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

Windermere Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? If, in any case, you have found a Windermere rental property alleged to be “unmortgageable,” you may ask why. In rather simple terms, an unmortgageable property is one for which buyers are unlikely to be able to get the usual financing, for instance, a mortgage.

In countless real estate transactions, that will make completing the sale almost unrealizable or impossible. As an investor and Windermere property manager, it’s key to take into consideration what things could cause your property to be unmortgageable so that you can avoid them. The last thing you want is to be ineffective at selling or refinancing your single-family rental properties on the account of these 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 vital rooms in any home is the kitchen. The same can be said for the bathroom. These are two rooms that potential homebuyers will focus on when weighing a purchase, and if either is in a pitiful state, it can make a property unmortgageable. If you’re planning to sell one of your rental properties, make sure to update any bad-looking or damaged kitchens and bathrooms before you put them on the market.
  2. Too Many Kitchens. In some cases, having too many kitchens can be just as bad as having an unserviceable one. It can be grueling to finance if a property has multiple kitchens – specifically, in a duplex or triplex. It has something to do with the fact that lenders look at multiple kitchens as a potential liability, and they may be afraid to offer a mortgage for such a property. If you’re looking to sell or refinance a rental property with plenty of kitchens, you may have to find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders largely like properties that are found in residential areas because they see them as a safer investment. If your rental property is too close to commercial property – for an instance, if it’s in a mixed-use development – it may be a pain to get financing.
  4. History of Short Leases. It may be also grueling to finance if your rental property has a history of short leases – take one example if tenants only stay for six months or a year. The reason is that lenders see it as a higher-risk investment. The sure fix is to do everything you can to achieve longer leases and encourage tenants to stay.
  5. Non-Standard Construction. It may be tricky to finance your rental property if it has non-standard construction – for instance, if it has a steel frame or is a concrete pre-fabricated build. Although it may not make a property unmortgageable, it will seem to slow things down substantially.
  6. Natural Hazards. If your rental property is found in an area with a history of natural disasters – specifically, in a flood or an earthquake zone – it could most definitely make mortgage lenders hesitate. In the same manner, if the property is infested with invasive plants or there is a nearby visible flood or fire damage. Deplorably, there aren’t many things you can do in connection with elements out of your control.
  7. Undesirable Location. If your rental property is found in a deplorable area – for instance, in a high-crime neighborhood or an area with much environmental contamination – it may be taxing to finance. Other challenges, such as being too close to a landfill or a government land development, can further make problems during a sale.
  8. Very Low Property Values. It could be difficult to finance your rental property if it’s located in an area with very low property values – like, a rural area or an economically depressed neighborhood. This is all the more 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 plenty 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 infrastructures – for instance, if the roads are in terrible condition or there is a lack of public transportation – it may be a pain to finance. Because of that lenders see weak infrastructure as a pointer that the area is undesirable, and they may not be at all willing to put forward a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – for illustration, if the foundation is becoming old or needs a new roof or other major repairs – it may be stressful or difficult to finance. If the damage is quite large, it may make the property completely unmortgageable. The exemplary practice is to take care of this first to make sure the property is in good condition before you try to sell it.

In closing, consistent property maintenance and regular improvements can aid you to hinder several complications on this list from happening. It is also beneficial to study your investment properties carefully when looking to buy to avoid these red flags, both now and in the future. Though no one can foresee everything that might happen, by undertaking detailed 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 South Orlando today.

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