ever you have sighted an Arcadia rental property held “unmortgageable,” you may ask why. In ordinary terms, an unmortgageable property is one for which buyers are unlikely to be able to procure regular financing, like a mortgage.

In almost every real estate transaction, that will make completing the sale almost unattainable and impossible. As an investor and Arcadia property manager, it’s crucial to realize what things could cause your property to be unmortgageable so you can keep away from them. The last thing you want is to be disappointingly unable to sell or refinance your single-family rental properties because of problems 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 significant rooms in any home is the kitchen. The same can be said for the bathroom. These are two rooms that potential homebuyers’ attention will be drawn to when evaluating a purchase, and if either is in poor shape, it can make a property unmortgageable. If you’re getting ready to sell one of your rental properties, try to update any old or damaged kitchens and bathrooms 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 inoperable one. It can be hard to finance if a property has multiple kitchens – by way of illustration, in a duplex or triplex. The reason is that lenders take multiple kitchens as a potential liability, and they may be unwilling to impart a mortgage for such a property. If you’re looking to sell or refinance a rental property with more than one kitchen, you may be obligated to find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders generally decide on properties that are built in residential areas. The reason is that they study and take them as a safer investment. If your rental property is too close to commercial property – particularly, if it’s in a mixed-use development – it may be demanding to get financing.
  4. History of Short Leases. It may be hard to finance if your rental property has a history of short leases – for instance if tenants only stay for six months or a year. Because of that lenders see it as a higher-risk investment. The best fix is to do everything you can to get longer leases and encourage tenants to stay.
  5. Non-Standard Construction. It may be a pain to finance your rental property if it has non-standard construction – specifically if it has a steel frame or is a concrete pre-fabricated build. While it is a matter of fact that it may not make a property unmortgageable, it will probably slow things down a bit more than you’d like.
  6. Natural Hazards. If your rental property is situated in an area with a history of natural disasters – like, in a flood or an earthquake zone – it most likely might make mortgage lenders hesitate. The same holds true if the property is infested with invasive plants or there is a nearby visible flood or fire damage. Sadly, there isn’t anymore you can do about elements out of your control.
  7. Undesirable Location. If your rental property is placed in an undesired area – such as, in a high-crime neighborhood or an area with a great deal of environmental contamination – it may be toilsome to finance. Other complications, like being too close to a landfill or a government land development, can thus provoke problems during a sale.
  8. Very Low Property Values. It is most likely difficult to finance your rental property if it’s located in an area with very low property values – take one example, in a rural area or an economically depressed neighborhood. This is even more 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, restoring it to working order will help. There are several budget-friendly renovations you can do that will contribute to increasing property values in a short amount of time.
  9. Weak Infrastructure. If your rental property is located in an area with weak infrastructure – for illustration, if the roads are in a bad state or there is a lack of public transportation – it may be demanding and challenging to finance. The reason is that lenders see weak infrastructure as a very clear sign that the area is undesirable, and they may be unprepared to offer a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – for instance, if the foundation is falling apart or needs a new roof or other major repairs – it may be arduous to finance. If the damage is nasty, it may make the property completely unmortgageable. The efficient way to manage this is to ensure that the property is in good condition before you try to sell it.

All in all, consistent property maintenance and recurring, regular improvements can be beneficial in helping you steer clear of most challenges on this list. It is, in particular, very important to study your investment properties carefully before acquiring any with these red flags, both now and in the future. Much as no one can see everything that might happen, by accomplishing complete market evaluations and caring for the properties you own, you can better 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 Fairmate today.

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